COVID-19 and The Effect on Mission Viejo Real Estate Market
I hope this message finds you and your loved ones in good health. At this difficult time in our country, I want to take a few minutes to reflect on what is going on and perhaps add my perspective to things.
With all the doom and gloom that is filling the news these days, many people are predicting a real estate market crash similar to the 2008 situation. But remember, we are in a health crisis and not a real estate crisis. While there is a general slowdown in the total economy, there are NOT many factors that point to a market meltdown.
Current inventory levels have dropped between 20-25% compared to last year, but the demand has also dropped similarly. We are STILL seeing a strong demand for the existing homes that are on the market.
Now, the government has included real estate as an essential business so for the time being, we are able to conduct business, but are having to shift many of our practices in response to local directives.
While open houses are not permitted, in-person showings are on a case-by-case basis.
Some sellers and listing agents have put strict hygiene practices in place requiring face masks, gloves, shoe covers and disinfectant wipes, but other sellers have decided that they don’t even want people in their homes and are requesting only virtual showing.
The industry has responded by upping their game with our listings by using 3-D virtual tours, recorded video, live video tours conducted by the seller, and by adding more photos to the listings.
Our company just closed its first virtual transaction when there was no face-to-face contact among the parties. I’m sure this will become the future for many segments of the real estate business as it will for many other industries.
Another factor that is affecting inventory is that people are not able to complete their existing contracts and are pulling out of their purchase.
Most of these are situations where the buyer has lost significant income or lost their job altogether and they are not able to get a loan. When this happens, we are seeing that these homes are quickly put back under contract with fresh buyers.
You see, there is still a ready and willing buyer pool out there. In fact, many buyers are more successful now than just a few weeks ago because there is less competition for the existing inventory.
Because of this steady demand, we’re not seeing a softening of prices. This could change at any time but the overall strong demand for housing in Mission Viejo and all of South Orange County California should keep prices up. There will not be a bursting bubble as many are predicting. If prices soften, I don’t think we’ll see anything more than about 5-8%, which is about what we gained last year.
If banks continue working with their customers' loans, we will avoid the foreclosure crisis we saw in 2008.
Now just a word of caution if you are in a tough financial situation regarding making your mortgage payments.
Be extremely cautious when considering a forbearance on your loan. Remember, forbearance is NOT forgiveness. Don’t fall into this trap. You WILL have to repay any payments that are temporarily suspended.
As of today, there is no across-the-board policy to protect loan holders. Some banks are granting a three month pause, but they will demand all the delayed payments be made at the end of the three months.
This is the worst case scenario for any loan holder to consider. Other banks are adding the delayed payments to the end of your loan and some are working out some accelerated payments throughout the loan term.
If you are at this stage financially, please reach out to me or a financial professional before you make any arrangements with your bank. We are all here to help you make it through this difficult time.
As we emerge from this crisis, I predict we will see a robust market, especially with all of the people who withdrew their homes from the market in the past month and also for the people who still have a strong need to move. Maybe it’s to accomodate a job transfer, moving into lower maintenance homes or settling an estate.
There are new homes hitting the market everyday which proves that there is still a need for some people to get moving in spite of the crisis.
I am also seeing the investors becoming more active hoping to scoop up properties at a deep discount. Again, be careful of any of these “I’ll buy your house for cash now” agencies. They will make a quick purchase but you will take a severe beating on the price. Investors never pay market value. If you are in a situation where you need to sell quickly, please give me a call before you accept one of these offers, whether from a local agent or even one of those online companies.
So, thanks for taking your time to watch this video. If you have any specific questions about your property or real estate here in Mission Viejo or South Orange County, feel free to reach out and give me a call, send me a text or email. I’m here to help with any of your real estate questions.
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And I’ll see you on the next one.