San Diego home sales had their biggest annual drop since the Great Recession in April as the effect of COVID-19 hit the housing market.
There were 2,499 home sales in April, down 30 percent from the same time last year, according to CoreLogic data released Tuesday by DQNews. The last time there was a year-over-year drop of that magnitude was March 2008.
Unlike the Great Recession, there was not a corresponding drop in home prices in April. The median home price reached $594,500, around 50,000 less than the record high reached in November.
The data is the first sign of what the housing market could look like in the age of the virus. Sales in April reflect purchases that began in March as stay-at-home orders swept the nation. While fear of economic insecurity stopped some potential buyers, another major factor in the slowdown was likely many sellers taking homes off the market to wait out the virus.
In March, when most of the sales reflected in April data took place, there were about 5,160 homes listed for sale, said the Redfin Data Center, a drop of 27 percent from the same time last year. It said that around the same time, de-listings, or homes being taken off the market, made up 8 percent of the market.
“Sellers have taken a bigger step back than buyers,” said Jordan Levine, deputy chief economist at the California Association of Realtors.
He said low inventory means many buyers in markets like San Diego are forced to fight it out for a limited number of properties — and continue to push prices up.
Levine said he did not expect a major drop in prices like during the Great Recession because the fundamentals of the market were strong going into this crisis. That is, there weren’t a lot of shaky home loans that couldn’t be paid back and banks that were over-leveraged. Also, he said governments and banks are more determined to keep people in their homes now than during the recession, when a lot of foreclosed homes flooded the market.
“Institutions realize it is better to try and help folks hang on to these homes and make it through the crisis,” he said, “and that will ultimately be a lot cheaper and less damaging to the economy.”
On a month-to-month basis, San Diego County home sales were down 26 percent from March to April. Bigger monthly drops are more common in recent history and are typically tied to interest rates. The last time sales dropped as much was December 2016 to January 2017 with sales dropping 28 percent as interest rates rose north of 4 percent after nearly a year of rates hovering around 3.5 percent.
The median price for a resale single-family home in April hit an all-time high of $650,250, even with 24 percent fewer sales than the previous month. Resale condos stayed near record highs, with a median of $435,000, but had the biggest monthly drop in sales of any category at 32 percent. Newly built sales, considered statistically insignificant because of so few available, had 235 sales (down 11 percent) and the median was $632,500.
At least some analysts and business owners say this might be a good time to buy or sell. Take Josh Stech, the CEO of the San Francisco-based company Sundae. His business buys distressed homes quickly from homeowners, similar to Zillow Offers and RedfinNow, except it only focuses on houses that need significant work.
Stech said it may actually be a good time to sell. He predicted there would be a big increase in new listings as stay-at-home orders are lifted so buyers would have more options. Also, he said there would be at least some foreclosures coming out of the economic shock of the past few months, also increasing supply.
“The recommendation I’ve been giving people is not what I’ve been reading,” he said. “My perspective is if you are thinking of selling in the next year or two, this is the time to sell. I would say you will get a better price today than the next year or two.”
On the buying side, he also said low interest rates are likely not to be this great forever, so there is also opportunity from that side on the market. At the same time, he said mortgage credit requirements are only getting tougher. The mortgage rate for a 30-year, fixed-rate loan was 3.31 percent in April, said Freddie Mac, down from 4.47 percent at the same time last year.
Home prices were up annually across Southern California by 4.3 percent. Riverside County had the biggest jump, rising 5.8 percent for a median of $412,500.
It was followed by San Bernardino County, up 5.4 percent for a median of $353,000; San Diego County up 4.3 percent for the median of $594,500; Los Angeles County up 3.8 percent for a median of $630,000; Orange County up 2.7 percent for a median of $755,000; and Ventura County up 2.6 percent for a median of $600,000.