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According to Zillow, while home sales have improved since the spring, rentals in urban areas have slowed suggesting that many are choosing to live in the suburbs. Certainly, remote working makes the suburbs more attractive for some as does the fact that city dwellers are unable to enjoy many of the amenities of urban living.
So far, Sacramento and San Francisco, along with Dallas-Forth Worth and the New York metro area are seeing the largest split between urban and suburban rent growth.
The good news is that the Federal Reserve is keeping its benchmark interest rate close to zero. While it’s not directly linked to mortgage rates, it does bear a strong influence.A
The not-so-good news is that lending standards have gotten stricter as banks are concerned about the long-range economy.
Analysts say that consumers with a credit score above 700 will most likely get the best rates while those with lower scores may have difficulty securing a loan.
Only in 2020 would a listing mention a Zoom Room before the wine cellar or hot tub. Other listings cite the extra bedroom as “perfect for a private home office, zoom room or au-pair suite.”
Of course, many smaller home or apartments don’t have the luxury of that “extra room,” but developers are predicting that future condominium developments will over communal workspaces just as they now offer gyms or roof decks.
Certainly, 2020 has been a year like no other to date and all the signs point to this continuing for the foreseeable future. What does this mean for real estate for the remainder of 2020?
First, mortgage rates continue to be abnormally low, with a 2.6 percent rate in June for a 15-year fixed mortgage. This means, of course, that many potential buyers are eager to purchase now before rates start inching upwards. This is good news for sellers. Of course, economic uncertainty has definitely cut down on the number of potential buyers. This is good news for those buyers who are still in the game.
High unemployment will also result in lower home prices. In fact, Fannie Mae is predicting a 15 percent drop in home sales nationwide, which will mean lower home prices. This is certainly good news for buyers.
Buyer or seller? 2020 is a unique year and, depending on your situation, could be the perfect time to buy or sell.
The current pandemic and economic upheaval combined with the ongoing housing crisis has created a situation for all bay Area renters, with low to moderate-income families suffering the most.
To afford a median-priced, two-bedroom apartment a Bay Area worker needs to earn $43 an hour in Alameda and Contra Costa counties, $57 an hour in Santa Clara County, and $64 an hour in San Francisco, and Marin and San Mateo counties. Conversely, a minimum-wage worker ($13/hr) would need to work 114 hours per week just to meet ends meet.
It is estimated that 45 percent of California residents are renters.
As the number of unemployment claims keeps rising – 44 million since mid-March – the Aspen Institute estimates that 23 million renters could be evicted by September.
Evictions are expected to increase dramatically in the coming months as financial support and prohibitions on evictions come to an end.
Black and Latinx renters are likely to be at higher risk according to analysts.
As the economy shifts, many Bay Area communities – particularly those near tech centers – are seeing rents dropping. San Francisco (11.8 percent), Mountain View (15.1 percent), Menlo Park (13.5 percent), Cupertino (15.7 percent), and San Jose (8 percent) all saw significant decreases on one-bedroom rentals.
On the other hand, communities a bit farther out saw modest increases – Oakland (4.5 percent), Walnut Creek (1.3 percent), and Concord (2.3 percent).
As more employees are able to work remotely and commuting is no longer a hugely significant factor, analysts expect more migration to the suburbs.
Fair Isaac Corp, the company that created FICO, has established a new credit index that should help more homebuyers qualify for a home loan. The index uses financial information before and after the Great Recession to determine “financial resilience” during times of economic volatility.
The idea is to go beyond the traditional FICO score, which evaluates a borrower’s ability to meet payment obligations based on previous history, with an emphasis on lower account balances and credit use.
For those looking to buy or sell a home earlier in the year, the pandemic certainly has thrown all plans off track. However, there are still alternatives even as the market trends downward.
If you’re looking to sell, rest assured that there are still people moving to new jobs etc. looking to buy. Setting the correct price point is critical in this market.
Even if you can’t sell, historic low rates make this a great time to refinance as many qualification criteria have been relaxed.
According to a new report by Redfin, 27 percent of prospective homebuyers say they are looking to move out of their current metro area. New York, Los Angeles, and San Francisco all saw a net outflow of homeowners in April and May.
Certainly, the pandemic and work-from-home opportunities are primary factors as well as the high cost of living in many coastal cities.
Analysts point out that the trend out of expensive metro areas had already started before the arrival of COVID-19 but current conditions have accelerated the trend.
