Why haven't home prices dropped?

Dated: May 23 2020

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The Southern California real estate market has slowed to a near-standstill, while estimates of current unemployment range from 14% – 20%. So how come the price of a home is still rising?

The main reason is that most people are still staying home as much as they can to avoid Coronavirus infection. Without a normal number of buyers and at least a somewhat normal number of available homes, very few transactions can be completed. April of this year, LA County had a 38% reduction in closed sales compared to the previous April—Ventura County’s sales dropped by 34% in the same period. Even if the number of buyers who are willing and able to pay today’s prices has shrunk, that smaller group could still support the number of transactions happening during social isolation.

The other reason why we haven’t observed the other shoe dropping is that California has put a moratorium on foreclosures and evictions. Lenders and landlords won’t be able to remove anyone from a property until 90 days after the state of emergency has been lifted. However, barring further action from the government, renters and mortgage holders will still have to make good on their missed payments. This widespread financial setback will cut heavily into the number of potential buyers who are ready to complete a sale, while the increase in properties nearing foreclosure or reclaimed by lenders will increase inventory.

We don’t know how much, or for how long, but it’s pretty clear that prices will be going down.

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DAVID DUNLAP

As a residential real estate executive with an extensive background in corporate marketing, I am able to apply unusually strong skills in marketing communications, e-marketing, strategic planning and ....

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