Over the past few weeks, some housing analysts and economists have expressed concerns that the new coronavirus / COVID-19 pandemic would bring the housing market to a standstill. That hasn’t happened.
Things have certainly slowed down, as you would expect in a situation like this. But in California, home-buying activity continues to go on despite the coronavirus situation.
In fact, a new report out this week showed that California currently leads the nation in terms of purchase loans used by home buyers.
California Home-Buying Activity Increased in Late April 2020
Lately, we’ve been paying close attention to the weekly mortgage loan application survey, conducted by the Mortgage Bankers Association (MBA). This report offers valuable insight into home loan application trends nationwide and, in some cases, at the state level.
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MBA’s weekly survey has revealed some interesting trends regarding California home-buying activity during the COVID-19 crisis. As we wrote last week, the MBA loan application survey showed a week-to-week increase in purchase loans (used by home buyers).
This week, there were some additional signs that the California housing market is holding up through the crisis. MBA’s latest forecast suggests that home-buying activity in California has rebounded a bit from the severe slowdown that happened in mid-April.
On May 6, MBA’s chief economist Mike Fratantoni wrote:
“Purchase volume increased for the third week in a row, led by strong growth in Arizona, Texas and California.”
In fact, the Golden State led the nation in terms of the week-over-week increase in purchase loan applications.
Evidence of a Psychological Shift?
These latest trends show an increase in home-buying activity across California. That’s a good sign. But what’s the driving force behind it? What’s happening within the real estate market?
Psychology might have something to do with it. These recent reports could be an early sign that California residents are starting to view the real estate market in a more favorable light. Most people realize that our current economic issues are temporary, and that the housing market will ramp up again when the crisis fades.
Additionally, a lot of people are now realizing that (A) you can still buy a home in California during COVID-19, and (B) you can do it with little to no face-to-face interaction. In other words, the pandemic is not a total deal-breaker.
The phrases “real estate transaction” and “home sale” can conjure images of office visits, meetings, and other forms of interaction between the parties involved. But things aren’t handled that way at present.
The truth is that the real estate and mortgage industries have rapidly adapted to the public health crisis. Nearly all of the paperwork can be done digitally. Home buyers can look at homes through virtual tours, over the internet. And even when an in-person visit is needed, protocols are in place to protect buyers and sellers alike.
This could be part of the reason why California home buyers are still applying for loans and making purchases, as of May 2020. They’ve realized it’s do-able.
Record-Low Mortgage Rates Entice Buyers
Just when we think mortgage rates can’t drop any lower, they prove us wrong. Again. This is another factor that could be bolstering California home purchases in spring 2020.
During the first week of March, the average rate for a 30-year fixed home loan sank to its lowest level in history (at the time). Thirty-year loans held an average rate of 3.29% that week, according to the weekly survey conducted by Freddie Mac. That was its lowest level in 50 years of surveys.
Surprisingly, rates dropped again last week. So we’ve hit yet another all-time record low.
On April 30th, Freddie Mac’s research team wrote:
“These low rates are driving higher refinance activity and have modestly helped improve purchase demand from their extremely low levels in mid-April. While many people are benefitting from low mortgage rates, it’s important to remember that not all people are able to take advantage of them given the current pandemic.”
Low mortgage rates will probably stay with us for a while. That’s partly due to economic stimulus measures taken by the Federal Reserve, in recent weeks. Good news for buyers!
Recap: California Housing Market Plugging Along
So we have a number of factors happening here, all of which could be helping to sustain real estate market activity in California.
- Mortgage rates have fallen to record lows, giving home buyers a chance to reduce the size of their monthly mortgage payments.
- The real estate industry in California (and nationwide) has modified its practices, in order to minimize interaction between parties.
- Meanwhile, there appears to be a change in mindset taking place among home buyers and sellers. People are beginning to realize that deals are still being made, and that it’s possible to buy a home in California during the coronavirus crisis.
We have a long road ahead, before things get back to normal. So let’s all do our part and continue to look out for one another. But it’s nice to see a little ray of light now and then.