Do you have these same thoughts? If so, you aren’t alone. Most of our past columns have been fact-driven and even statistic-based, but we felt it would be fun this month to simply share our professional opinion of what’s taking place and impacting our local real estate market. This column reflects some of our thoughts, ideas, and assumptions of why real estate seems to continue forging ahead in the midst of a global pandemic.
Working from Home – Due to the closure of many office spaces, working from home has become the new normal. This is an interesting phenomenon that may be helping buyers keep some of their hard-earned money in their pockets. Money saved on office rent, gas, auto insurance or even the decision to not own a car may directly lead to increased purchasing power. Buyers may now be considering purchasing a larger home with an extra room for an office or some additional space to satisfy their new working-from-home conditions.
Schools Closed and Open Spaces Limited – School’s out for summer (cue Alice Cooper), but will kids actually ever go back to their respective schools? Distance learning, teaching from home, and Zoom classes for kids are now becoming common for many Americans. Buyers may be scrambling for homes with larger yards, pools (P.E. class must go on!) or additional rooms to be used as study spaces. There’s no question that some active buyers are identifying homes with these “wish list” features as they search for new properties.
Historically Low Mortgage Rates – We informed the parents of one of our clients that the current interest rate on a 30-year mortgage has now dropped to nearly 2.75%, and their mouths dropped open. Decades ago, mortgage rates were over 15% and just months ago, jumped to what we thought was an unimaginable 4%, but they’ve dropped again. So what does this mean to prospective buyers? To give an example, a buyer purchasing a $750,000 home with a 20% down payment will need to secure a $600,000 mortgage. The monthly payment at 4% is approximately $3,424/mo. (based on 30-year fixed rate). At 2.75%, that payment decreases by approximately $415/mo. That’s a considerable savings that can also help a buyer stretch their finances to secure a higher-priced or larger home.
Housing Inventory – The basic principle of supply and demand moves to the forefront once again in real estate. If supply decreases, competition for available housing increases, which leads to rising prices. San Pedro and most of the South Bay continue to experience a record low homes for sale. This continues to cause multiple offer scenarios for desired homes as they hit the open market. With limited housing inventory and the current low mortgage rate environment, it’s difficult to envision a major market correction in the near future despite the craziness in our economy.
It’s clear our country is experiencing some of the most challenging economic times since the paralyzing financial crisis of 2008. We are a great nation that always finds a way to rise to the challenge when faced with adversity. This time is no different. Collectively, we will get through this. Shop Local! Live Local! spt