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July pending home sales jump over 15% annually, as properties go into escrow in record time

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FROM CNBC.COM:

  • Pending home sales, which measure signed contracts to purchase existing homes, increased 5.9% in July compared with June, according to the National Association of Realtors.
  • Sales were 15.5% higher annually.
  • “Home sellers are seeing their homes go under contract in record time, with nine new contracts for every 10 new listings,” said the NAR’s chief economist, Lawrence Yun.

The usual summer slowdown in the housing market is not happening this year. Buyers continue to show strong demand, spurred by the new stay-at-home world of the coronavirus and by record low mortgage rates.

Pending home sales, which measure signed contracts to purchase existing homes, increased 5.9% in July compared with June, according to the National Association of Realtors. Sales were 15.5% higher annually

“We are witnessing a true V-shaped sales recovery as homebuyers continue their strong return to the housing market,” said Lawrence Yun, the NAR’s chief economist. “Home sellers are seeing their homes go under contract in record time, with nine new contracts for every 10 new listings.”

Yun said he does not expect sales to drop off in the historically slower fall season. He is predicting existing home sales to increase to a 5.8 million annualized pace in the second half of this year. That would bring the full-year total to 5.4 million, a 1.1% gain compared with 2019.

Regionally, pending home sales in the Northeast rose 25.2% for the month and were up 20.6% from a year ago. In the Midwest, sales rose 3.3% monthly and 15.4% annually.

Pending home sales in the South increased 0.9% for the month and were up 14.9% from July 2019. Sales in the West rose 6.8% monthly and 13.2% annually.

The only thing holding back even stronger sales is the shortage of homes available. Inventory at the end of July was down 21% annually, marking the lowest supply ever recorded by the NAR, since it began tracking this metric in 1982.

“Anecdotally, Realtors are telling me there is no shortage of clients or home seekers, but that scarce inventory remains a problem,” Yun said. “If 20% more homes were on the market, we would have 20% more sales, because demand is that high.” 

Mortgage rates marked record lows in July, giving buyers additional purchasing power. Home prices, however, continue to push higher due to stiff competition in the market. The median home price in July hit a record $304,100, as measured by closed sales.

July sales of newly built homes, which are also measured by signed contracts, surged dramatically, as buyers are now looking for new, high-tech, smart homes with floor plans designed for working and schooling at home. Builders are also benefiting from the severe shortage of existing homes for sale. 

WRITTEN BY DIANA OLICK FOR CNBC.COM

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Bidding Wars Are Back. Here’s What You Need to know

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From MotelyFool.com: Housing prices can fall during a recession, but that doesn’t always happen right away. Sometimes, it takes a while for home values to drop, but once they do, it gives investors a key opportunity to snag quality real estate on the cheap. And that opens the door to huge profits for house flippers as well as investors looking to snatch up rental properties.

But that doesn’t seem to be happening during our current recession. Not only are home prices holding relatively steady but buyer demand seems to have surged. In fact, against the odds, bidding wars are making a comeback on the real estate market, and while that’s great news for sellers, it poses a challenge for buyers.


Bidding wars are back

A good 53.7% of home purchases were subject to bidding wars in June, according to Redfin (NASDAQ: RDFN), which is surprising at a time when the economy is sluggish. But a big reason for that could boil down to the fact that there’s not a lot of inventory on the market today.

What makes our current recession unique is that it was spurred by a health crisis, not economic uncertainty. As such, many would-be sellers may be holding off on listing their homes due to the tricky logistics involved. At a time when open houses require thorough planning and subsequent sanitizing, sellers who aren’t in a rush to find buyers are likely putting their plans to list their homes on pause. That, in turn, leads to a shortage of available homes to buy, which explains why those looking to purchase are being pushed into a situation where they’re forced to outbid one another. In fact, Redfin reports that in May 2020 (a time of year when listings tend to be abundant), the number of homes for sale was down 18.9% from the same time last year.

Furthermore, historically low mortgage rates could be driving more people to buy homes. On July 16, the average rate for a 30-year fixed mortgage dropped to 2.98%, the lowest on record.

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When does it pay to engage in a bidding war?

In hot markets, bidding wars are often inevitable, both during periods of steady economic activity as well as recessions. But does that mean it’s worth engaging in one?

To some extent, it might be. If you’re looking to buy a home in the suburbs of a major city, now’s a good time to do so. Many city dwellers are reeling from the COVID-19 lockdown and may be itching to abandon urban life in the coming months. As an investor, you have a solid opportunity to make money by flipping a house outside a major city quickly or buying a rental. If that’s the situation you find yourself in, participating in a bidding war could make sense.

But remember, the more you pay for a home, the more it impacts your bottom line, so what you don’t want to do is get in over your head and overspend on a home you’d likely be able to snag for a much more competitive price a year or two down the line. Therefore, do your research to see which markets are currently experiencing bidding wars and why. If the market you’re targeting usually isn’t loaded with buyer competition, it could pay to bide your time and wait things out.

WRITTEN BY MAURIE BACKMAN FOR MOTELYFOOL.COM

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The 4th of July events still happening in SoCal this year

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FROM THE LA TIMES: NOTE-Many 4th of July events are now being canceled, or are expected to be canceled, due to the recent spike in coronavirus cases: Check websites, and social media before you head out so you’re not disappointed. And don’t forget your mask.

For fans of fireworks shows, this Fourth of July will feel like a rather subdued affair. Many traditional events in Southern California have been canceled due to the ongoing pandemic. Below, THE LA TIMES has compiled a list events that are still on as well as virtual events you can safely enjoy from home.

Outdoor Fourth of July events

Note that the Santa Clarita 2020 Spirit of America Fireworks Spectacular and the Rancho Cucamonga Community Fireworks Show, which had earlier been billed as some of the few outdoor fireworks shows in the area this year, have been canceled.

Avalon’s 4th of July Celebration. If you can make it out to Catalina Island, the city of Avalon is hosting a celebration on July 4. The day begins at 10 a.m. and activities are planned until 9 p.m. lovecatalina.com

A Front Yard 4th of July in Huntington Beach. This year’s parade will tour neighborhoods throughout Huntington Beach. The city also is hosting a home-decorating contest. hb4thofjuly.org

Drive-In Movie at the Rose Bowl. The Rose Bowl will screen drive-in-style movies on weekends this summer starting July 2. Tickets are per vehicle, and parking spots are assigned on a first-come, first-served basis. A full list of films and times is available on the website. tribecafilm.com

Fourth of July Extravaganza at Vitello’s. Alfresco dining in the Vitello’s parking lot in Studio City, 7 p.m. on July 4. vitellosrestaurant.com

Virtual Fourth of July events

Grand Park + the Music Center 4th of July Block Party. Performances and more on Grand Park’s streaming platforms. July 4th (time TBA). july4.grandparkla.org

Fontana’s 4th of July Virtual Celebration. The city has taken the most memorable snippets of previous Fontana fireworks shows and compiled them into one show. The virtual watch party begins at 5 p.m. on local TV channels, the city website, YouTube or Facebook. The city also is hosting a recipe contest. fontana.org

2020 RunnerMania Virtual Running Festival. The virtual festival has a 5K race, a half marathon and a 24-hour ultra marathon, which involves completing as many miles as possible over 24 hours. Participants competing in the 5K and the half marathon are expected to complete their distance over the weekend starting July 3 and ending July 5. (This relies on the honor system: You self-report your mileage and time.) Registration required. thevirtualrunchallenge.com

Monterey Park Virtual Celebration. Decorate your home for Fourth of July and submit pictures. Photos will be included on the city website and shared on social media. montereypark.ca.gov

Feels Like Summer by DJ Illanoise. An immersive audiovisual livestream with a theme of “summer in Los Angeles” by DJ Illanoise, an L.A.-based DJ and podcast producer. Organizers said they are streaming all day on July 4. Tickets are $10. Net proceeds benefit Los Angeles food banks. feelslikesummer.la

This New Credit Score Could Help More Home Buyers Receive Mortgages

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FROM REALTOR.COM:  With the U.S. mired in a recession and unemployment at its highest level since the Great Depression, many lenders have turned off the credit spigot for all but the most qualified borrowers. So despite record-low mortgage interest rates, many would-be home buyers have been left frustrated.

A new credit index released by Fair Isaac Corp. this week could change that, potentially making it easier for borrowers to score a loan. The company also produces the widely used FICO credit score.

The FICO Resilience Index is intended to help lenders assess the ability of a borrower to withstand an economic downturn—even those with lower credit scores. It was designed to encourage lenders to continue making loans without raising minimum credit score requirements and other criteria. Lenders can use the score produced by the Resilience Index in addition to the regular FICO score.

“Our hope is that it will allow lenders to continue to be able to make prudent loans,” says Joanne Gaskin, vice president of scores and analytics at FICO. “Lenders are going to feel more comfortable continuing to approve borrowers rather than denying” them.

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During the last recession, millions of consumers with lower credit scores still met their financial obligations, according to the company.

“It’s a step in the right direction,” says realtor.com Senior Economist George Ratiu. “Just one number, the traditional FICO score, shouldn’t be the sole metric in determining a borrower’s ability to repay a loan.”

Lenders are a bit skittish given the economic climate. Credit scores do not reflect whether homeowners are receiving mortgage forbearance because of pandemic-induced hardship.

“For a lot of lenders in the current environment, the FICO score is not a clear indicator of a consumer’s current financial health,” says Ratiu.

The new FICO score could relieve some of their concerns. It will place less weight on missed payments and more emphasis on lower account balances and credit utilization, says Gaskin. It does not factor in how much money someone has stashed in their savings account.

“It makes sense that these are consumers who have a cushion going into an economic downturn,” says Gaskin.

But the new scores may not benefit everyone equally—which could be especially hard on people of color, says Stephen Ross, an economics professor at the University of Connecticut. He is also co-author of “The Color of Credit: Mortgage Discrimination, Research Methodology, and Fair-Lending Enforcement.”

“It will certainly change who gets loans in a recession,” says Ross. “We know minority borrowers tend to have bigger income losses and more periods of unemployment during economic downturns.”

WRITTEN BY CLARE TRAPASSO FOR REALTOR.COM

What Home Buyers and Sellers Can Expect in 2020, as Pandemic Revises Forecast

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FROM REALTOR.COM: There are so many ways in which 2020 is not turning out the way most Americans expected. In terms of real estate, we were hurtling toward a busy spring season. All the economic indicators looked strong, boosting buyers to battle it out for a limited supply of homes. But then the coronavirus pandemic swept across the nation, upending those expectations and forcing us to reassess the year ahead.

Home sales have fallen and real estate listings dissipated as the COVID-19 pandemic made many buyers and sellers think twice about buying, selling, and potentially even moving with a deadly and highly contagious virus on the loose. But home sales will rebound in the late summer and fall, driven by millennials eager to own a home of their own, according to a revised forecast for 2020 by realtor.com®’s economists.

Markets in smaller, more affordable cities and surrounding suburbs could be particularly brisk as folks reevaluate the appeal of big-city life during a pandemic. But realtor.com also predicts the housing market will experience a second round of pain in the form of another downturn toward the end of the year.

“COVID-19 has really dramatically changed the way the housing market is going to perform this year,” says realtor.com Chief Economist Danielle Hale. “We started off with the potential for the best year in more than a decade for sales. But we’re going to see ups and downs as the market grapples with an unsteady economy. This will affect buyers and sellers across the board.”

Sales of existing homes are expected to drop about 15% in 2020 compared with the previous year. Realtor.com is anticipating 4.5 million sales this year, compared with 5.34 million last year. The company’s economic team had originally forecast, late last year, that 5.25 million sales would take place in 2020.

While many cash-strapped buyers have eagerly anticipated prices falling, triggering a real estate bonanza similar to the Great Recession, that’s not likely to happen this time around. That’s because the number of homes on the market has fallen, by about 45% in April, and so has demand from buyers. There’s no glut of for-sale homes driving prices down.

“Sellers don’t like to reduce their prices. So they decide not to sell,” says Hale. Instead, they just pull their homes off the market.

The median price for an existing home is expected to hold steady, rising by just 1.1% in 2020 over the previous year.

“Were it not for COVID-19, we probably would’ve seen prices rise in the 2% to 4% range,” says Hale. That’s because even before the pandemic, available housing fell well short of demand, pushing prices up.

Buyers shouldn’t despair. Record-low mortgage interest rates will offset some of the slightly higher prices. Rates are expected to be around 3.2% this year, down from nearly 4% last year. And they could even fall into the 2% range later in 2020, amid further financial uncertainty.

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The problem is, buyers may have a harder time snagging those low mortgage rates. Lenders are requiring higher credit scores and down payments, in some cases, as the nation grapples with unemployment rates that are likely in the 20%-plus range.

Another downside for buyers is that home construction is expected to slow, exacerbating the housing shortage. Housing starts, or the number of homes on which construction has begun, are expected to drop by 11% this year. Before the pandemic stalled construction sites in certain states, realtor.com had expected starts to jump by 10% in 2020.

Where buyers go shopping could also shift in the wake of the coronavirus. Those cooped up in small apartments in pricey cities may seek out smaller cities and suburbs where they can get more square footage and a backyard for less money. And with unemployment as bad as it’s been since the Great Depression, buyers may also seek out these areas for their lower prices.

“The experience of being at home for a long period of time has everyone rethinking their priorities,” says Hale. “People are recognizing space is more important, so they’re looking for more affordable areas where they can have more space at the same price.”

 
WRITTEN BY Clare Trapasso for REALTOR.COM

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