Even as the pandemic persists and economic uncertainty rises, the housing market, although normalizing, is
remaining remarkably resilient with little evidence of an impending foreclosure crisis. Home sales have fallen from
15-year highs and the number of new mortgage applications have been sliding for nearly 4 months. However, the
market is just returning to pre-crisis levels where excess demand and too little inventory are at “regular” rather
than extraordinary levels. Many challenges remain ahead, but for now, rates remain low and buyers may even be
getting slightly more bullish on housing.
Buyers Feeling Slightly More Optimistic About Buying: In our monthly survey of California consumers’
housing sentiments, the percentage of respondents who thought it was a good time to buy increased from
an all-time low of 17% in July to 18% in August. This remains depressed relative to pre-crisis levels, but it is a
slight improvement and show how even a small uptick in supply can help to bolster buyer spirits. This was
also reflected in the mortgage application data, which was still down, but by slightly less than in preceding
weeks. With interest rates remaining below 2.9%, buyers should continue to be enticed, but the wildcard
remains the public health numbers that have typically depressed new listings as they rise.
Serious Delinquencies Drop Sharply in California: According to new data released by the Mortgage Bankers
Association, the number of mortgages that are 90 or more days delinquent fell to 2.72% in the second quarter
from 3.27 in the first. That marks the third consecutive quarterly decline and shows that although the broader
economy has been significantly impacted by the crisis, homeowners have largely prioritized their mortgage
payments in the fact of financial distress. There was a slight uptick in 0-30-day delinquencies as the
forbearance program expired, but all other categories of delinquency were down including notices of default.
Seasonal Pattern Appears to Reassert Itself: After completely bucking the typical seasonal pattern in 2020,
California’s housing market has started to resemble a typical year as sales in the state appear to have peaked
in June and July before gradually declining in August. As a result, August will likely show another modest
decline in transactions as the market continues to normalize after hitting 15-year highs in December. Last
week, home sales were down relative to the same point in 2020 for 4th time in the past 5 weeks.
Recent Uptick in COVID Cases Impedes New Supply: The number of new homes being added to MLSs around
the state had been showing signs of improvement during the Spring and Summer, with some genuine
increases relative to 2020 levels in recent months. However, as the number of new coronavirus cases begins
to rise sharply, the state has begun to fall short of last year again. Last week marked also marked the 4th week
in the past 5 that saw the number of new listings shrink. California averaged just 818 homes added to the
MLS each day last week compared to more than 1,000 per day at the end of August 2020. In addition, more
REALTORS® reported having a seller hold back from selling last week–roughly 2 out of every 5 members who
responded.
Mortgage Applications Continue Losing Streak: Last week was the 14th consecutive year-to-year decline in
new purchase mortgage applications, according to the Mortgage Bankers Association. C.A.R.’s weekly sales
totals generally track with broader mortgage applications with a 5-6 week lag, and this suggests that the
current market normalization that began in July is likely to persist through the August data and likely into
September as well. However, new applications are roughly on par with 2019 levels, which suggests that the
market is normalizing back to pre-crisis levels rather than cooling or under-performing.
California Pandemic Numbers Remain Elevated: The 7-day average for new coronavirus cases is currently
12,275, which is down slightly from 14,451 per day last week. However, the situation remains very
challenging as the positivity rate for new tests remains in excess of 5% and the hospitalization rate continues
to grow. The number of Californians that have received at least one dose of the vaccine has grown in recent
weeks as various events and employers begin to mandate vaccination, but only 56.6% are currently fully
vaccinated.