Spring is normally the hottest time of the year for home sales. But the financial impact of coronavirus (COVID-19) induced shelter-in-place orders and the financial crash that preceded it are keeping the market from heating up.

In 2019, multiple listing service (MLS) inventory in California rose 3% from February to March, the start of the spring listing season. During the same 30 day-span in 2020, California MLS inventory decreased 8%, according Redfin data.

The greatest inventory drop is being experienced in the high tier, with the decrease lessening in the mid- and low tier.

A more recent Redfin analysis measures the MLS inventory change in the 30-days spanning mid-March through mid-April at the metro level:

Inventory change: mid-March to mid-April 2019

Inventory change: mid-March to mid-April 2020

San Francisco

+107%

+32%

San Jose

+96%

+41%

Sacramento

+91%

+46%

Los Angeles

+46%

+15%

Riverside

+37%

+15%

San Diego

+57%

+36%

The fact that MLS inventory continues to rise month-over-month across the state is promising news. But the increase is significantly lower than is typical for this time of year. In fact, San Francisco saw the steepest inventory decrease in the nation, even sharper than other hard-hit metros like New York or Boston.

Changing plans and decreased confidence

The steep inventory decrease is due to two actions by sellers:

  • a decrease in new listings; and
  • more sellers removing their listings from the market.

For example, during mid-March through mid-April, 4,100 homes were removed from the market in Los Angeles. This is almost double the 2,200 listings removed during this time in 2019. Further, just 7,000 new listings were added in Los Angeles during mid-March through mid-April 2020, less than half the 14,300 new listings added during these 30 days in 2019.

Homebuyers and sellers are both acting with caution in 2020. With record job losses being experienced across the U.S., the coming recession is now in plain sight. Even those with stable incomes are thinking twice before making any big financial moves.

Others who are less fortunate are needing to put their home searches on hold due to reduced incomes. Still others who qualified earlier in the year are suddenly finding lenders more stringent in their qualifying criteria, demanding higher credit scores and higher down payments.

Combined, these shifts are all pushing home sales inventory and volume down. Watch for sales reports to continue down in the coming months as the country continues head-first into the 2020 recession.

Related article:

California home sales volume lays low