How Strong Was the Pandemic’s Influence on Work From Home Policies?
Before 2020, remote work was less common, often taking the form of an occasional day working from home when a child was sick or an employee couldn’t make it into work.
However, the COVID-19 pandemic changed that, with employers finding it safer for workers to complete their jobs at home. According to Upwork’s Future Workforce Pulse Report, 41.8% of the American workforce was still fully remote nine months into the pandemic. Additionally, the largest work marketplace predicted that remote work will continue through 2021. While some employees will return back to the physical workspace, a large percentage are expected to continue with remote work, a predicted 26.7% according to business managers surveyed in the Pulse report. An estimated 36.2 million Americans will be working remotely by 2025, according to the report, signifying an 87% increase from the numbers before the pandemic.
California was one of the hardest hit locations during the pandemic. Stay-at-home orders also changed the nature and location of work for many California workers. All of these changes have affected real estate demand.
Why Did Real Estate Demand Increase During the Pandemic?
As the pandemic took hold in the United States, the popular opinion was that it would only last a few weeks. People prepared to hunker down in their own homes and try to make it work. However, as the pandemic dragged on for months and now for more than a year, people had to make more permanent changes.
People had to find a workable solution. If they were living in a small apartment, had no home office, or had kids learning from home, they would invest in office space, coworking spaces, or bigger homes. Flex jobs also made it possible for people to migrate to new areas where they wanted to live since they were no longer required to report to their jobs in person.
Additionally, people who were not satisfied with their current living situation or who simply wanted a change after being stuck in the same place for so long purchased or rented new properties. Others wanted to leave COVID-19 hot spots for less populated areas and where they could safely spend more time outdoors.
Another trend is that as people lost their jobs or were furloughed, many had to make new arrangements. Many downsized to decrease their expenses.
Mortgage rates are now at an all-time low, providing yet another incentive to purchase property now.
All of these factors have culminated in an unprecedented demand for real estate during the pandemic.
Why Did Real Estate Demand Decrease During the Pandemic?
It wasn’t all good news for the real estate market during the pandemic. April and May 2020 saw the lowest number of home sales since 2007, according to the Federal Reserve Bank of St. Louis.
When shelter-in-place orders were put in place, many business owners did not have enough customers to stay open, leading to temporary shutdowns. As of September 2020, about 100,000 establishments were out of business after temporarily shutting down. Some of these businesses were sold while others are simply vacant properties.
Business owners who had performed well before the pandemic pulled back on their plans to expand after uncertainty about the pandemic arose.
With more employees working from home, business owners have stopped renting our or buying space for them to work.
Tips for Buying Real Estate During a Pandemic
If you’ve decided to take advantage of the low mortgage rates or you’re an investor looking for property during this unique time, you may have noticed that the process of purchasing a property is a lot different today. You might not have as much human interaction during the process and new rules may limit your access to the property.
Here are some tips to help you through the real estate purchase process during a pandemic:
Be prepared to do much of the transaction online – New advances in technology and a desire to remain socially distanced have helped propel much of the purchasing process online. Be prepared to do much of the transaction online, including applying for a mortgage, finding properties, and even closing.
Search California public records – You’ll still want to do your due diligence and find out about the property before you make an offer. Fortunately, you can search California public records to find out information about the property and who has owned it.
Take advantage of virtual tours – You might find it difficult to get a real estate agent to meet you in person and give you a tour. However, virtual tours allow you to see inside a home or business without having to be physically present, which may help you narrow your search for a property.
With the COVID-19 vaccine and hope in sight, real estate investors should consider how the end of the pandemic may affect their real estate holdings while also thinking about how the pandemic has permanently shifted work culture in America.
Year-Over-Year California shows growth in home prices that is stronger than 90% of the country while still staying relatively far below its peak value.
When you take a look at the numbers in CoreLogic’s January Housing Price Index Report you can see that California is on the strong side of two very telling metrics when compared to the numbers nationwide.
Continued Growth in CA Housing Prices is Likely, at Slower Pace
The year-over-year change from January 2014 was 5.7% for the National index. California was on the stronger side of that, posting a 7.3% year-over-year change. Even that can be considered strong growth. That number will likely continue to decline over the next year.
The National HPI is currently 12.7% less than its all-time peak reached in April of 2006, just before the market crashed. In California the market is even further away from its peak value than the National HPI. The current HPI in CA is 14.4% less than its May 2006 peak. Even though prices may be on the high side compared to incomes they’re not as high as they were and more importantly, the increases in prices are slowing.
This recent slowing of price increases means that incomes are having an effect on housing prices and that is a key distinction of the pre-bubble days.
Now that the National market is approaching previous all-time highs (some state markets already have reached their previous peaks), price increases have been regularly slowing down for the past year. Home values have rebounded out of the crash and are trying to align with incomes. This is an important stage because home prices cannot continue to shoot up the way they have over the past two years without another bubble bursting.
Sitting on the strong side of these two metrics positions California real estate to continue to show valuable increases over the next year. At 14.4% below its peak, the CA market would need about 3 years at 5% increase per year to reach that previous peak. The goal then, is for incomes to match pace with housing so that California homebuyers will actually be able to afford home prices. This way, when the housing price index reaches that previous peak price it will be because California incomes have increased as well. As opposed to lenders approving buyers for loans they can’t actually afford (that’s what happened last time).
Do Your Research – Conditions Vary by Market
These numbers or conditions aren’t necessarily present in all California neighborhoods, however. Many places in CA have reached their previous peaks and some are even seeing declines. We highly recommend Zillow’s Home Prices pages. The data allows you to get a solid understanding of what has been happening and what could be happening with prices in a specific area. Define regions by County, City, Metro-Area, Neighborhood, or Zip Code. Compare the data and trends in three different parts of California and see where they fall in relation to the state averages.
The national housing market continues to show signs of improvement but there’s plenty more progress to be made. Due to progressive foreclosure laws in our state, the California real estate market is way ahead of the curve, the foreclosure report shows. The state has made great headway in recovering from the crash with foreclosure numbers that are among the lowest in the nation.
The January 2014 CoreLogic National Foreclosure Report shows promise for continued improvement in the housing market in 2014.
The report states that 48,000 foreclosures were completed in January, a number that is down 19% from the previous 12 months and down a whopping 11.8% from December. That month-to-month drop is indeed significant and is an excellent forecast of the progress that still needs to be made. Before the housing market crash the number of monthly foreclosures was around 21,000. So even with these strong decreases we still have a ways to go before we return to an equilibrium. So January’s numbers still need to see a 50% drop before we begin to reach the stats from the pre-bubble days but the month-over-month change is a good indicator of the nation’s continued momentum toward that goal.
Judicial Foreclosure States are Slowing the Nation’s Recovery
The numbers also show that states requiring Judicial Foreclosure are seriously lagging behind the states that offer non-Judicial Foreclosure. The simple difference here is that Judicial Foreclosure requires the lender to sue the borrower in state court before proceeding with the auction of the property. This process costs the lenders more money than in Non-Judicial states and takes significantly longer. This has caused a foreclosure backlog in the Judicial Foreclosure states and is seriously hindering the recovery process in those states. The CoreLogic Foreclosure Report shows that, on average, the Judicial Foreclosure states have higher Foreclosure Inventory Rates and Serious Delinquency Rates than the Non-Judicial states mainly because they are so back logged that they are two to three years behind the Non-Judicial states.
As a Non-Judicial Foreclosure state, California is bucking the national trend with a Foreclosure Inventory Rate and Seriously Delinquent Rate that are among the lowest in the nation.
California seems poised for solid housing price growth in 2014 with one of the lowest foreclosure inventories in the nation and one of the strongest housing price indexes as well.
The latest CoreLogic Home Price Index Report continues to show good news in the housing market. It also shows why the winter months could be the best time to buy all year.
Three facts to focus on:
Housing Price Index only increased 0.2% from September to October and 0.1% from October to November. This is a rather low increase although not out of the ordinary for this time of year. It means that prices did not go up very much during those months.
November’s 11.8% HPI increase represents the 21st consecutive month of year-over-year increases in the Housing Price Index. This means that prices have been climbing steadily for almost two years now.
Home prices remain 17.3% below the April 2006 peak. This means prices will likely continue to increase though those increases may begin to slow as we approach the 2006 peak price.
Taken together, these facts show that the remaining winter months of 2014 are a great time to purchase a new home in Placer & Nevada Counties, Calfiornia. In the long-term prices show no sign of decline but for the remaining winter months that rate of increase will remain low. Get in now before springtime demand brings prices up and watch your home appreciate in value for 2014.
If we look at CoreLogic’s Historical Data it shows that the national month-to-month increases in housing prices were 0.7% for January 2013, and all the way up to 1.5% in February 2013. So this winter lull in price increases won’t be lasting long.
In an effort to boost the economy and the housing recovery the HUD announced this week the creation of the FHA Back to Work Extenuation Circumstances program. By recognizing that the credit situation that many consumers currently find themselves in, may have more to do with the irresponsible and possibly illegal actions of others than with poor financial decisions by the consumers themselves, FHA seeks to give a reprieve from the current waiting period that exempts borrowers from qualifying for FHA-backed mortgages for a certain number of years after a bankruptcy, foreclosure, short sale, or deed-in-lieu foreclosure. The letter released by the U.S. Department of Housing and Urban Development (HUD) on August 15th states, “FHA recognizes the hardships faced by these borrowers, and realizes that their credit histories may not fully reflect their true ability or propensity to repay a mortgage.”
Borrowers who can…
Provide evidence that an “Economic Event”, “beyond the borrower’s control”, such as a job loss or other serious reduction in pay, impaired the borrower’s credit.
Demonstrate full recovery from the event.
Complete an hour-long, one-on-one counseling session with the goal of addressing the cause of the Economic Event and the actions taken to overcome and reduce the likelihood of reoccurrence.
…will be granted exemption from FHA’s waiting period for bankruptcies, foreclosures, deeds-in-lieu, and short sales. This period previously lasted up to two years for bankruptcies and up to three years for foreclosures, short sales, and deed-in-lieu of foreclosures.
One of the key phrases is “beyond the borrower’s control.” This demonstrates a willingness to acknowledge that after a serious economic crisis, a consumer’s credit can be severely affected by forces beyond their control and that credit scores should not be the only benchmark used to determine the ability to repay debt. Responsible borrowers can easily find themselves the unwilling victims of the negligent or irresponsible actions of the general public.
It’s too early to tell if the required hoops will be too difficult to jump through and since this Letter released by HUD only loosely defines the qualifications, we will have to wait and see what the net result of the program will be.
Hopefully programs like these will help give a boost to the housing market and the economy, allowing hard-working and responsible consumers to get back in to the housing market and to start rebuilding their credit much quicker. “We have to applaud HUD for reducing the time to get back into the market for the people hit the hardest. An event beyond your control that forces you into another event like foreclosure is a double blow and these people should be allowed to be homeowners again. Although this will not help everyone it is a step in the right direction,” says Sean Safholm, Regional Vice President with Land/Home Financial Services, Inc.
To learn more about the specifics of this program or to help better determine your eligibility we strongly encourage you to speak with a Loan Specialist at a Mortgage Lender or Mortgage Broker. They will be able to provide you with the knowledge and support to help you decide if the program is right for you and to guide you through the process of completing the application.
You can contact Sean Safholm with Land/Home Financial Services directly, for advice from a trusted member of my business network. Sean can be reached at (888) 415-2000 or Sean.Safholm@lhfs.com