The COVID-19 pandemic has had an impact on all aspects of our lives, including our finances. Rising unemployment, stock market fluctuations, and worries about the future are impacting people’s financial decisions. Many San Diegans are worried right now about the value of their home and/or real estate investments.
If you are like most people, you have questions:
- Has the real estate market changed in San Diego County since mid-March when we sheltered in place? Yes
- Are we entering a recession? Most likely yes (according to the experts)
- Are we heading towards a housing crash? No
Recession DOES NOT Equal Housing Crisis
Experts looking at historical data are warning that we are heading towards a recession, if we aren’t already there. But, what does that actually mean for the real estate market? What is the definition of a recession? According to the National Bureau of Economic Research, a recession is a “significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real Gross Domestic Product (GDP), real income, employment, industrial production and wholesale-retail sales.”
Most experts believe in the future we will look back at this time of April through June 2020 and the data will show this was a time of recession in the United States. Does that mean we’re headed for a housing crash? Past recessions did not adversely impact home values, with the exception of two: the Great Recession from 2007-2009 and the Gulf War Recession from 1990-1991. According to Freddie Mac Home Price Index data from 1975-2018, no other recessions have impacted the U.S. housing market.
But, yes, the real estate market has been impacted by COVID-19 and the “shelter in place” directives. There are fewer buyers and sellers. Lenders have tightened their lending belts, especially with jumbo loans. Potential buyers have taken losses in the stock market. Escrows are taking longer, and we have a new norm for showing homes – virtual tours and showings are taking place. Making the saying “pictures tell a thousand words” truer than ever.
Comparing March 2020 to March 2019, the San Diego County HomeDex Marketwatch Report shows that closed sales in East County and North County have increased, while all other areas of the county have decreased. Pending sales, days on market, and inventory have also all decreased. But median sales price has increased for an average of 6.2%.
Housing is an essential need, and there are things you can do to ensure your home keeps as much value as possible. Improvements and repairs can still be completed now. Contractors are looking for work. Consider the exterior of your home: do you need to paint? Do you need to complete wood repairs? Does your fence need to be repaired or re-built? Do you need a new driveway or walkway? Do you need to refresh your landscaping? Do you need a roof repair? There is plenty we can still do to call our home our castle and/or prepare it for sale.
The experts agree the length of the recession depends upon the course of the pandemic. Based on today’s information, we expect to begin to see a recovery in the third and fourth quarters of 2020 and especially in 2021.
San Diego has a strong and diverse economy. We are fortunate to have a variety of business sectors: military, agriculture, banking, medical and biomedical, technology, and hospitality. Many of these industries are considered essential and have remained operational during the pandemic.
Sellers are still selling and buyers are still buying. The time is right to sell or buy when it’s the right time for you. Whether we currently consider ourselves in a recession, or if we are about to enter one, experts predict the housing market will be the sector that leads the economic recovery.
If you plan to sell, buy, or rent, know there are multiple new California Association of Realtors documents related to COVID-19 and the real estate transaction. We are also available to answer questions.
Written by Ron Greenwald, MBA, SRES Lic#01264025 and Patti Gerke, MBA, SRES, CRS Lic#01386269 – Realtors® with COMPASS located in San Diego, CA, and online at www.greenwaldgerke.com