Impact of COVID-19 on the Southern California Housing Market: Deals Falling Through, Prices Dropping, and Financing Drying Up

The Southern California housing market was on fire at the start of 2020, fueled by low interest rates and a booming economy. However, the outbreak of the global pandemic has thrown a wrench into the works, causing deals to fall through, sellers to slash prices, and certain types of financing to dry up.

Rick Cirelli, a mortgage broker in Laguna Beach, summed up the situation by saying, “Everybody is backing out.” While the full extent of the impact won’t be seen in home sale reports until next month, early data is already showing signs of a slowdown.

The Mortgage Bankers Association reported a 23% drop in mortgage applications for purchases in California last week compared to the previous week. A survey by the California Association of Realtors found that a quarter of agents had clients holding back from buying or selling due to the coronavirus outbreak, with those numbers increasing in a follow-up survey.

With Governor Gavin Newsom’s stay-at-home order in place, the real estate market is facing uncertainty. Referrals for new purchases have dried up, and buyers are hesitant due to economic uncertainty and difficulty in obtaining financing.

The $2 trillion relief package passed by the U.S. Senate includes measures to help homeowners, such as forbearance and a temporary moratorium on foreclosures for federally backed mortgage loans. However, the overall impact on the housing market remains to be seen.

Some companies, like Redfin and Zillow, have halted home purchases due to market uncertainty. Buyers are pulling back for various reasons, including fear of being unable to sell their own homes and difficulty in obtaining financing.

Despite the challenges, some deals are still moving forward. Active Realty reported multiple offers on a property, showing that there are still buyers in the market. Virtual tours and online transactions are helping to keep the market moving, despite physical distancing rules.

Overall, the housing market in Southern California is facing a period of uncertainty and slowdown. While some deals are still happening, many buyers are taking a wait-and-see approach. As the situation continues to evolve, the full impact on the real estate market remains to be seen.