Elk Grove March 2020 vs. March 2019
These charts show sold homes that went into contract early in the year, mostly January and February. Doesn't that seem like a lifetime ago? The stay at home order due to COVID 19 has created a lot of market uncertainty not reflected in these past numbers. The pandemic has definitely affected our Elk Grove market; 11 homes were put on hold and 11 listing contracts were canceled since the middle of March. The number of homes going pending has also gone down. As of April 10th, Elk Grove has 96 homes for sale with a median price of $483,249. It will be interesting to see how the current conditions will affect our Elk Grove pricing. (note-the Laguna West, Lakeside, Stonelake chart reflects a very small sample size and is not indicative of the overall market).
The Sacramento Region
Ryan Lundquist explains in this week's, Sacramento Appraisal Blog, "Right now we are beginning to get some solid pandemic real estate data...but we’re still waiting to see exactly what happens to the direction of prices over time." Since March 12th, he reports that 517 listings were put on hold, 437 listing contracts have been canceled, the number of homes going pending is down and the number of new listings is down. On a positive note for home sellers, 43% of the homes that went pending since the lock down have had multiple offers.
Other Markets and Future Pricing
It is really tough to see into the future, but maybe we can make some educated guesses based on past markets hit by similar events. In Mike DelPrete's video, The Real Estate Pandemic Survival Guide, he shows how the pandemic has affected the real estate market in other hard hit areas, including China and Italy. He also looks at some other past events. In each case, local markets were affected negatively, but picked up again over time. The amount of time depended on the severity of event. In Jonathon Miller's Housing Notes, he states "If the outbreak is not prolonged, there is still potential for a release of pent-up demand, but this depends on the extent of damage done to the economy" about his New York area.
There are a couple of positives in our market. Most home owners still have quite a bit of equity in their homes and we still have a scarcity of homes in California. On the other hand, a market with a lot of uncertainty that includes a loss of wealth and higher unemployment usually means lower prices. How much lower? It really does depend on how quickly we can get back to normal. Elk Grove put in place the stay at home order early on so maybe that will enable us to get back to normal soon. Ryan Lundquist polled followers on Twitter asking, "Would you buy a house now during the pandemic?" The interesting, non-scientific results so far; 40.4 YES, 32.3 NO, 24.7 MAYBE. Would I buy right now? Yes, I close on a house next week. I can't see into the future, but it has been my experience as an investor that uncertain times are times of opportunity. Only time will tell.
Thank you to Ryan Lundquist for his input and introducing me to the work being done by Jonathon Miller and Mike DelPrete.