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Bidding Wars Are Back. Here’s What You Need to know

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From MotelyFool.com: Housing prices can fall during a recession, but that doesn’t always happen right away. Sometimes, it takes a while for home values to drop, but once they do, it gives investors a key opportunity to snag quality real estate on the cheap. And that opens the door to huge profits for house flippers as well as investors looking to snatch up rental properties.

But that doesn’t seem to be happening during our current recession. Not only are home prices holding relatively steady but buyer demand seems to have surged. In fact, against the odds, bidding wars are making a comeback on the real estate market, and while that’s great news for sellers, it poses a challenge for buyers.


Bidding wars are back

A good 53.7% of home purchases were subject to bidding wars in June, according to Redfin (NASDAQ: RDFN), which is surprising at a time when the economy is sluggish. But a big reason for that could boil down to the fact that there’s not a lot of inventory on the market today.

What makes our current recession unique is that it was spurred by a health crisis, not economic uncertainty. As such, many would-be sellers may be holding off on listing their homes due to the tricky logistics involved. At a time when open houses require thorough planning and subsequent sanitizing, sellers who aren’t in a rush to find buyers are likely putting their plans to list their homes on pause. That, in turn, leads to a shortage of available homes to buy, which explains why those looking to purchase are being pushed into a situation where they’re forced to outbid one another. In fact, Redfin reports that in May 2020 (a time of year when listings tend to be abundant), the number of homes for sale was down 18.9% from the same time last year.

Furthermore, historically low mortgage rates could be driving more people to buy homes. On July 16, the average rate for a 30-year fixed mortgage dropped to 2.98%, the lowest on record.

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When does it pay to engage in a bidding war?

In hot markets, bidding wars are often inevitable, both during periods of steady economic activity as well as recessions. But does that mean it’s worth engaging in one?

To some extent, it might be. If you’re looking to buy a home in the suburbs of a major city, now’s a good time to do so. Many city dwellers are reeling from the COVID-19 lockdown and may be itching to abandon urban life in the coming months. As an investor, you have a solid opportunity to make money by flipping a house outside a major city quickly or buying a rental. If that’s the situation you find yourself in, participating in a bidding war could make sense.

But remember, the more you pay for a home, the more it impacts your bottom line, so what you don’t want to do is get in over your head and overspend on a home you’d likely be able to snag for a much more competitive price a year or two down the line. Therefore, do your research to see which markets are currently experiencing bidding wars and why. If the market you’re targeting usually isn’t loaded with buyer competition, it could pay to bide your time and wait things out.

WRITTEN BY MAURIE BACKMAN FOR MOTELYFOOL.COM

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The 4th of July events still happening in SoCal this year

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FROM THE LA TIMES: NOTE-Many 4th of July events are now being canceled, or are expected to be canceled, due to the recent spike in coronavirus cases: Check websites, and social media before you head out so you’re not disappointed. And don’t forget your mask.

For fans of fireworks shows, this Fourth of July will feel like a rather subdued affair. Many traditional events in Southern California have been canceled due to the ongoing pandemic. Below, THE LA TIMES has compiled a list events that are still on as well as virtual events you can safely enjoy from home.

Outdoor Fourth of July events

Note that the Santa Clarita 2020 Spirit of America Fireworks Spectacular and the Rancho Cucamonga Community Fireworks Show, which had earlier been billed as some of the few outdoor fireworks shows in the area this year, have been canceled.

Avalon’s 4th of July Celebration. If you can make it out to Catalina Island, the city of Avalon is hosting a celebration on July 4. The day begins at 10 a.m. and activities are planned until 9 p.m. lovecatalina.com

A Front Yard 4th of July in Huntington Beach. This year’s parade will tour neighborhoods throughout Huntington Beach. The city also is hosting a home-decorating contest. hb4thofjuly.org

Drive-In Movie at the Rose Bowl. The Rose Bowl will screen drive-in-style movies on weekends this summer starting July 2. Tickets are per vehicle, and parking spots are assigned on a first-come, first-served basis. A full list of films and times is available on the website. tribecafilm.com

Fourth of July Extravaganza at Vitello’s. Alfresco dining in the Vitello’s parking lot in Studio City, 7 p.m. on July 4. vitellosrestaurant.com

Virtual Fourth of July events

Grand Park + the Music Center 4th of July Block Party. Performances and more on Grand Park’s streaming platforms. July 4th (time TBA). july4.grandparkla.org

Fontana’s 4th of July Virtual Celebration. The city has taken the most memorable snippets of previous Fontana fireworks shows and compiled them into one show. The virtual watch party begins at 5 p.m. on local TV channels, the city website, YouTube or Facebook. The city also is hosting a recipe contest. fontana.org

2020 RunnerMania Virtual Running Festival. The virtual festival has a 5K race, a half marathon and a 24-hour ultra marathon, which involves completing as many miles as possible over 24 hours. Participants competing in the 5K and the half marathon are expected to complete their distance over the weekend starting July 3 and ending July 5. (This relies on the honor system: You self-report your mileage and time.) Registration required. thevirtualrunchallenge.com

Monterey Park Virtual Celebration. Decorate your home for Fourth of July and submit pictures. Photos will be included on the city website and shared on social media. montereypark.ca.gov

Feels Like Summer by DJ Illanoise. An immersive audiovisual livestream with a theme of “summer in Los Angeles” by DJ Illanoise, an L.A.-based DJ and podcast producer. Organizers said they are streaming all day on July 4. Tickets are $10. Net proceeds benefit Los Angeles food banks. feelslikesummer.la

This New Credit Score Could Help More Home Buyers Receive Mortgages

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FROM REALTOR.COM:  With the U.S. mired in a recession and unemployment at its highest level since the Great Depression, many lenders have turned off the credit spigot for all but the most qualified borrowers. So despite record-low mortgage interest rates, many would-be home buyers have been left frustrated.

A new credit index released by Fair Isaac Corp. this week could change that, potentially making it easier for borrowers to score a loan. The company also produces the widely used FICO credit score.

The FICO Resilience Index is intended to help lenders assess the ability of a borrower to withstand an economic downturn—even those with lower credit scores. It was designed to encourage lenders to continue making loans without raising minimum credit score requirements and other criteria. Lenders can use the score produced by the Resilience Index in addition to the regular FICO score.

“Our hope is that it will allow lenders to continue to be able to make prudent loans,” says Joanne Gaskin, vice president of scores and analytics at FICO. “Lenders are going to feel more comfortable continuing to approve borrowers rather than denying” them.

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During the last recession, millions of consumers with lower credit scores still met their financial obligations, according to the company.

“It’s a step in the right direction,” says realtor.com Senior Economist George Ratiu. “Just one number, the traditional FICO score, shouldn’t be the sole metric in determining a borrower’s ability to repay a loan.”

Lenders are a bit skittish given the economic climate. Credit scores do not reflect whether homeowners are receiving mortgage forbearance because of pandemic-induced hardship.

“For a lot of lenders in the current environment, the FICO score is not a clear indicator of a consumer’s current financial health,” says Ratiu.

The new FICO score could relieve some of their concerns. It will place less weight on missed payments and more emphasis on lower account balances and credit utilization, says Gaskin. It does not factor in how much money someone has stashed in their savings account.

“It makes sense that these are consumers who have a cushion going into an economic downturn,” says Gaskin.

But the new scores may not benefit everyone equally—which could be especially hard on people of color, says Stephen Ross, an economics professor at the University of Connecticut. He is also co-author of “The Color of Credit: Mortgage Discrimination, Research Methodology, and Fair-Lending Enforcement.”

“It will certainly change who gets loans in a recession,” says Ross. “We know minority borrowers tend to have bigger income losses and more periods of unemployment during economic downturns.”

WRITTEN BY CLARE TRAPASSO FOR REALTOR.COM

What Home Buyers and Sellers Can Expect in 2020, as Pandemic Revises Forecast

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FROM REALTOR.COM: There are so many ways in which 2020 is not turning out the way most Americans expected. In terms of real estate, we were hurtling toward a busy spring season. All the economic indicators looked strong, boosting buyers to battle it out for a limited supply of homes. But then the coronavirus pandemic swept across the nation, upending those expectations and forcing us to reassess the year ahead.

Home sales have fallen and real estate listings dissipated as the COVID-19 pandemic made many buyers and sellers think twice about buying, selling, and potentially even moving with a deadly and highly contagious virus on the loose. But home sales will rebound in the late summer and fall, driven by millennials eager to own a home of their own, according to a revised forecast for 2020 by realtor.com®’s economists.

Markets in smaller, more affordable cities and surrounding suburbs could be particularly brisk as folks reevaluate the appeal of big-city life during a pandemic. But realtor.com also predicts the housing market will experience a second round of pain in the form of another downturn toward the end of the year.

“COVID-19 has really dramatically changed the way the housing market is going to perform this year,” says realtor.com Chief Economist Danielle Hale. “We started off with the potential for the best year in more than a decade for sales. But we’re going to see ups and downs as the market grapples with an unsteady economy. This will affect buyers and sellers across the board.”

Sales of existing homes are expected to drop about 15% in 2020 compared with the previous year. Realtor.com is anticipating 4.5 million sales this year, compared with 5.34 million last year. The company’s economic team had originally forecast, late last year, that 5.25 million sales would take place in 2020.

While many cash-strapped buyers have eagerly anticipated prices falling, triggering a real estate bonanza similar to the Great Recession, that’s not likely to happen this time around. That’s because the number of homes on the market has fallen, by about 45% in April, and so has demand from buyers. There’s no glut of for-sale homes driving prices down.

“Sellers don’t like to reduce their prices. So they decide not to sell,” says Hale. Instead, they just pull their homes off the market.

The median price for an existing home is expected to hold steady, rising by just 1.1% in 2020 over the previous year.

“Were it not for COVID-19, we probably would’ve seen prices rise in the 2% to 4% range,” says Hale. That’s because even before the pandemic, available housing fell well short of demand, pushing prices up.

Buyers shouldn’t despair. Record-low mortgage interest rates will offset some of the slightly higher prices. Rates are expected to be around 3.2% this year, down from nearly 4% last year. And they could even fall into the 2% range later in 2020, amid further financial uncertainty.

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The problem is, buyers may have a harder time snagging those low mortgage rates. Lenders are requiring higher credit scores and down payments, in some cases, as the nation grapples with unemployment rates that are likely in the 20%-plus range.

Another downside for buyers is that home construction is expected to slow, exacerbating the housing shortage. Housing starts, or the number of homes on which construction has begun, are expected to drop by 11% this year. Before the pandemic stalled construction sites in certain states, realtor.com had expected starts to jump by 10% in 2020.

Where buyers go shopping could also shift in the wake of the coronavirus. Those cooped up in small apartments in pricey cities may seek out smaller cities and suburbs where they can get more square footage and a backyard for less money. And with unemployment as bad as it’s been since the Great Depression, buyers may also seek out these areas for their lower prices.

“The experience of being at home for a long period of time has everyone rethinking their priorities,” says Hale. “People are recognizing space is more important, so they’re looking for more affordable areas where they can have more space at the same price.”

 
WRITTEN BY Clare Trapasso for REALTOR.COM

3 Coronavirus Facts Americans Must Know Before Returning To Work, School

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By Robert Pearl, M.D. for FORBES: 

We can’t un-bungle our nation’s COVID-19 response. Political leaders acted too slowly, health agencies committed unforced errors with testing kits and, amid the confusion, an information fog settled over the land. 
Americans remain afraid, perplexed and chronically misinformed (despite wall-to-wall coronavirus coverage across the leading cable-news programs and print publications).  
To counter the uncertainty, any plan to get us out of the coronavirus crisis must first acknowledge and broadly communicate three immutable, scientific facts.

Fact 1: Staying home saves lives but it doesn’t kill the virus

Weeks of social distancing and self-isolation in the United States have made us all safer. These precautions slowed the spread of COVID-19, thus helping to “flatten the curve.” Doing so buys hospitals and critical care centers enough time to staff up and stock diagnostic tests, protective gear and ventilators. 

However, it’s imperative that Americans understand these measures do not eliminate the virus. By staying home (and six feet apart from each other), we did not (and cannot) outlast our opponent.

Whenever we return to our jobs, schools and community gatherings—be it this spring, summer or fall—infections will rise. It’s not a prediction. It’s a biological fact. 

To avoid overwhelming critical care services, local reopening strategies must keep a multitude of safety precautions in place, especially those meant to protect the most vulnerable populations. The elderly—and those with chronic illnesses like heart and lung disease—remain at highest risk and therefore must continue to shelter in place. As such, local governments should provide them with food, housing and safe transport as needed. 

Fact 2: We’re in this for the long-haul 

There’s a bitter paradox brewing in the United States. The spread of COVID-19 has been, and still is, largely predictable based on objective and publicly available data. Yet most people—including Wall Street investorsgovernors and sports-starved fans—seem unable to comprehend the mathematical realities of a virus that spreads exponentially. 

As federal and state officials hammer out plans to reopen the economy, our nation must accept the unfortunate truth that every path forward is booby-trapped. 
woman inside laboratory

The coronavirus will persist until there is either (a) a safe vaccine (still 12 to 18 months away) or (b) until there is “herd immunity,” whereby two-thirds of the nation (about 200 million people) must become infected, recover and develop the appropriate antibodies. This, too, will take at least a year. 

A theoretical third option, which involves aggressively testing and quarantining all infected individuals, no longer applies. In the United States, that ship sailed in back February when the number of cases soared into the tens of thousands with no way of tracking carriers and their recent contacts. At this point, too many people are infected and too many of the infected show no symptoms, making it impossible to rid the virus through containment.

So, what options do we have? Trump recently announced he is “authorizing each individual governor of each individual state to implement a reopening, and a very powerful reopening, plan of their state.”

This is a dangerous tightrope to walk at the state level. Governors must ensure they don’t ease restrictions too quickly or too slowly.

Reports of increased mental health crises, domestic violence incidents and suicides demonstrate the urgency of getting people out of their houses and back to their normal lives. At the same time, the Spanish Flu of 1918 reminds us that the “second wave” of a virus can prove just as deadly as the first.  

Medical requirements for reopening the country must therefore include: 

  • Limiting exposure, likely for a year. Restaurants and shops should reopen only under three conditions: (1) community hospitals have additional capacity to handle an uptick in demand, (2) all local businesses agree to restrict indoor capacity based on the six-foot rule, and (3) all staff wear masks. 
  • Making tests free and convenient. Testing for COVID-19 requires the insertion a 6-inch long swab into the back of the nasal passage through one nostril and rotating the swab several times for 15 seconds. It’s a painful process, which is why Americans won’t consent to a reopening strategy that involves daily tests. Nevertheless, local governments need to make testing available at no cost to anyone with COVID-19 symptoms. Those who are confirmed should immediately self-quarantine.
  • Helping health officials. In parallel to molecular testing for the disease, our nation must ramp up serological testing, which can identify those that were infected, have since recovered and developed antibodies—thus telling health officials how close we are to herd immunity.  

Fact 3: Our nation is ignoring the most important metric 

Every day, cable-news chyrons display the latest numbers of confirmed COVID-19 cases and deaths. These figures are eye-popping, but they tell us very little about the relative safety of reopening the country.

That’s why it’s important for all Americans to acquaint themselves with a different, more-informative metric. 

R0 (pronounced “R naught”) is a number that indicates the contagiousness of an infectious disease like COVID-19. Specifically, it tells us the average number of unvaccinated (or otherwise vulnerable) people who will contract a disease from one contagious individual. 

For example, measles has an R0 of 12 to 18, which means that one infected person will transmit the virus to as many as 18 unprotected people. The R0 for HIV is 4.0 and the seasonal flu is 1.2. 

Early data suggests the R0 of COVID-19 is between 2.5 and 3.0. However, the actual number depends not only on the biology of the disease but on the actions people take. 

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For example, when people observe social distancing and adhere to rigid shelter-in-place measures, the number drops. In the UK, where strict lockdown protocols and frequent testing are in place, the R0 is low (currently estimated to be 0.62). Conversely, the R0 value grows much higher in densely packed conditions including sports arenas, large conferences and events like Mardi Gras.

As explained here, the R0 value shows the potential transmissibility of the disease, and its careful monitoring constitutes both the safest and fastest way for the United States to implement a reopening strategy:

  • If R0 is less than 1.0, each infected person transmits the virus to less than one other individual. As a result, the disease incidence will decline and the virus will slowly die out.
  • If R0 equals 1.0, each infected person will transmit the virus to one other individual. As a result, the infection rate will remain constant (though the curve will be flat) and there won’t be a future spike (or second wave). 
  • If R0 is more than 1.0, each infected person will pass the virus onto more than one individual. As such, the number of infected people will rise and the number of individuals needing critical care can quickly surge.  

If we want Americans to better understand the relative safety and preparedness of local and regional “reopening” plans, we must base our decisions on this important number. 

Facts Save Lives

About 90% of the country has been on some form of lockdown order for several weeks now. People are losing patience. As our nation eagerly eyes the future, we must let science inform our decisions about reopening small businesses, allowing students to return to class and easing social restrictions.

If we move ahead too quickly, we risk losing lives unnecessarily. If we move too slowly, we also risk unnecessary deaths. We can’t allow politics or panic to push our nation too far in either direction. These three facts, based on science, should guide the way.

WRITTEN BY ROBERT PEARL, M.D, FOR FORBES.COM

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