Agents are mixed on whether and how COVID-19 will impact their business.

As coronavirus cases continue to rise in the Golden State, the California Association of Realtors is warning that it is likely to revise its housing forecast downward for the year, although the trade group still expects to see home sales and prices rise.

At 175 as of March 12, California has the third-highest state count of reported cases of COVID-19 so far, according to the Centers for Disease Control and Prevention (CDC). California Gov. Gavin Newsom began the day by ordering the cancellation or postponement of gatherings of 250 people or more statewide through the end of March in an effort to prevent the spreading of the disease.

“The situation with COVID-19 (‘Coronavirus’) continues to evolve and markets are down sharply for a second straight week. The California Association of Realtors has processed all of the recent data and will likely revise its forecast lower in the coming weeks. However, based upon our current expectations for the trajectory of the virus, the revisions will be modest unless the outbreak accelerates beyond current expectations,” the trade group said in an update on its website.

Until now, C.A.R.’s forecast expected sales of existing single-family homes in 2020 to rise 0.8 percent on an annual basis to 401,200 and the median home price to rise 2.5 percent year over year to $607,000. The Los Angeles-based trade group now anticipates it will revise this forecast downward, but not dramatically.

Source: California Association of Realtors

“The situation remains fluid, and conditions could deteriorate beyond what is currently envisioned depending on the severity and duration of the outbreak, but if current economic forecasts of modest declines in GDP growth are realized, the effects of lower rates should help to offset the effects of a slower economy and increased economic uncertainty such that California would still achieve a modest improvement in both home sales and prices this year,” C.A.R. said.

The trade group, which has more than 200,000 members, expects the luxury and second home markets to be hit due to the stock market downturn. But a silver lining may be that real estate becomes more attractive.

“Although lost wealth is expected to have negative impacts on higher-priced properties, the fear that financial markets could fall further could improve the prospects for real estate as investors seek safe havens for their assets,” the trade group said.

C.A.R. also noted that the International Monetary Fund (IMF), Wells Fargo and Goldman Sachs had downgraded their forecasts for economic growth — but that they are still predicting growth, just at “a much slower pace” than previously thought, the trade group said.

Still, C.A.R. warned that a recession could result if consumers lose confidence. “If consumer confidence retreats and spending dwindles as a result, the economy does not have many other sources of growth to fall back on, which could precipitate a new recession as the factory sector remains in the doldrums after taking a hit during the trade conflict with China,” the trade group said.

For now though, the Federal Reserve’s emergency rate cut has reduced some of the short-run risk of a recession and also resulted in lower mortgage rates, according to C.A.R. The trade group expects the cost of 30-year fixed rate mortgages could come down an additional 10-20 basis points in the coming weeks.

A “flash poll” C.A.R. conducted via email March 6-9 found mixed expectations among the 240 California Realtors who responded about how the coronavirus outbreak will impact their business.

Half expect the coronavirus outbreak will have a negative impact on home sales and 49 percent said they expect a negative impact on time on market. But 36 percent expected no impact on home sales and 38 percent expected no impact on time on market.

Forty percent anticipated a negative impact on home prices, but 45 percent didn’t and 15 percent expected a positive impact on prices. More than half of respondents, 53 percent, expected no impact on closings, while 38 percent expected a negative impact.

Forty-four percent anticipated no impact on housing supply and 19 percent expected a positive impact, while 37 percent predicted a negative impact. Most (55 percent) did not expect an impact on market competition and 18 percent expected a positive impact; 28 percent anticipated a negative impact.

More than one third of survey respondents reported they had clients asking coronavirus market-related questions and 26 percent said they had clients who put their home purchase or home sale on hold, the trade group said.

Source: California Association of Realtors

C.A.R. said it will have another update next week on how coronavirus is impacting the housing market. In the meantime, the association has suspended non-essential volunteer and staff travel and cancelled its spring board of directors meetings which had been scheduled for April 28-May 1 in Sacramento.

Email Andrea V. Brambila.
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