July 8th 2020 Market Update
What do you think of the housing market? – One of the most commonly asked questions. So Let’s talk about our housing market right now. We will break down the market status through statistics in this blog, or watch this video!
As we see here, there’s a huge drop in the unemployment rate. Obviously, that’s because the economy is partially reopened recently. What’s interesting is that most of the unemployment is really still lying on hotels and also government jobs, but the professional services, and especially food services and bars have gone up quite a bit. We had reached a peak in about April, and then it actually quickly dropped, so we are now about down to 11% of the unemployment rate. Obviously, we hope that it can continue to come down, and also a lot of these belong to temporary job loss, so a lot of economists actually have a very positive outlook on what’s going to happen.
As we talked about that the market has been really strong right now. A lot of people wonder why – I mean, the unemployment rate still seems to be really high, and we hear all this coronavirus rate is still really high. However, at the same time, the mortgage rate has been very low.
The mortgage demand spikes 33%, and I just quickly grabbed some range from Wells Fargo and Chase on July 7th. I want to remind everybody that this doesn’t apply to everyone – it depends on the FICO Score, your loan-to-value, etcetera, but here is a snapshot.
For jumbo loan, Wells Fargo is offering a 3.25% for 30-year fixed and 2.625% for 7-year ARM. As for Chase, this is a high balance loan limit, and the rate is around 2.49 for 5/1 to about 2.99 to 30-year fixed. The jumbo loan limit is actually higher than the high balance loan limit, and there is also a conforming loan limit. Different areas have different numbers, so in Santa Clara County, anything above $729,000 will be considered jumbo loan limit.
Now, since the rate has dropped so much, we wonder if the rate is going to come back up soon. A month ago, the federal reserve rate has gone down, and they had said that they are likely to keep the rate low until 2022. The chart above shows some projections from a few agencies. They are actually projecting the rate is going to come down from 2020 2Q all the way to 2021 1Q, which will be helping boost the housing market as well.
Again, this chart above shows the home price projection through different organizations. Most of them are projecting the home prices are going to continue to go up even throughout 2022, except the Home Price Expectation Survey has predicted the home price to come down a little bit in 2020. Mostly, we saw that too, it’s mostly during the shelter-in-place that had caused the home prices to come down.
However, if you look locally in the Bay Area, especially the graph above which has compiled statistics from 5 counties in the Bay Area. The orange line represents the 2019 volume, and the blue line represents 2020 sold volume. As you see, most of the time, during the summertime, which is now in June, the activity actually comes down, because in June, July, August, people are going out of town or on vacation. But right now in 2020, it is actually going up, like we said that we have a late start for the spring season in the housing market, people are definitely coming out.
Here you can see the MLS again in all 5 counties. As we compare the numbers from April, May and June, in April, obviously, there are fewer new listings coming out, fewer spendings, fewer closed sales. Same thing for May. In June, there are a lot more new listings compared to 2019 in the same period of time, and there are more transactions going on, but in terms of closed sales, we are still catching up from April and May, because we were still in the middle of the shelter-in-place.
We can see the list price over the sold price in this list of data from Santa Clara County cities. Most of it is still above asking, or slightly below the asking price. This number really shows how strong the market is. Some probably thought that because of the coronavirus, the housing market is coming down, but at the same time, you see that there are still actually a lot of multiple offers occurring in different areas and different cities of Santa Clara County.
Here is another graph showing the list price over the sales price median, and it consists of data from three different counties – Alameda, San Mateo, and Santa Clara County. Looking at the one on the right versus the one on the left, we see that the sales price is still higher. Last year in September, the fourth quarter, it is a little lower, but besides the first two months of this year, everything else is pretty much at or above the list price in general.
Now looking at the projections and the mortgage rates, everything just seemed to be going really well. We also did a small survey from just a few people, and we still see that a lot of people are really thinking about their homes right now. Either they need to move, or they need to remodel. Our team works with a lot of buyers, and we do get calls from some of them saying that they need a bigger space or a bigger yard right now. They are okay with moving a little bit further away from their work, because now they get to work from home more, they don’t have to go into the office every single day. However, other people might say that they don’t want to leave where they live right now, and they just want to remodel.
It is really interesting that 35% said that a new floor plan would be appealing. Now many are actually saying that they would like to have more rooms, more separation, and more privacy instead of an open floor plan, because it gets really tough when you are working at home.
Based on this trend, we invited Studio Director Kaileen Yen and Structural Engineer Jason Powers to talk about Remodeling, Expansion, and Architectural Challenges and Process during our 9th Bay Area Housing Q&A Webinar. Feel free to watch the recording on our HG-TV page!