The macroeconomic data is encouraging as businesses report stronger results and increased optimism. The labor markets continue to heal as well, albeit at a slower pace. C.A.R. also released its outlook for 2021, which calls for ongoing improvements in the absence of a resurgence of the pandemic. Buyers remain enthusiastic and low rates, which are expected to persist over the near term, are at the root of that trend. However, there are some signs of a recovery that is gradually subsiding to a more muted pace after an initial resurgence.
Updated C.A.R. Forecast Expects More Home Sales and High Prices in 2021: At REImagine!, Leslie Appleton-Young delivered her updated forecast for 2021 that expects sales to continue to improve for the remainder of 2021 and increase modestly again next year. Buyer demand remains robust and that has already pushed California’s median price above $700,000. However, inventory is expected to remain a challenge that will keep sales growth in the single digits next year.
Fewer Mortgages Now in Forbearance: After more than 5 households applied for forbearance during the coronavirus pandemic, those numbers have gradually begun to improve. After peaking at nearly 9% of all residential mortgages during the summer, the MBA now estimates that 6.81% of mortgages are in forbearance. Although that still represents more than 3.3 million households, nearly 1 million are no longer skipping payments.
More Encouraging Macro Data Last Week: Business optimism increased, inflation eased (so the Fed will be encouraged to continue to accommodate), and interest rates are back to all-time low levels of just 2.87% last week according to Freddie Mac. Unsurprisingly, buyer demand for those still employed remains robust in this low-rate environment and California’s weekly showings index is currently 182.3% ahead of the same point in 2019 and mortgage purchase applications were up 24.2% on an annual basis last week.
REALTORS® Growing Less Optimistic As Business Finally Starts to Slow: Although the percentage of California REALTORS® that closed a sale and entered escrow were both up last week (by 4.5% and 11.1%, respectively), fewer reported listing a property (-4.9%) and fewer also did listing appointments (-2.7%). In addition, optimism about the future has also continued to wan from its peak back in August. The percentage of California REALTORS® expecting ongoing growth in sales, listings, and prices all fell last week.
Weekly Market Data Slowing: After remaining unseasonably strong through September, closed transactions finally began to dip last week with an average of 807 daily closed transactions. That is down 15.4% from the previous week and was led by double-digit declines in almost every part of the state. The Central Coast fell 20.1%, Southern California dipped 18.7%, the Far North was down 14.3%, and the Central Valley was down 12.5%. Only the Bay Area escaped with a single-digit decline of just 9.5% last week. New listings and pending sales were also trending down last week.
Serious Delinquencies Rising in California: Despite the relative strength of housing and the recent improvements in forbearance numbers, the number of serious delinquencies and potential foreclosures in California remains a risk over the medium term. According to recent data from the MBA, 6.83% of California’s residential mortgages were delinquent by 30 days or more delinquent. Foreclosure starts remain minimal due to current moratoria, and many of these homeowners may get current, sell their homes, or otherwise avoid foreclosure, the numbers translate into more than 350,000 homeowners behind on payments here in California.
For now, things are moving in the right direction epidemiologically, economically, and in the housing market.