It was only a matter of time until housing, like every other sector of the economy took a big hit.  Of course the housing cheerleaders thought somehow that a global pandemic would keep housing untouched while every other facet of the economy would come to a grinding halt.  So it should come as no surprise that nearly one-third of renters (and soon mortgage holders) are having trouble making their rents. Banks are gearing up for waves of foreclosures.  Only poor areas you say? In affluent Irvine, the Great Park area with a newly built section of homes went to close to zero sales from having steady sales in the past weeks. Did you also know the stay at home order hit on March 19, not even one month ago?

So much for COVID-19 not having an impact on the housing market. It is mind boggling how some housing bulls are so locked into their delusional world that a global pandemic that is putting billions of people under lockdown somehow seems to be good news for housing or is going to have a minor impact on home values. People need to realize that housing was already incredibly unaffordable for most people and professional couples buying homes, many working for hot tech startups that will now get smashed, are going to see their incomes slashed. Not everyone is going to return to work when things return. The frontline was hit and we saw that with a mind boggling 1-million Californians filing for unemployment insurance in the last report. To put this in perspective, we didn’t even come close to this during the Great Recession. So it should come as no surprise that escrows are tumbling just two weeks into this shut down.

COVID-19 is going to have a significant impact on the housing market.  Global markets are facing significant volatility as we deal with the first major global pandemic that is hitting both developed and developing nations equally.  This virus knows no borders and it is surprising how many people are still posting narrowly that this is somehow not going to impact the real estate market.  They assume the Federal Reserve is going to have the power to generate demand out of thin air with low interest rates.  But to who will you sell?  This shock that we are experiencing is a global health crisis and entire nations are fully shutting down to save lives.  The Fed has aggressively come out saying they will lower rates but low rates can’t help if you are out of a job or if the economy is shut down because the virus lingers longer than a week or two (by looking at China, South Korea, Italy, and Spain for example we are just starting to enter phase one).  The hit to the financial system will be big and here in Los Angeles, the city is in essence slowly shutting down with schools closed, restaurants being limited in service, and grocery stores being cleaned out by panic.  Yet somehow this is positive for housing?

For all of the glamor and glitz and notion that California is indestructible, there is a net migration of California residents out of the state.  And why is that?  Affordability continues to be the driving force for many families looking at a state that has become a renter’s paradise and for those wanting to own, paying $750,000 or a million dollars for a crap shack simply does not make sense.  So people are moving out in droves and the numbers back this up.  California lost 190,000 residents based on the 2018 Census data.  With the new Census taking place this year and housing prices once again being unaffordable, there is going to be a continuation of this trend.  And when you look at the actual prices of houses, rents, and local area incomes it becomes an easy decision for many.  Let us look at the figures.