Update to the Nevada County Market and the impact of COVID
In my last blog post (early May 20200,) we had begun to see pretty significant impacts on the Nevada County residential real estate market. New listings were down, pending sales were down, properties taken off the market were way up, and closed sales were slightly down.
We’ve had a few months of similar trends and I have some observations. First, let’s review some fresh statistics. I’ve concentrated on comparing 2020 vs 2019 to isolate the impact of a COVID 2020 market and comparing that to a normal 2019. From Jan 1 - March 19 (CA’s stay-at-home order begin date), 2020 was out to be a similar year to 2019, maybe even have a larger amount of sales. From March 20 to July 1 has been a completely different story.
New Listings
New listings are still down. The state of CA issued industry guidance for Real Estate Transactions in early May which has helped real estate professionals understand how to navigate buying and selling homes during a pandemic. These have helped both buyers and sellers understand what to expect when viewing a property. Masks, gloves, shoe coverings, and hand sanitizer is mandatory in almost all homes that are occupied by sellers. Still, new listings are down 35% in 2020 (from March 20 - July 1) vs 2019. I believe this is two-fold, there are some sellers who have decided they don’t want to sell in such uncertain times. There is also a group of sellers who still want to put their home on the market but are not comfortable with potential buyers entering their home. I’ve been calling this a potential phantom inventory of new listings that could eventually hit the market.
Pending Sales
At the beginning of the pandemic, pending sales were down 48% (March 16-31) but have since rebounded in a big way. Overall pending sales are actually up 16% from March 20 to July 1 in 2020 vs 2019. The average listing prices of those pending sales are slightly up (+6%). This shows that buyers are still wanting to buy homes. In fact, from June 16 - June 30 2020 there were 129 pending sales in Nevada County, an increase of 122% over the same period in 2019. It’s common for a home to sell very quickly if its priced correctly. Most of the appraisals I have completed in Nevada County the past few weeks show a drastic inventory shortage in many markets.
Listings Taken Off Market
Just like pending sales, we saw a dramatic impact on listings taken off the market at the beginning of the pandemic. From March 16-31 there was an increase of 228% in homes taken off the market (2020 vs 2019). This trend did not continue. Overall from March 20 - July 1 listings taken off the market are slightly up (+7%) in 2020 when compared to 2019.
Closed Sales
Because the purchase of a home involves an escrow time period, the data for closed sales typically lags a little but gives good insight as to what transactions actually complete. At the beginning of the pandemic, some properties in escrow fell out because buyers didn’t want to complete a purchase during such uncertain times. An escrow of a home I was appraising was delayed because the buyers home they were selling, out of the area, fell out of escrow. While this is a normal scenario, any delays will impact the sales that can close. From March 20 - July 1 closed sales are down 14% in 2020 vs 2019. With the number of pending sales from June 16 - June 30, I’d expect that to change.
Prices
Overall, closed sale prices are a good indicator of price trends. Right now, the data indicates prices are overall stable. The average sale price for all sales March 20 - July 1 was $478,667 in 2020 (All residential sales in Nevada County per Metrolist MLS). This is slightly up (+2%) from the same time period in 2019. The average price per square foot was $247.57, which is slightly down (-1%) from 2019. Some buyers are expecting to get a COVID pandemic discount, and it’s just not there. I have noticed, due to the lack of inventory, that buyer’s offers are often higher than the market can support. Because of the lack of inventory, potential buyers feel the need to make a full-price offer or an offer above listing price within the first few days a home is on the market. If this price is higher than what can be supported, this can cause major issues with closing escrow, especially if the buyer is relying on financing to close that escrow. It’s always best to consult your real estate professional when deciding on your offer. If that offer cannot be supported, be prepared for the lender to require more funds out of pocket in order to complete the deal.
Marketing Times
The average combined days on market (CDOM) is the way real estate professionals measure how long it takes to sell a home. In 2019 the average monthly CDOM ranged from 49 to 89 days. 2020 has been much of the same with monthly averages ranging from 51 to 92 days. It’s important that sellers keep this in mind when their home is newly listed, but didn’t sell in the first 10 days. We all hear stories on social media that people are selling their homes in one weekend, and that does happen, but the reality is that 2-3 months of marketing time is typical. And when the price range goes up, typically so do the marketing times.
Other Economic Factors
The unemployment rate in Nevada County was 14.2% according to the preliminary numbers for May 2020 (CA Dept of EDD). That’s 4,190 more people on unemployment in 2020 than there were in 2019. This is massive and many are thought to be temporary, and with the economy re-opening and individuals returning to work, it’ll be imperative to determine how many temporary unemployment situations become permanent. It’s not just retail, bars, and restaurants that may be subject to a trickle-down effect. There will be many support industries (such as sales forces, marketing, advertising, tech support, and manufacturing) who will not feel the impact of a recession until months later.
Since early April, the Judicial Council of California voted to halt evictions and foreclosure filing for 90 days. This has been extended and there is the legislature in progress (AB 1436) that would bar landlords from evicting tenants for up to 90 days after the state of emergency is lifted. We may see a dramatic rise in evictions and foreclosures once they are legally allowed. Mortgage forbearance, or pausing your mortgage payments, has slightly decreased but according to the Mortgage Bankers Association 4.2 million homeowners currently have mortgages in forbearance plans (as of 6/28/2020).
The average U.S. rate for a 30-year fixed mortgage rate last week was 3.13% which is the lowest on record per Freddie Mac. Lower mortgage rates typically help support stable and increasing home prices because the cheaper the mortgage rate, the more borrowers get with keeping the same monthly payment.
Final Thoughts
Right now, the Nevada County real estate market is playing catch up for the March and April lost months. This is true for many parts of the country. Locally, we are seeing fewer sellers list their homes, which is creating a shortage. It’s unknown if this shortage will continue with many businesses and industries ‘opening back up’ and attempt to return to normal. Prices continue to remain overall stable. Sorry, buyers, there is no massive pandemic discount. And sellers, although there is a shortage, we haven’t seen prices increase yet. Marketing times remain very similar to what they were pre-pandemic. There are so many other factors going on in our economy this is always subject to change. As I’ve said many times before, my crystal ball is broken, so I’m not going to predict what’s going to happen in the future. Of course, I will be here to analyze the data and pass my analysis along.
I wish everyone a happy, safe 4th of July!
