COVID-19 has impacted the economy across the board.
The economic data prior to the Coronavirus was pumping on all cylinders. Consumer confidence, consumption, unemployment, housing, stocks, leading economic indicators, everything was pointing to a phenomenal 2020. After the virus broke, every chart was impacted severely. Housing was no exception.
Experts have been debating what the economic recovery will look like. Initially some experts were calling for a quick rebound, a “V-Shaped” bounce. That is when the economy rises nearly as fast as it falls.
Yet, with more time to reflect on all the data, most experts now agree that it will be a “U-Shaped” recovery, one that after hitting a bottom will slowly but surely turn upward.
The best analogy is a dimmer switch. As the dial is slowly turned, the economy will continue to accelerate until one day it is pumping on all cylinders again.
Housing is proving that it is an exception and is currently experiencing that “V-Shaped” recovery with demand soaring 38% in the past two weeks. How can that be?
The sleeping giant has awakened. Even though life as everybody knows it has ben turned upside-down and California has only moved to “Phase 2,” record-low interest rates are instigating demand. Donning masks and gloves, buyers are viewing homes again and making offers.
Prior to the “stay at home” order in mid-March, housing was a sizzling hot Seller’s Market with extraordinarily little inventory and unbelievable demand.
It was the hottest start to a Spring Market since 2013, a Spring to remember for Orange County housing. Low mortgage rates, average 3.75%, was stoking the fire of demand. When the virus hit, demand plunged, and the market slowed.
Now that it has been a couple of months, flattening the Coronavirus curve has been successful so far. Slowly but surely more of the economy is coming back online. As a result, eager buyers who had been sitting on the fence waiting to purchase are jumping back in and ready to take advantage of record low mortgage rates at 3.25%.
In the past couple of weeks, demand (the last 30-days of pending sales) jumping from 1,172 pending sales to 1,622, a 38% rise. It was last at this level in mid-January.
Typically, during this time of year demand has already peaked and it does not change much at all. Not this year. Demand is in recovery mode and the sharp increase indicates that it is “V-Shaped.”