No pandemic ‘fire sale’ on Bay Area homes, despite ‘breathtaking’ drop in transactions

Sales of existing, single-family homes in April — the first month to show the full force of the coronavirus — dropped a stunning 30.1% statewide and 37.4% in the Bay Area compared to the same period last year, but median prices were more or less unchanged, according to a survey released Monday by the California Association of Realtors.

“It’s not a fire sale,” said Leslie Appleton-Young, the association’s chief economist. “Typically, prices are sticky on any movement down when sellers don’t have to sell. When you get into a foreclosure situation, you have a bigger problem.”

April data shed the most light yet on how the coronavirus is affecting residential real estate because deals that closed in March were entered into before most shelter-in-place orders took effect in mid-March. Some sales that closed in early April also may have gone into escrow pre-coronavirus, although prices may have been renegotiated after the stock market collapsed and layoffs began mounting.

“I would call (the decline in sales) dramatic, sudden, breathtaking,” Appleton-Young said. “What it shows is an inability to transact for buyers and sellers and unwillingness to move forward with transactions.”

The 30.1% sales decline statewide is the largest year-over-year drop since December 2007.

Between March and April this year, sales dropped 25.6% statewide — the biggest month-to-month decline since at least 1979. In the Bay Area, they fell 16.2% from March to April. The survey excludes sales of condominium units, newly built homes and homes not advertised on a Multiple Listing Service.

The median price of a home statewide, which was rising 7% to 8.5% year over year in January and February, rose a scant 0.6% in April.

In the Bay Area, the median price was $980,000 in April, down 3% from March but down only 0.8% from April of last year.

However, that’s a little surprising because the median price rose year over year in every Bay Area county last month. The biggest gains were in Solano (up 10.9% to $482,500) and Alameda (up 9.6% to $1.03 million). The smallest was in Marin (up 1.1% to $1.37 million.) San Francisco’s median price rose 4.1% to $1.7 million.

The median is the price at which half the homes sold for more and half for less. To calculate the Bay Area median, the association throws all homes sold in the Bay Area into one big bucket and sorts them high to low. So even though every county’s median price went up in April, the Bay Area median went down slightly because “there was a lot more in the bucket from the bottom end of the market,” Appleton-Young said.

That’s consistent with what many agents have been reporting, that lower-priced homes are moving faster than high-priced ones.

Marcia Weske of the Grubb Co. was planning to list a two-bedroom condo on Berkeley Way in Berkeley the week the shelter-in-place orders came out. Afterward, “we waited for weeks, trying to figure out how this was going to play out,” she said.

Rather than underpricing the home to create a bidding frenzy — a common tactic in recent years when demand outstripped supply — they listed it April 10 at $745,000, the price the seller was willing to accept. Some agents are calling this transparent pricing.

Nevertheless, “the outpouring (of interest) was constant,” Weske said. But marketing was arduous. The shelter-in-place orders say that showings must be done virtually, whenever feasible. When it’s not feasible, in-person showings can be scheduled, with strict rules. There can be no more than one agent and two clients from the same household. Masks, gloves and booties should be worn, surfaces must be disinfected between showings and a warning posted at the door.

“I pre-screened everyone who was going to see it, had them sign paperwork, read through disclosures,” Weske said.

The house attracted 12 offers, “quite a few in the $800,000 range,” she said. Some came from people who had never seen it in person. Three were for $850,000. Of those, “we took the one that had the best terms,” from a family buying it for a UC Berkeley student.

Weske said all of her clients looking for homes are first-time buyers. “They are tired of cramped living, they are hoping to start this next phase of their lives.”

Appleton-Young said the entry-level market is holding up better than the high end because buyers are more sensitive to mortgage rates, which have fallen, and to stock prices, which have also fallen.

The average rate on government-backed loans is down about a third of a percentage point in the past two months to 3.28%. These loans go up to $765,700 in most Bay Area counties. They’re easier to get than bigger loans, called jumbos, which lack government backing and are harder to sell to investors. With so much uncertainty, lenders are less willing and in some cases less able to hold jumbos on their books.

To get a jumbo loan, you need at least 20% down and a credit score over 700, said Jay Voorhees, owner JVM Lending in Walnut Creek. Before the coronavirus, “we could do 10% down and a 680 FICO” credit score. Jumbo rates on average are about 1.5% higher than they were a few weeks ago, he added. Some smaller banks have lower rates but long wait times.

For health and safety reasons, Wells Fargo has stopped having appraisers go into houses where it’s making a loan.

“As a result, we have temporarily reduced maximum allowable (loan-to-value ratios) on jumbo loan amounts in some cases and eliminated cash-out refinances to account for alternative valuation methods,” Wells Fargo spokesman Tom Goyda said in an email.

Voorhees said his volume of home-purchase loans dropped by 50% after the coronavirus hit, and stayed at that level for about six weeks.

“Now we are back up to where we were this time last year,” he said. “March and April tend to be our busiest months. You had pent-up demand; that’s why we are seeing a surge now. I think people are realizing they are not going to get laid off, the market is not going to be as soft as people thought it would be.”

Even during the slowest times, some people need to buy or sell because they are “upsizing, downsizing, getting married, getting divorced or relocating,” said Mary Ann Veldkamp, an agent with Coldwell Banker Global Luxury in Santa Rosa.

Jessica August Saenz, Tony Saenz and their year-old daughter Amelia moved from Tucson to Santa Rosa in October because both got jobs as physicians at Kaiser Permanente — she in infectious diseases, he in family medicine.

“I think we moved Oct. 7, by the ninth the power was out, a couple weeks later we evacuated, we started new jobs in November and by January we’re in a pandemic,” Jessica said. “It has been a busy, trying, challenging time.”

So, they figured, “Why not buy a house?”

They put an offer on a home under construction in the Fountaingrove area on Valentine’s Day.

“It was supposed to be done May 15, they contacted us in early April and said, ‘Do you want to move in on May 1 instead?’” Jessica said.

Despite the pandemic, they didn’t consider backing out.

“We knew what we could afford. We felt pretty confident when we started our search in December what we had to work with,” Tony said.

Many agents have seen a significant uptick in the past two weeks. Before the coronavirus, Sonoma County was “averaging 80 to 100 homes going into escrow, and 80 could sell, in a given week,” said Tom Kemper, manager of the Santa Rosa Coldwell Banker office. Those numbers “fell into the 30s and 40s once everything shut down, no one could go anywhere, do anything. Two weeks ago, they popped up into the 60s. Last week, there were 92 going into contract.”

Veldkamp said she had two homes close on Monday that went into escrow after the stay-at-home orders came down.

Kathleen Pender is a San Francisco Chronicle columnist. Email: kpender@sfchronicle.com Twitter: @kathpender

Article source: https://www.sfchronicle.com/business/networth/article/No-pandemic-fire-sale-on-Bay-Area-homes-15278910.php

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