Page not found – Better Homes and Gardens Real Estate Reliance Partners http://glenbell.agent.rpeastbay.com Better Homes and Gardens Real Estate Reliance Partners Wed, 07 Dec 2022 03:04:52 +0000 en-US hourly 1 Better Homes and Gardens Real Estate Reliance Partners Page not found – Better Homes and Gardens Real Estate Reliance Partners false Page not found – Better Homes and Gardens Real Estate Reliance Partners podcast Better Homes and Gardens Real Estate Reliance Partners Page not found – Better Homes and Gardens Real Estate Reliance Partners http://glenbell.agent.rpeastbay.com/wp-content/plugins/powerpress/rss_default.jpg http://glenbell.agent.rpeastbay.com c9c7bad3-4712-514e-9ebd-d1e208fa1b76 Glen’s SF East Bay Real Estate Market Update November 30, 2022 http://glenbell.agent.rpeastbay.com/2022/12/07/glens-sf-east-bay-real-estate-market-update-november-30-2022 http://glenbell.agent.rpeastbay.com/2022/12/07/glens-sf-east-bay-real-estate-market-update-november-30-2022#respond Wed, 07 Dec 2022 03:02:29 +0000 http://glenbell.agent.rpeastbay.com/?p=971   November 30, 2022 – Real Estate Market Numbers By Glen Bell   (510) 333-4460   I think you have to look at the whole year to understand the market we’re in and how interest rates are factoring in. We started the year out with the lowest inventory that I’ve seen in the last 20 years. […]

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November 30, 2022 – Real Estate Market Numbers

By Glen Bell   (510) 333-4460

 

I think you have to look at the whole year to understand the market we’re in and how interest rates are factoring in.

We started the year out with the lowest inventory that I’ve seen in the last 20 years. The lack of inventory, while still experiencing lower interest rates, caused a crazy competitive market this last spring that just wasn’t expected by most economists. Most had projected single digit appreciation for 2022. It was a bit of a frenzy that drove the median prices up in Alameda County by 26%, to their peaks in May. Keep in mind that “fear” and “greed,” (similar to what we see in the stock market), are two driving principals in our market place. Buyers were scrambling to “get in” creating a crazy hyper competitive market that drove prices up. The negative news didn’t come into play until after the first quarter.

High inflation and economy concerns

Rapid interest rate increases

stock market declines

News of local lay-offs

Talk of a coming recession

Buyer fatigue

All of this has contributed to the uncertainty in our Bay Area Real Estate markets. Many buyers simply “paused” and got on the fence about buying. We began seeing a cool down starting as early as June. Properties are staying on the market longer, there are more price reductions, there are fewer multiple offers, sales are down, and prices have come back to where they began at the beginning of the year.

Unrealistic expectations by many sellers based on prices seen during the peak in May further contributed to the decline we’re experiencing now in our market. For the first time in years, we’re seeing a real shift from a strong sellers market to one that is now favoring buyers. Since June, our supply and demand ratio, (or pending over actives) has been below one. The pending/active ratio has been a benchmark that we’ve used as a measure of supply and demand to determine whether we’re in a buyer’s or a seller’s market. Typically, a number well above 1, (less inventory, or supply, with more pending sales, or demand) favors sellers. While numbers below 1 (more inventory, or supply, with fewer pending sales, or demand) favors buyers. Last year at this time we were still in a very strong sellers market with a ratio of 2.29. We are now experiencing a ratio of .62, indicating a buyer’s market.

The month’s supply for the combined 39 city area is 36 days. Historically, a 2 to 3 months’ supply is considered normal in the San Francisco East Bay Area.  Last year we saw a 12 day supply at this time. Yes, that’s quite a difference compared to last year but let’s put that in perspective. Inventory is still historically low. Back in 2008 during the REO days, when home prices saw big declines, we had a whopping 9.5 month supply of homes, see below graph.

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Glen’s SF East Bay Real Estate Market Update December 31, 2021 http://glenbell.agent.rpeastbay.com/2022/01/11/glens-sf-east-bay-real-estate-market-update-december-31-2021 http://glenbell.agent.rpeastbay.com/2022/01/11/glens-sf-east-bay-real-estate-market-update-december-31-2021#respond Tue, 11 Jan 2022 20:55:43 +0000 http://glenbell.agent.rpeastbay.com/?p=931   December 31, 2021 – Real Estate Market Numbers By Glen Bell   (510) 333-4460   This is always the time of year where we reflect on where we’ve been and where we’re headed. “The housing market has been breaking new records across multiple fronts throughout 2021, leaving home shoppers wondering if they should buy now […]

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December 31, 2021 – Real Estate Market Numbers

By Glen Bell   (510) 333-4460

 

This is always the time of year where we reflect on where we’ve been and where we’re headed.

“The housing market has been breaking new records across multiple fronts throughout 2021, leaving home shoppers wondering if they should buy now or wait in the hope that more homes become available, and at more affordable prices in 2022.”

The Historical Median Price graph below, demonstrates just how much homes have appreciated over our last two years; For the East Bay, (Alameda and Contra Costa Counties), we’ve seen an average increase of 27%.

 

At the same time, the number of houses for sale has dropped, creating even greater pressure on home prices. Last year at this time we experienced a 55% drop in November and December of 2020. Seasonality has always been a huge factor, but this was more than normal. This year we saw an even greater reduction, a 70% reduction of inventory for November and December of 2021. As of December 31, 2021, there were only 598 homes listed for sale in the 39 cities that I track. Approximately 55% of those listings are homes that have been sitting for 30 days or longer. I’ve been tracking statistics since 2007, and this is the lowest number of homes for sale that I’ve ever seen. This leaves us with only a 6 day supply of homes, compared to a 15 day supply last year.

Our supply and demand ratio, (or pending over actives) has jumped up to 2.88, it’s highest level since March of 2013. I rarely see this ratio go over 2, indicating a “strong Sellers” market.

The pending/active ratio has been a benchmark that we’ve used as a measure of supply and demand to determine whether we’re in a buyer’s or a seller’s market. Typically, a number well above 1, (more inventory, or supply, with fewer pending sales, or demand) favors sellers.

Asked “Will home prices fall?

“The question on the minds of sellers, buyers, homeowners, and just about everyone else is whether prices might actually fall. Sorry, buyers, that likely won’t happen anytime soon.”

“You’ve still got a lot of young people who have still not bought a home but who would like to,” says Realtor.com Chief Economist Danielle Hale. “Anytime the market starts to cool, you’ve got people on the sidelines waiting for their chance to get in. That keeps both home sales and home prices from declining too much.”

I expect more homes to hit the market this spring, but doubt it will be enough to resolve the problem of demand.

You can read what some of the experts are predicting for 2022 in the articles shared below.

 

Here are some highlights for the 39 East Bay Cities that I track:

 

  • The month’s supply for the combined 39 city area is only 6 days. Historically, a 2 to 3 months’ supply is considered normal in the San Francisco East Bay Area. As you can see from the graph above, this is normally a repetitive pattern over the past four years. Last year we saw a 15 day supply at this time.

 

 

  • Our inventory for the East Bay (the 39 cities tracked) is now at 598 homes actively for sale. This is lower than what we saw last year at this time, of 971. We’re used to seeing between 3,000 and 6,000 homes in a “normal” market in the San Francisco East Bay Area. Pending sales decreased to 1,724, also lower than what we saw last year at this time of 2,293.

  • Our Pending/Active Ratio is 2.88. Last year at this time it was 2.36
  • Sales over the last 3 months, on average, are 9.0% over the asking price for this area, much higher than what we saw last year at this time, of 4.9%.

 

 

Recent News

 

Experts predict what’s next for the Bay Area real estate market in 2022

By Tessa McLean, SFGATE, December 29, 2021

When the COVID-19 pandemic hit the Bay Area, many expected the real estate market to tank. While it certainly slowed for a bit as open houses were prohibited and residents stayed in their homes, it quickly picked back up, fueling a competitive market with low inventory and a strong set of buyers rethinking their living spaces. That continued into 2021 as the suburbs stayed king, demand outstripped supply, and, at least in the Bay Area, many residents have yet to return to an office. Now, with a still very uncertain future ahead of us, what’s next for the Bay Area housing market? We talked with local experts in the home buying and rental market to get their opinions on what’s to come.

It’s still going to be a seller’s market

Every real estate agent we spoke with agreed that 2022 is still likely to be a seller’s market in the Bay Area. Even as interest rates are projected to go up, the demand for homes will still be greater than the inventory, especially for single family homes, in the region. “In the history of United States real estate, being a seller in San Francisco right now is the single best opportunity you’re ever going to have in your lifetime,” said San Francisco real estate agent Aaron Bellings of Compass. “… I think San Francisco is going to have a banner year. If I was thinking about selling in the next 6 to 12 months I wouldn’t hesitate to put my house on the market.”

He said much of that demand is from buyers that were starting to look in 2021 and still haven’t found a place. “I see the spring being absolutely crazy again. I have buyers right now that are chomping at the bit to get in there and there’s nothing out there for them,” Bellings said. “It’s going to be a strong market.”

Nina Hatvany, a real estate agent in San Francisco for over 30 years, said the amount of quality, single family homes on the market is usually low in the city, but those houses are now in particularly short supply. Plus, between the continuing pandemic and the inevitable hike in interest rates, now is the time to put a home on the market. “It’s definitely a good time to sell,” Hatvany said. “… I would definitely take advantage since we don’t know what the future will bring.”

Khrista Jarvis, an East Bay Compass real estate agent, said the robust seller’s market translates into a tough buyer’s market — especially in the East Bay. “It’s frustrating to be a buyer in this market. There are multiple offers, bidding wars, paying $200,000 over asking is just the norm,” she said. “You have to be super competitive and sometimes make offers several times before you get a house.”

Jarvis said the region continues to be particularly hot for buyers from San Francisco as many are still looking for more space than they can get in the city.

Seasonality has disappeared

The old adage says that if you’re going to put your home on the market, you better wait until after the Super Bowl. And you definitely can’t sell a home during the winter. Today, none of that holds true. “We’re going to go into a very strong season right away,” Jarvis said. “Usually the market waits until spring, but this year it’s going to start really early. Seasonality is out the window. I think it’s just busy all year round now. Even December. I thought I’d get a break for the holidays and that’s just not the case.”

Bellings said there is still some seasonality, just not in the way it exists in other major markets. “We really don’t have an off-season. It really just comes down to whether people are in town to actually look at and bid on the homes put on the market,” he said. “Usually we start to see pick up post-President’s Day, but I wouldn’t be surprised if things start to pick up mid- to late January this year.”

Everyone is watching interest rates

Interest rates are going up, it’s just a matter of when. If the Fed sticks to their plans, prospective buyers and sellers are going to have to keep that in mind in 2022. “It is going to create a sense of urgency,” Bellings said. “I’ve already had buyers reach out to me and say we need to make this happen before the Fed starts hiking rates. People are already starting to feel the pressure even though we don’t know when this is going to happen and how high the rates will go.”

For sellers, that means the time is now. “It would be wise to move quickly if you want to be in the driver’s seat when it comes to selling your home,” said Daryl Fairweather, Redfin’s chief economist. “For the second half of 2022, if mortgage rates increase, that could definitely put the brakes on demand and make it harder to sell a home.”

Even if rates creep up to 4%, that’s still historically low, especially for an area with as much wealth as the Bay Area has. “In other places I would expect the housing market to slow down significantly, but San Francisco is on a different trajectory,” Fairweather said. “There will be more demand for homes than there was this year. … What I think is the Bay Area will look more like the rest of the country in terms of how quickly prices grow, how many homes sell over list price.”

Rent will probably go up

As the home buying market reached new heights over the past year and a half, the rental market in San Francisco, Oakland and San Jose did the opposite. These Bay Area cities are some of the only places in the country where rent has yet to creep back up to pre-pandemic levels, even allowing San Francisco to lose its throne as the most expensive rental market in the country to New York, according to Zumper. Experts have speculated that’s due to the Bay Area’s embracing of remote work amid the pandemic, though many offices won’t stay closed forever.

“General inflation will probably push rent up eventually, but if offices keep getting pushed back that will still keep them down relatively,” Zumper data journalist Jeff Andrews said. “The fundamentals are all pointing to rent going up again.”

He also expects some of the seasonality of the rental market to return this year, after being more volatile since early 2020.

While Zumper found that New York City surpassed SF as the most expensive rental market in 2021, “San Francisco still stands out as the most expensive market on our platform,” said Rob Warnock, research associate at Apartment List. “But, the Bay Area is the last remaining place where there is a discount,” he said. “… That said, I think prices are going to go up again in the early parts of [2022].”

Warnock said since the Bay Area has been one of the places most amenable to remote and flexible work, it also could affect trends across SF neighborhoods. Prices in areas downtown, like SoMa, may still remain at a deep discount while more western neighborhoods like the Sunset may keep their slightly inflated rates.

Space is still a must

“Zoom rooms” and Peloton bikes became must-haves as the pandemic wore on, and none of the agents we spoke with saw that going away anytime soon. “I’m not seeing the desire for home offices or gyms go away at all,” Hatvany said. “It’s become a very locked-in thing. It’s a complete essential in ways that it never was.”

Hatvany has even seen some new “amenities” emerge — like being located near a Slow Street. She said just as parks are great nearby amenities for a home buyer, slow streets now hold the same desirability.

Outdoor space is still crucial for most clients, said Josh Dickinson, the founder of real estate agency Zip Code East Bay, and he’s even seeing more sellers get creative to upgrade that outdoor space. There’s even been a rise in ADU-like spaces, like upgrading a shed in the backyard that can be used as a multipurpose space.

Even with their confident predictions, there wasn’t one person that didn’t mention the feeling of uncertainty that still lies ahead as we continue into the next phase of the pandemic. “I think we’re all just anxious to see what is it all going to look like when we get back to the point where people are going back to the office and all the COVID numbers are declining,” Dickinson said. “It in some ways seems like we’re still a long way from there.”

Housing Market Predictions 2022: Will Prices Drop?

By Natalie Campisi, Forbes Advisor, December 28, 2021

The housing market has been breaking new records across multiple fronts throughout 2021, leaving home shoppers wondering if they should buy now or wait in the hope that more homes become available, and at more affordable prices in 2022.

So far, home price appreciation is up year-over-year (YOY) by 18.5% in the third quarter, the highest level in the Federal Housing Finance Agency (FHFA) House Price Index history. Inflation has shot up at the fastest pace since 1982. At the same time, the number of houses for sale has dropped, creating greater pressure on home prices.

Housing supply plunged to its lowest level in history, with just 1.38 million homes on the market in June, down 23% annually. Buyers scooped up homes faster than ever before, shrinking the number of days homes spent on the market to a record-low of just 15 days.

And mortgage rates are holding steady around the 3.1% mark for a 30-year, fixed-rate mortgage–although it’s not the lowest on books, it’s mighty close.

Here’s what this means for 2022, according to housing experts.

Will Home Prices Rise In 2022?

Depending on whether you’re the buyer or seller, you might be very happy or very disappointed to learn that home prices are poised to rise in 2022, most experts say. While headwinds like rising mortgage rates and a significant uptick in Covid-19 cases may impede price growth, they won’t stop home price appreciation from climbing.

“Much of what drove high price growth this year will follow us into next year,” says Nicole Bachaud, an economist at Zillow. “We will expect to see prices rising at extremely high levels for the first few months of 2022 before beginning to taper off towards more normal levels.”

Most experts say housing demand will stay strong in 2022 unless inflation continues to outrun wages at the current feverish pace, which could stall buyer appetite. Rising inflation is also putting renters in a pinch who can no longer afford to save as much for a down payment when rental rates are skyrocketing.

The national average rental price for a one-bedroom jumped 21.3% and more than 16.7% for a two-bedroom in October on a YOY basis, according to the latest Apartment Guide and Rent.com report.

“What can affect demand is the affordability challenge,” says Danielle Hale, chief economist at Realtor.com. “One thing that can offset that is a more competitive labor market.”

A recent survey by the Conference Board suggests a 3.9% in wage costs for companies in 2022, which would be the highest jump in salaries since 2008. But even this bump wouldn’t make it easier for most entry-level buyers to access homeownership.

The wild card that could cool home prices is getting Covid under control enough that it would convince people to move back to big cities, says Todd Teta, chief product and technology officer at Attom, a property data firm. He also says that the reverse could happen—a spike in Covid cases, for example—stoking more interest in suburban real estate.

“If the pandemic fades, interest in rental housing in congested urban areas could rekindle, especially if employers start demanding that more workers return to their offices. That could significantly reduce buyer demand and ease the pressure on prices,” Teta says. But “all of this will depend on how many more people with the means to buy are worried about where they live now and how the pandemic proceeds.”

It’s important to note that while these are national trends, real estate is local. So while places like Boise, Idaho had a 37.3% price jump YOY, Philadelphia saw more modest price growth of 9.9% during the same period.

Home Inventory Predictions for 2022

A major determinant of home price trends is how much supply is available relative to demand. One way to gauge this is to look at the months’ supply of homes for sale, which estimates how long the existing inventory for sale would last based on the current sales rate if no more new houses were built.

The lowest months’ supply for 2021 was in January, with just 3.6 months’ supply and the highest was in August with 6.6 months, a considerable jump, according to the Federal Reserve Bank of St. Louis. Although supply gradually picked up in spring through late 2021, some forecasters expect supply to slacken.

For one, new home construction is getting hampered by the rising cost of building materials and a severe shortage of labor. All building materials, from copper to steel, have jumped in cost but lumber prices, in particular, have hit astronomical price increases. The futures price of lumber jumped to an all-time high of $1,670 per thousand board feet in May. It began to cool in the summer, dropping to $454 per thousand board feet in August. However, it shot back up to more than $1,044 as of December 20.

Amid the affordability crisis in housing, the Biden administration is moving to make the costs of lumber even more expensive. The Commerce Department said November 24 that it will nearly double tariffs on softwood lumber imported from Canada from an average of 8.99% to 17.99% on their imports.

Several lawmakers and major trade groups like the National Association of Homebuilders are calling for a reduction in Canadian tariffs as mounting lumber costs can topple the gains new home construction made in the past six months.

“With Biden doubling tariffs on Canadian lumber, it will add a lot of pressure on home costs and how long it takes to build a home,” says Robert Dietz, chief economist and senior vice president for economics and housing policy for the National Association of Home Builders. “That’s why you see the median price of a new home above $400,000.”

The median price of a new house was $407,700 in October, up 17.5% from a year ago, according to the Federal Reserve Bank of St. Louis. New home prices have been climbing at an accelerated rate since the Covid-19 pandemic began. In April 2020, the median new home price was $310,100, the lowest point before jumping nearly $100,000 more during a span of 18 months.

As for existing homes entering the market, much of that will depend on the pandemic, says Selma Hepp, deputy chief economist at CoreLogic, a real estate data analytics company.

“While Baby Boomers preferred to downsize prior to the pandemic, it appears that they are staying put for now,” Hepp says. “Up to now, there has not been a notable increase in for-sale inventory as Baby Boomers stayed put, and potentially hosted their children and family.”

Should You Buy a Home Now Or Wait?

Buyers with the means to buy a home now may be looking at pricing factors like interest rates when deciding whether to leap. However, first-time buyers face much steeper challenges, like rising down payment requirements.

As home prices escalate, so does the down payment and monthly mortgage costs. This means that some buyers might have to save up more money or look for less expensive housing. As more companies have allowed their employees to work remotely, some buyers have moved to more affordable areas, but that’s not the case for everyone.

James McGrath, a licensed real estate broker in New York and co-founder of Yoreevo, a residential brokerage, says demand will begin to cool in 2022, so there might be more availability for those who wait.

“It’s very hard for the amount of sales to remain at record levels when there isn’t much to sell,” McGrath says. “It seems all but certain that the number of transactions will decline. With this, buyers can be more patient. There should be less competition from buyers and more houses to choose from as we normalize on both.”

There are unforeseen variables that can alter the course of real estate at any time, so the best strategy is to make sure you can afford the house you buy and still have room to save up for rainy days. For example, if you’re buying with a partner or co-signer and they lose their job, make sure you can pay the mortgage with just one income.

You should also plan on living in it for at least five years or enough time to cover your closing costs, so you don’t end up losing money when you sell. A mortgage affordability calculator is a great tool for figuring out your budget.

 

Will the housing market continue its hot streak in 2022?

By Mike Simonsen, HousingWire, December 10, 2021

As we approach the end of another hot year for the market, homebuyers and sellers are eagerly looking ahead to the 2022 housing market. Will the market continue its streak of strong growth, or are we finally about to see a slow down?

Here’s a high-level forecast for what to expect next year, based on the supply and demand signals we can already see in today’s data. I’ll also highlight which variables we should be watching for unexpected market shifts.

1. Demand will continue to be strong into 2022.

The first signal we look at to forecast the strength of the housing market is days on market – how fast are homes moving? Right now, we’re seeing a median of 49 days on market and climbing, as it normally does this time of year. A typical December would see market time at 85-100 days, so you can see from the chart that demand is staying elevated later in the year, which is a bullish sign for next year.

 

Due to the strong seasonal patterns, I predict days on market will hit a low of 21 days in April, tying the record-fast market times from earlier this year.

With homebuyer demand off the charts earlier this year, Altos Research began tracking the phenomenon we call “immediate sales.” You’ve probably seen this in your local market, where offers happen more or less immediately after the home gets listed for sale. At this moment, about 25% of properties are going into contract essentially immediately every week (around 20,000 of them within hours or days of listing) — even as supply and transaction volume declines through the end of the year.

I actually expected immediate sales to be dropping at this point, but it isn’t. Even over the Thanksgiving holiday, total volumes were down, but immediate sales as an indicator of demand were still dominant. The fact that this trend is continuing unabated into the winter indicates continued strong demand into next year.

That being said, if the housing market turns, immediate sales will be one of the first places we’ll be able to see it. For example, if buyers are cooled by higher interest rates, the first thing that’s going to happen is they’re not going to make those immediate offers.

Since it will take several months for rates to rise high enough to discourage buyers, we can expect immediate sales and all the related buyer competition characteristics (multiple offers, over-bidding) to remain common well into at least the second quarter of 2022.

Another signal pointing to continued elevated demand is the percent of homes on the market taking price reductions. In a normal market, we tend to see about 30% to 35% of sellers initially over-price their homes and eventually reduce the price to attract buyers.

Right now price reductions are at 27%, and starting to tick down again after the fall peak in September. You can see that it’s higher than last year, but still lower than normal. Home sellers with properties on the market now know that the demand is there, and they don’t have to cut their prices. This tells us that the transactions for these homes that happen in the first quarter will still be priced very strongly.

 

2. Low inventory will continue to be a major issue.

Unfortunately for all these eager homebuyers, inventory continues to be at record low levels. We are currently at just over 350,000 single-family homes on the market. You can see from this chart that inventory has been on a downward trajectory for years, and recent strong demand has only accelerated this trend. You can also see that it’s normal for inventory to drop at this time of year, but it’s actually declining faster than I expected even a few weeks ago, which indicates that we’ll start 2022 with record- low levels of available inventory, even less than in 2021.

 

At this point, it looks like we’re going to end the year at just under 300,000 single-family homes for sale. If we’re lucky, we’ll start getting greater inventory in the housing market in February, then it’ll start climbing and be at a more normal curve next year, but we’re still miles away from a normal level, with no indication that we’ll return to our usual million homes anytime soon.

That being said, keep an eye on rising interest rates. If you look at the 2018 line in the inventory chart, you’ll see that inventory hadn’t yet declined by this time of year in 2018. Why? Because interest rates rose from around 3.9% to 4.9% between April and December, and that cooled the market enough that a little bit of inventory built up during 2018. You can see that 2019 was the only recent year that started with more inventory than the year before.

3. Home prices will remain high into 2022.

With demand showing no signs of cooling and record-low inventory, I expect home prices to remain high into next year. The median home price for single family homes this week is $375,000, which is about 10% higher than last year and where we are likely to end the year.

 

 

As we look towards 2022, all the leading indicators show tight inventory and strong demand keeping prices high — a strong seller’s market. If interest rates start rising, and we’re seeing inflation or other economic challenges, this could have a cooling effect on the market. These variables aren’t in the data yet, but they’re looming. We’ll want to keep watching the data closely to spot any major shifts.

 

Zillow’s Hot Housing Takes for 2022

By Zillow Research on Dec. 8, 2021

The housing market may not reach the incredible heights of 2021, but we expect it will be anything but slow next year. Expect the strong sellers market to persist, the Sun Belt to maintain its top spot as the most in-demand region, and flexible work options to continue to shape housing decisions in new ways in 2022.

The following are Zillow’s bold housing predictions for 2022. Whatever happens, the Zillow Economic Research team wishes you and yours a safe, healthy, prosperous and enjoyable year!

2022 will fall just short of record-breaking

2021 marked the hottest housing market in U.S. history by some measures, including Zillow’s Home Value Index. While we may not see those records broken in 2022, Zillow economists expect incredibly strong price growth and sales volume to continue.

Zillow’s forecast calls for 11% home value growth in 2022. That’s down from a projected 19.5% in 2021, a record year-end pace of home value appreciation, but would rank among the strongest years Zillow has tracked. Existing home sales are predicted to total 6.35 million, compared to an estimated 6.12 million this year. That would be the highest number of home sales in any year since 2006.

Sellers keep the upper hand

The usual seasonal cooldown in the housing market is reappearing this fall after a hiatus in 2020. Fewer homes are selling above list price, homes are staying on the market a few days longer than they did during the summer, and more sellers are cutting their price.

Zillow economists expect these metrics to trend slightly cooler in 2022, but don’t mistake that for a buyers market. The market forces that have given sellers the upper hand over the past two years or so — tight supply after years of underbuilding, and elevated demand due to remote workU.S. demographics and low mortgage rates — will persist next year as well. Expect to see bidding wars on many homes, especially as the market heats up during the spring and summer shopping season.

Large rentals will be in high demand

Rising home values will impact the rental market as well. After a slowdown in the early months of the pandemic, rent prices came roaring back, especially in what were previously some of the most affordable markets. As rising costs make it harder to save for a down payment, expect demand for larger rentals to increase, including for single-family homes, as families stay in the rental market longer.

The ‘Sun Belt surge’ will extend to secondary markets

2021 was in many ways the year of the Sun Belt. Zillow predicted Austin would be the hottest market of 2021 as part of a “Sun Belt surge,” which proved to be the case — no metro has seen home values grow more than Austin so far this year, and all of the top destinations for long-distance movers were in the Sun Belt.

Zillow predicts this surge will extend to smaller Sun Belt cities in 2022 as price hikes in this year’s star markets make more-affordable nearby markets more attractive. From April to August, Austin held the top spot in quarter-over-quarter home value growth, which is a good indicator of current housing demand. As of October, the smaller Florida metros of Fort Myers and Sarasota held the top spots, and 24 of the top 25 markets were in sunny states – a sign of things to come in 2022.

More Gen Zers and millennials will buy a ‘second home’ before a primary residence

Americans are taking advantage of remote work flexibility to move to larger homes in more-affordable markets, but many will not want to commit to a new location full-time. This is often true for younger people who are attracted to the amenities of living in a city, where expensive housing is more likely to put homeownership out of reach.

With these factors in play,  there may be more people buying what’s traditionally a second home — either a part-time vacation home or an investment property — before they buy a home as a primary residence.

Young people today are savvy watchers of the housing market, in part because of time spent Zillow surfing. Purchasing a “second” home in a market more affordable than the one they live in is a way to break into the market and start building equity while mortgage rates are low, possibly teaming up with friends or family to lessen the financial burden. Virtual home shopping tools available today, such as Zillow 3D Home tours, make buying a home in a far-flung location easier.

No end in sight for the renovation boom

In the race to buy a home in the ultracompetitive pandemic housing market, many buyers have had to make one or more compromises (81%). As prices and mortgage rates rise, expect many homeowners to upgrade their existing home rather than try to wade back into the market to trade up.

A Zillow survey of homeowners found nearly three-quarters would consider at least one home improvement project in the next year. The top projects on their to-do list are renovating a bathroom (52%) or kitchen (46%), adding or improving a home office space (31%), finishing a basement or attic (23%), adding a room (23%) or adding a separate dwelling unit (21%).

Work will play a key role in moving decisions

The rise of flexible work options has changed how heavily a short commute factors into where Americans live. Home buyers used to pay handsomely to live near downtown and reap the benefits of a quick trip to and from the workplace each day, but that dynamic flipped in much of the country last year as buyers prioritized affordability and extra space. In 2022, hybrid and fully remote work will continue to reshape which areas are most in demand as the pandemic winds down and more workers receive permanent guidance on their flexible work options.

Zillow economists expect fully remote workers to continue to seek affordable markets, like those in the Sun Belt and other nontraditional housing hot spots where they can afford to buy their first home or trade up for a bigger one. And amid the “Great Resignation” and a generally aging population, traditional retirement markets are likely to see elevated demand.

New construction gains will only be a drop in the bucket, despite best efforts of builders

The reason home prices are rising so quickly is economics 101: high demand and low supply. Zillow research shows that in the 35 largest housing markets alone, there has been a shortfall of 1.35 million new homes since 2008 because of a construction slowdown following the housing crash. Home builder confidence is sky-high, and builders are doing all they can to get houses up, but supply chain snags and labor shortages are limiting progress. The gap shrunk in 2021 and will likely shrink again in 2022, but the housing shortage will be a defining feature of the market once again next year.

 

Glen Bell – (510) 333-4460   jazzlines@sbcglobal.net

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Glen’s SF East Bay Real Estate Market Update September 30, 2021 http://glenbell.agent.rpeastbay.com/2021/10/05/glens-sf-east-bay-real-estate-market-update-september-30-2021 http://glenbell.agent.rpeastbay.com/2021/10/05/glens-sf-east-bay-real-estate-market-update-september-30-2021#respond Tue, 05 Oct 2021 22:54:54 +0000 http://glenbell.agent.rpeastbay.com/?p=901 September 30, 2021 – Real Estate Market Numbers By Glen Bell   (510) 333-4460   We’re beginning to see a change in the market place. So, I’d like to start by quoting an article posted by Realtor.com on September 30, 2021; “After a wild year of unprecedented price increases, a worsening shortage of homes for sale, […]

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September 30, 2021 – Real Estate Market Numbers

By Glen Bell   (510) 333-4460

 

We’re beginning to see a change in the market place. So, I’d like to start by quoting an article posted by Realtor.com on September 30, 2021;

“After a wild year of unprecedented price increases, a worsening shortage of homes for sale, and cutthroat bidding wars where offers six figures over the ask price weren’t uncommon, conditions are finally normalizing. More homes are expected to go up for sale this season just as many would-be buyers are either priced out or so fed up after losing out on home after home that they’re dropping out of the running.”

“With more folks sidelined, some of the steam has been let out of the market. Prices aren’t rising by as much as competition is down and homes are taking a little longer to sell, giving buyers some breathing room.”

“It’s not like the market is soft,” says Lawrence Yun, chief economist of the National Association of Realtors. “It’s just moving away from that extreme frenzy.”

My current statistics are supporting these comments. We’re still seeing a strong sellers’ market. Just not as crazy as what we were seeing February through May. We’ve seen a 48% increase in our inventory since the end of May and yet a 9.2% drop in pending sales.

The pending/active ratio has been a benchmark that we’ve used as a measure of supply and demand to determine whether we’re in a buyer’s or a seller’s market. Typically, a number well above 1, (more inventory, or supply, with fewer pending sales, or demand) favors sellers. A number below 1 favors buyers. I rarely see this ratio go over 2 and yet it’s remained above 2 February through May, (during the height of our crazy, competitive and frenzied market this year). The pending/active ratio is currently at 1.34 still indicating a strong “sellers’ market. However, this ratio has been steadily coming down from its’ high in March of 2.47.

“Things are settling down. There will still be some multiple offers, but it will be less tense,” says Lawrence Yun, chief economist of the National Association of Realtors®. He expects the days of homes receiving 20 to 30 offers are becoming a thing of the past. “And some homes are lingering on the market for a week or two without an offer.”

The average days on market are now up to 40 days for the East Bay listings, up considerably from its’ low in April of 16 days on market. The per centage of homes “sitting” for 30 days or longer is now 32%, up from it’s low in April of 17%. The bottom line is that homes are taking longer to sell and more are sitting.

Asked “Will home prices fall?

The question on the minds of sellers, buyers, homeowners, and just about everyone else is whether prices might actually fall. Sorry, buyers, that likely won’t happen anytime soon.

“You’ve still got a lot of young people who have still not bought a home but who would like to,” says Realtor.com Chief Economist Danielle Hale. “Anytime the market starts to cool, you’ve got people on the sidelines waiting for their chance to get in. That keeps both home sales and home prices from declining too much.”

She expects more homes to hit the market in October and through the end of the year. But it won’t be enough to ameliorate the problem of demand.

Here are some highlights for the 39 East Bay Cities that I track:

  • The month’s supply for the combined 39 city area is 24 days. Historically, a 2 to 3 months’ supply is considered normal in the San Francisco East Bay Area. As you can see from the graph above, this is normally a repetitive pattern over the past four years.

  • Our inventory for the East Bay (the 39 cities tracked) is now at 2,156 homes actively for sale. This is roughly what we saw last year at this time, of 2,129. We’re used to seeing between 3,000 and 6,000 homes in a “normal” market in the San Francisco East Bay Area. Pending sales decreased to 2,894, lower than what we saw last year at this time of 3,205.

  • Our Pending/Active Ratio is 1.34. This is down from our high of April of 2.47. Last year at this time it was 1.51

 

  • Sales over the last 3 months, on average, are 9.8% over the asking price for this area, much higher than what we saw last year at this time, of 3.1%.

We’ve experienced such a big price increase this year, that I had to ask myself by how much. So, to give us an idea, here’s a spreadsheet showing the historical annual median price broken down by city. 2021 shown is year to date, through September 30th of this year. Keep in mind that these numbers will probably come down some due to seasonal influences where median price typically lowers as we approach the holidays.

Recent News

The Fever Has Broken’: Is the Housing Market Frenzy Really Going To Cool Off This Fall?

By Clare Trapasso, Realtor.com, Sep 30, 2021

Over the next few weeks and months, the long-overheated U.S. housing market is expected to continue to cool off in the bracing chill of autumn.

After a wild year of unprecedented price increases, a worsening shortage of homes for sale, and cutthroat bidding wars where offers six figures over the ask price weren’t uncommon, conditions are finally normalizing. More homes are expected to go up for sale this season just as many would-be buyers are either priced out or so fed up after losing out on home after home that they’re dropping out of the running.

“The fever in the housing market has broken,” says Ali Wolf, chief economist of building consultancy Zonda. “There have been buyers that have just been beat down for the last six months—and after losing so many homes and going through the emotional roller coaster, they’ve decided to stop searching for now. There are more homes on the market than there were six months ago.”

During the COVID-19 pandemic, record-low mortgage interest rates, below 3%, helped many homebuyers to absorb prices that reached all-time highs in the spring and summer. But prices rose so high so quickly that even bargain mortgage rates couldn’t offset them enough to give buyers some needed financial relief.

With more folks sidelined, some of the steam has been let out of the market. Prices aren’t rising by as much as competition is down and homes are taking a little longer to sell, giving buyers some breathing room.

In September, the rate of year-over-year growth was halved, to 8.6%, down from its peak of 17.2% in April, according to Realtor.com® data. This means the median list price of a home grew half as fast as in the spring. Homes also took a bit longer to sell, at about 43 days. While that’s down 11 days from the same month last year and 22 days from 2019, it’s up 6 days from June.

“Things are settling down. There will still be some multiple offers, but it will be less tense,” says Lawrence Yun, chief economist of the National Association of Realtors®. He expects the days of homes receiving 20 to 30 offers are becoming a thing of the past. “And some homes are lingering on the market for a week or two without an offer.”

This fall, buyers may once again be able to include contingencies in their offers, such as requiring home inspections and appraisals, and still win out bidding wars. They may even—gasp—get homes at the list price.

All-cash offers could also dip if buyers don’t need to cash out their savings, stocks, and cryptocurrency stashes to stand out from the competition.

“It’s not like the market is soft,” says Yun. “It’s just moving away from that extreme frenzy.”

The changes in the housing market may be coinciding with the seasonal slowdown. Typically, competition is fierce in the summer as families battle over larger homes in the suburbs, hoping to secure residences and settle in before the kids start school. Then the market slows down with less competition for the smaller homes that traditionally go up for sale.

Yun expects annual price increases will slow to a more normal level, around 5%, versus the double-digit price hikes that reigned earlier in the year. But this may not be true for every home in every part of the country.

“If you want a reasonably priced home in a desirable area, be ready to still face stiff competition,” says Zonda’s Wolf.

Will home prices fall?

The question on the minds of sellers, buyers, homeowners, and just about everyone else is whether prices might actually fall. Sorry, buyers, that likely won’t happen anytime soon.

The nation is still suffering from a severe housing shortage resulting in more buyers than there are abodes for sale. This is a continuing hangover from the Great Recession’s aftermath, when builders largely held off on building while investors bought up single-family homes and turned them into rentals. Meanwhile, the millennial generation is larger than the previous one, meaning there are more prospective buyers than there were a decade or so ago.

There’s plenty of pent-up demand for homes.

“You’ve still got a lot of young people who have still not bought a home but who would like to,” says Realtor.com Chief Economist Danielle Hale. “Anytime the market starts to cool, you’ve got people on the sidelines waiting for their chance to get in. That keeps both home sales and home prices from declining too much.”

She expects more homes to hit the market in October and through the end of the year. But it won’t be enough to ameliorate the problem of demand.

The nation is still short about 5 million homes, Hale says. As builders can’t get them up fast enough, she expects it will take between five and six years before there are enough homes for sale to meet demand.

New construction is beginning to pick up after months of builders contending with shortages in lumber, labor, materials, and appliances. While there are still delays compared with before the pandemic, there was about a 5% uptick in construction in August compared with July, says Zonda’s Wolf.

“Inventory is still very, very tight,” says Wolf. But “we’re up from the bottom. We expect to see a little more inventory trickle onto the market through the end of this year and into next year.”

Rising mortgage rates will likely keep high prices under control

Rising mortgage interest rates are expected to keep price growth in check: After all, buyers can afford to fork over only so much for their monthly housing payments. So if rates rise, buyers won’t be able to afford more expensive properties.

This could result in lower price growth, or prices going flat or even dipping a little in certain markets.

“Once mortgage rates push up a little bit, it’s going to combine with higher home prices to price people out of the market,” says Mark Zandi, chief economist of Moody’s Analytics. “Some markets could see prices go down a little, like in the most juiced markets. … [But] it’s not a crash.”

Rates are expected to top 3% by the end of the year and reach 4% by the end of 2022, says Joel Kan, an economist at the Mortgage Bankers Association. They averaged 2.88% for a 30-year fixed-rate loan in the week ending Sept. 23, according to the most recent Freddie Mac data.

Historically speaking, even 4% is still low. Over the past 20 years, mortgage rates averaged about 5%, according to MBA. The difference between a 3% and a 4% rate on a $380,000 home (the median list price nationally) was about $169 a month on a 30-year fixed-rate loan. That adds up to nearly $61,000 over the life of the loan.

“We’re expecting rates to increase moderately over the next 12 months,” says Kan. “As the economy improves, as the job market improves, typically that pushes rates higher. [But] there is a little bit more uncertainty now, given that we’ve seen the pandemic linger longer than we expected.”

How will the fall market affect home sellers?

While experts predict the housing market will remain firmly in the seller’s court, the days of picking prices out of thin air are likely coming to an end. The same goes for not making any improvements to a property (let alone having it properly cleaned) before listing it.

“Some sellers got a little too greedy or had a misconception about the market conditions,” says NAR’s Yun.

Zonda’s Wolf recommends sellers look at comps of other homes in their neighborhoods that have recently sold to get a realistic idea of what they can charge for their properties. They should also get their homes in tiptop shape. And while they may not get 20 offers like their neighbors may have received a few months ago, well-priced, move-in ready homes are in high demand.

“If you’re a seller today, you’ll likely still get top dollar, but you’re still going to have to put in the work,” adds Wolf. “Dust for cobwebs, stage the home, put on a fresh coat of paint.”

Where home prices are going next, according to forecast models

BY LANCE LAMBERT, Fortune, September 21, 2021

The COVID-19 housing market—underpinned by remote work, pandemic-induced low mortgage rates, and a demographic wave of first-time homebuyers—has been among the hottest in the nation’s history. Since the onset of the crisis, median home list prices are up 23%.

Recently, some of that exuberance has finally left the market. Indeed, since bottoming out this spring, housing inventory is up 30% as some homebuyers start to balk at record prices, and more sellers—who fear losing out on big gains—are listing. While the market is clearly still a seller’s market, it has inched a bit in buyers’ favor in recent months.

But what does softening in the housing market mean for home price growth?

The consensus among the industry’s forecast models is that we’re headed for slower growth, albeit still positive. The weakest projection comes from real estate research firm CoreLogic, which is forecasting just a 2.7% appreciation in the coming 12 months. Meanwhile, John Burns Real Estate Consulting and Freddie Mac—which do calendar year forecasts—project home price growth of 4% and 5.3%, respectively, in 2022.

“Annual home price growth was the most that we have ever seen in the 45-year history of the CoreLogic Home Price Index. This price gain has far exceeded income growth and eroded affordability, wrote Frank Nothaft, chief economist for CoreLogic, in his latest market outlook report. “In the coming months this will temper demand and lead to a slowing in price growth.”

Already, we’re starting to see this slowing appreciation materialize in the market. Between April 2020 and April 2021, median home prices on Realtor.com skyrocketed 17.2%. But over the most recent 12-month period, that rate was just 8.6% year over year. While this represents numerical “softening,” it’s easy to imagine how it might not feel like it to the typical homebuyer. After all, 8.6% is still well above most Americans’ annual pay bump.

How can home prices keep rising after posting such large gains? It all comes down to supply and demand. As Fortune has previously reported, we’re in the middle of the five-year period during which the largest chunk of millennials, those born between 1989 and 1993, are hitting their thirties—the age when first-time homebuying really kicks into gear. Meanwhile, housing supply is simply outmatched: Reeling from the 2008 housing bust, homebuilders spent the past decade playing it safe rather than aggressively building what this demographic wave would need. As a result, the U.S. is now under-built by around 4 million homes, according to a recent analysis by Freddie Mac.

But strong fundamentals don’t mean the market is free of risk.

The biggest wild card is Federal Reserve Chair Jerome Powell. If inflation-concerned central bankers raise interest rates sooner than expected, it would translate into downward pressure on real estate prices.

The second unknown is tied to the end of federal pandemic protections. At the end of September, the mortgage forbearance program—which currently protects 1.5 million homeowners—will begin to wind down. Some of those struggling borrowers could opt to sell their home. The latest forecast by Zillow estimates 25% of those forbearance mortgage holders will list their home. While that would certainly increase housing inventory, it wouldn’t fundamentally change the current market. However, Zillow researchers write if they’re wrong, and it’s actually 50% of forbearance borrowers who list their homes, then the market would see “a significant deterioration from current conditions.”

Zillow Market Pulse:

By Matthew Speakman on Sep. 17, 2021

The housing market remains very competitive but slowing home value appreciation indicates that the frenzy from earlier in the year is quieting down. An increase in for-sale inventory reinforces this narrative and looks to be increasing home shopper confidence. Interest rates remain low, but trended firmly upward toward the end of the week in anticipation of a Fed announcement.

Home value growth cools even as annual appreciation sets new records

  • The national Zillow Home Value Index (ZHVI) increased by 17.7% in August from a year ago.
  • Monthly ZHVI appreciation cooled 0.22 percentage points from July to 1.75%.

Inventory levels grow for a fourth straight month, coinciding with an uptick in home purchase applications

  • More than 1.1 million homes were for sale in August, up 4.1% from July.
  • Applications for home purchase mortgages increased by 7.6% last week from the week before, according to the Mortgage Bankers Association.

Mortgage rates end the week higher in anticipation of a key Fed announcement

  • Mortgage rates now sit at their highest level in about two months.
  • Investors believe that the Federal Reserve could announce plans next week to tighten monetary policy.

So what? 

  • As the summer nears its end, the housing market remains very warm, but it has gotten distinctly cooler from earlier in the year. Home values continue to grow at a record-fast annual pace: The nation’s typical home value – as measured by the Zillow Home Value Index (ZHVI) – grew 17.7% in August from the same month in 2020, setting a new all-time high annual growth rate for the fourth straight month. The typical home value in the US in August has increased by more than $45,000 from a year ago. But while the annual appreciation continues to set new records, monthly home value growth has begun to soften. National ZHVI increased by 1.75% in August from July, a slower monthly pace than the 1.97% monthly clip registered in July. While monthly ZHVI appreciation in August was the third strongest month-over-month reading in Zillow data history, the one-month deceleration from July the sharpest since July 2020. Taken together, the figures illustrate that the housing market remains very competitive, but that it is also actively cooling from its white-hot state. Leading indicators of home price growth reinforce this dynamic. Of the for-sale listings that went pending last week, 78% of them did so after being on the market for fewer than 30 days. That’s down from a high of more than 85% earlier in the year, but still more than 25 percentage points higher than the shares in the same weeks in 2018 and 2019.

 

  • The softening home price pressure is due in part to increasing levels of for-sale inventory. After consistently plumbing new lows for almost a year, the number of for-sale homes on the market has risen for four consecutive months. While inventory levels are still down significantly (22.7%) from a year ago, the recent uptick in listings has afforded eager home shoppers more options and appears to have assisted in boosting their confidence. The share of people who believe it is a good time to buy a home – as measured by Fannie Mae – ticked up four percentage points in August from July, the first monthly improvement since March. The measure remains near all-time lows, but the monthly improvement was an encouraging sign for the market. And this increased optimism is also showing signs of materializing into home purchases. The Mortgage Bankers’ Association’s index of home purchase mortgage applications increased by 7.6% last week from the week prior. The measure – a leading indicator of home sales in the coming months – has improved in six of the last eight weeks and now sits at its highest level since April.

 

  • One trend that could threaten this budding momentum in home sales activity are recent increases in mortgage rates. Rates had stayed relatively flat for the last few weeks, but they ended the week by making some sharp upward moves and now sit at their highest level since July. The upward momentum came even as a key reading on inflation showed price growth slowed last month, indicating that sky high inflation may finally be starting to cool (though other measures of inflation suggest that price growth may be accelerating and broadening beyond a few select industries). Inflation is a key factor for mortgage rate movements, as rising prices weaken the value of bonds, causing yields to rise and, usually, mortgage rates to follow suit. Whether or not mortgage rates will continue this upward momentum or revert to recent lows will depend more heavily on a key policy announcement next week from the Federal Reserve. The Fed has hinted they may announce a planned shift toward tighter monetary policy this month, but recent weaker-than-expected reports on the labor market and other key sectors, as well as the ongoing surge in COVID cases across the country, may have weakened their case. For now, mortgage rates remain very low and will likely continue to offer attractive financial conditions for housing market shoppers looking to buy their home.

Glen Bell – (510) 333-4460   jazzlines@sbcglobal.net

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Glen’s SF East Bay Real Estate Market Update May 31, 2021 http://glenbell.agent.rpeastbay.com/2021/06/11/glens-sf-east-bay-real-estate-market-update-may-31-2021 http://glenbell.agent.rpeastbay.com/2021/06/11/glens-sf-east-bay-real-estate-market-update-may-31-2021#respond Fri, 11 Jun 2021 19:23:07 +0000 http://glenbell.agent.rpeastbay.com/?p=877   May 31, 2021 – Real Estate Market Numbers By Glen Bell   (510) 333-4460 We’re seeing a very strong sellers’ market right now. It’s primarily due to our current supply and demand. Low rates and the foreseeable improvements in our economy are both driving factors. Inventory at the end of May, was the lowest that […]

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May 31, 2021 – Real Estate Market Numbers

By Glen Bell   (510) 333-4460

We’re seeing a very strong sellers’ market right now. It’s primarily due to our current supply and demand. Low rates and the foreseeable improvements in our economy are both driving factors. Inventory at the end of May, was the lowest that I’ve seen it for a May since I have been tracking statistics in the SF East Bay going back to 2007. Our inventory last year at the end of May was low and this year it’s 36% lower in the East Bay. Demand is still there as there are still a good number of homes going into contract. There just aren’t enough homes available for the number of buyers who are looking. This has triggered more competition driving prices up. That’s what you are now seeing with any of the online searches. This could change for a number of reasons, but what I’m hearing is that there won’t be much movement with interest rates for the rest of the year. So, I expect a strong sellers’ market to continue with maybe a bit of a slowdown later this year.

Our inventory really didn’t change much from last month. In fact, it’s remained relatively flat since the beginning of the year. That’s unusual because we normally see a steady increase beginning in January through fall. We have an 18 day supply of homes for sale today. Last year at this time, there was a 39 day supply. I suspect that although homes are coming onto the market to a greater degree, most are getting snapped up quickly. Pendings did increase slightly. However, compared to last year at this time, it’s up a whopping 37%.

The pending/active ratio has been a benchmark that we’ve used as a measure of supply and demand to determine whether we’re in a buyer’s or a seller’s market. Typically, a number well above 1, (more inventory, or supply with fewer pendings, or demand) favors sellers. A number below 1 favors buyers. It’s currently at 2.19 indicating a strong “sellers’ market.” I rarely see this ratio go over 2 and yet it’s remained above 2 since February. For those who remember, this market resembles the one following when sales started cranking up after their big declines during the REO years beginning in 2008. Last year at the end of May, this ratio was at 1.02, (what we would consider a balanced and fairly normal market).

For those agents working with buyers who have been looking, this has been a challenge. Prices have been increasing in most areas due to fierce competition. In fact, looking at the entire East Bay Area, the average sales price % over the average asking price is now at 11%. I checked and couldn’t find anything this high since I began tracking this statistic. Last year at this time, we were at 3.1%.

Markets have traditionally been seasonal, but that’s become less of a factor due to Covid19 influences. With more people working at home and schools having been closed, we’re starting to see a migration from the San Francisco/South Peninsula areas to our own East Bay, or the Central Valley, and even out of state. Buyers want something more affordable and with some distance from their neighbors, possibly having a yard. That’s one reason why the condo market has become soft and that there’s a movement to houses in the East Bay.

Here are some highlights for the 39 East Bay Cities that I track:

  • The month’s supply for the combined 39 city area is 18 days. Historically, a 2 to 3 months’ supply is considered normal in the San Francisco East Bay Area. As you can see from the graph above, this is normally a repetitive pattern over the past four years. Supply is less when compared to last year at this time, of 39 days.

 

  • Our inventory for the East Bay (the 39 cities tracked) is now at 1,454 homes actively for sale. This is fewer than what we saw last year at this time, of 2,275. We’re used to seeing between 3,000 and 6,000 homes in a “normal” market in the San Francisco East Bay Area. Pending sales increased slightly to 3,186, much higher than what we saw last year at this time of 2327.

  • Our Pending/Active Ratio is 2.19. Last year at this time it was 1.02.
  • Sales over the last 3 months, on average, are 11% over the asking price for this area, much higher than what we saw last year at this time, of 3.1%.

 

Recent News

C.A.R. Housing Market Forecast as of April/27/2021

County Market Overview

CAR Market Minute – June 7, 2021

While the outlook for the economy and the market remains bright, both are encountering supply constraints as the reopening continues. Despite a surge in consumer spending and an improving job market, labor and material shortages have become hurdles that the recovery needs to overcome. As such, inflation and slower job growth remain topics of concern when discussing how fast the U.S. can get back to its pre-pandemic levels. Meanwhile, the housing market has had solid performance since the second half of 2020 but is showing signs of moderations in recent weeks. As tight supply continues to apply upward pressure on prices, the market momentum could slow as affordability issues kick in in the second half of the year.

REALTORS® See Some Market Moderations in the Week Ahead: While almost half (48.6%) of those who responded to the weekly survey expected home sales to rise in the coming week, the share has been below 50% for the fourth time in the past five weeks. Meanwhile, more REALTORS® believed that home prices might have already peaked as those who expected prices to go up declined to 58.2%, the lowest level since late January. The consistent moderations since late April suggest that the market momentum could be easing slightly going into the summer season.

Job Growth Improves but Lower than Expected: U.S. employers added 599,000 jobs last month, an increase from a revised 278,000 in April, but the gains were lower than expected. Businesses continue to struggle to fill job openings as potential workers remain on the sidelines. Factors that constrain the labor supply includes workers’ fear to go back to their jobs because of concerns about catching COVID, the disincentive effect of additional unemployment benefits, and childcare constraints as schools have not fully returned to in-person learning. With payrolls still 7.6M below the pre-pandemic level, a full recovery may not be reached until early 2023. The unemployment rate fell to 5.8% in May from 6.1% the prior month.

Rates Inch Up but Remain below 3%: The average 30-year fixed-rate mortgage (FRM) increased slightly in the first week of June but remained below the 3% threshold. Despite market concerns about rising inflation in recent weeks as the economy continues to recover, the average 30-year FRM compiled by Freddie Mac has been at or below 3% for the past seven weeks. The lower-than expected job growth figure released last Friday may have eased some of the market concerns, as the 10-year Treasury has been primarily moving side-ways since then.

Consumers Feel More Pessimistic about Homebuying: As housing affordability deteriorated further and supply shortage remained an issue, homebuyers sentiment declined to the lowest point in 32 months, according to the C.A.R. Housing Sentiment Survey. Only 19% of consumers believe it is a good time to buy a home in May 2021, a sharp drop from 25% in the prior month, and a steep decline from 31% in May 2020. With California setting another record median price in April 2021 and the corresponding mortgage payment increasing more than 30% from a year ago, potential homebuyers are feeling more pessimistic about the homebuying conditions.  Meanwhile, 72% of all respondents believe it is a good time to sell, an all-time high since the survey launched in September 2018.

Home Building at Fastest Pace in Areas with Shortest Commute Times: Home building expanded the fastest in places with the shortest commute times, according to an index released by the National Association of Home Builders (NAHB). The Q121 Home Building Geography Index (HBGI) shows that single-family home building was the highest in the longest commute (top two quintiles), with a combined market share of 63.6%. The year-over-year growth rate, however, was the strongest at 22.2% in the shortest commutes (bottom quintile). So, while the longer-commute areas have a much greater market share in single-family home building, the construction growth rates were highest in the areas with shortest commute times.

 

S.F. condo sales hit 16-year high with ‘ferocious’ buyer demand, price discounts

By J.K. Dineen, SF Chronicle, June 7, 2021

San Francisco’s pandemic-battered condo market bounced back with a vengeance this spring, scoring its busiest three-month period in at least 16 years as vaccinated buyers rushed back into the city to take advantage of pricing that is still significantly below its 2018 highs, according to a new report from the brokerage Compass.

The San Francisco condo, tenancy-in-common and co-op market saw more than 1,300 sales in the three-month period between March and May, up from about 400 sales a year ago.

“I’ve been doing this for 30 years and I’ve never seen the ferocious buyer demand that is going on right now,” said Patrick Carlisle, chief market analyst for Compass.

San Francisco’s condo market weakened considerably during the first year of the pandemic as downtown office towers went dark, theaters shuttered and restaurants closed. Apartment buildings in the downtown neighborhoods saw a 25% drop in rents, as many young tech workers took advantage of work-from-home flexibility to return home to their parents or move into more spacious and affordable cities. Now many of those workers are plotting their return, even if their jobs will remain partially remote, Carlisle said.

The spike in interest in condos may have been in part motivated by their value compared to the roaring single-family home market. While single-family homes in San Francisco jumped about 6% year over year, — to a median price of about $1.8 million — condo prices are still off their highs. High-rise condo prices are down 9.1% from pre-pandemic highs, while mid-rise units are down 9.6% and low-rise homes are 5.2% below what they were. The median two-bedroom condo is about $1.3 million, according to Compass.

Throughout the entire Bay Area, the three-month period saw 3,969 sales of homes and condos of $2 million or more, a 103% increase from the same three-month period in 2019, according to Compass. San Francisco luxury condo and house sales — defined as over $2 million — also hit all-time highs in sales, up 50% and 70%, respectively, from previous peaks. In Contra Costa County, luxury home sales were up 220% from their previous high.

With condos still down almost 10% and single-family homes up 6% or more, “you are starting to see a bigger differential between condo and single-family home prices,” said Carlisle. “It’s likely that people are looking at that and deciding they can get more for their money” in a condo building, he said.

Tishman Speyer Senior Managing Director Carl Shannon said trade at the twisty white Jeanne Gang-designed Mira tower in downtown San Francisco is “vastly improved” over a year ago. So far this year, 50 condos have sold in the building, generating more than $75 million in sales, he said. The 391-unit tower is more than 50% sold.

“2021 has been fantastic for us,” he said. “We have seen the rate of absorption and pricing both improve dramatically. People are beginning to come back to San Francisco in a very real way. Every day and every week, the feeling on the streets downtown is better.”

Tishman Speyer recently broke ground on two new buildings at Mission Rock, across from Oracle Park. One of the buildings is pre-leased to Visa; the other will be apartments.

“I think the vaccine rollout is a huge factor in the condo market,” said Carlisle. “People are feeling better about getting into elevators and walking down hallways. Population density is no longer as much of an issue.”

 

Glen Bell – (510) 333-4460   jazzlines@sbcglobal.net

 

 

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Glen’s SF East Bay Real Estate Market Update March 31, 2021 http://glenbell.agent.rpeastbay.com/2021/04/06/glens-sf-east-bay-real-estate-market-update-march-31-2021 http://glenbell.agent.rpeastbay.com/2021/04/06/glens-sf-east-bay-real-estate-market-update-march-31-2021#respond Tue, 06 Apr 2021 23:48:26 +0000 http://glenbell.agent.rpeastbay.com/?p=849 March 31, 2021 – Real Estate Market Numbers By Glen Bell   (510) 333-4460 We’re seeing a very strong sellers’ market right now. It’s primarily due to our current supply and demand. Low rates and the foreseeable improvements in our economy are both driving factors. Inventory at the end of March, was the lowest that I’ve […]

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March 31, 2021 – Real Estate Market Numbers

By Glen Bell   (510) 333-4460

We’re seeing a very strong sellers’ market right now. It’s primarily due to our current supply and demand. Low rates and the foreseeable improvements in our economy are both driving factors. Inventory at the end of March, was the lowest that I’ve seen it for a March since I have been tracking statistics in the SF East Bay going back to 2007. Our inventory last year was low and this year it’s 20% lower in the East Bay. Demand is still there as there were a good number of homes going into contract. There just aren’t enough homes available for the number of buyers who are looking. This has triggered more competition driving prices up. That’s what you are now seeing with any of the online searches. This could change for a number of reasons, but what I’m hearing is that there won’t be much movement with interest rates for the rest of the year. So, I expect a strong sellers’ market to continue with maybe a bit of a slowdown later this year.

Our inventory really didn’t change much from last month. That’s unusual for March because we normally see a sizable increase. We have an 18 day supply of homes for sale today. Last year at this time, there was a 24 day supply. I suspect that although homes are coming onto the market, most are getting snapped up quickly. Pendings did increase by approximately 17%. Compared to last year at this time, it’s up a whopping 55%.

The pending/active ratio has been a benchmark that we’ve used as a measure of supply and demand to determine whether we’re in a buyer’s or a seller’s market. Typically, a number well above 1, (more inventory, or supply with fewer pendings, or demand) favors sellers. A number below 1 favors buyers. It’s reached 2.47 indicating a strong “sellers’ market.” This is the highest I’ve seen it since March of 2013. For those who remember, that was when sales started cranking up again from their big declines during the REO years beginning in 2008. Last year at the end of March, we were at 1.28.

For those agents working with buyers who have been looking, this has been a challenge. Prices have been increasing in most areas due to fierce competition. In fact, looking at the entire East Bay Area, the average sales price % over the average asking price is now at 7.3%. I checked and couldn’t find anything over 7% since I’ve been tracking this statistic. Last year at this time, we were at 2.6%.

Markets have traditionally been seasonal, but that’s become less of a factor due to Covid19 influences. With more people working at home and schools having been closed, we’re starting to see a migration from the San Francisco/South Peninsula areas to our own East Bay, or the Central Valley, and even out of state. Buyers want something more affordable and with some distance from their neighbors, possibly having a yard. That’s one reason why the condo market has become soft and that there’s a movement to houses in the East Bay.

Here are some highlights for the 39 East Bay Cities that I track:

  • The month’s supply for the combined 39 city area is 18 days. Historically, a 2 to 3 months’ supply is considered normal in the San Francisco East Bay Area. As you can see from the graph above, this is normally a repetitive pattern over the past four years. Supply is less when compared to last year at this time, of 24 days.

  • Our inventory for the East Bay (the 39 cities tracked) is now at 1,244 homes actively for sale. This is fewer than what we saw last year at this time, of 1,552. We’re used to seeing between 3,000 and 6,000 homes in a “normal” market in the San Francisco East Bay Area. Pending sales increased slightly to 3,073, much higher than what we saw last year at this time of 1,988.

  • Our Pending/Active Ratio is 2.47. Last year at this time it was 1.28.
  • Sales over the last 3 months, on average, are 7.3% over the asking price for this area, much higher than what we saw last year at this time, of 2.6%.

Recent News

C.A.R. Housing Market Forecast

 

C.A.R.’s Housing Affordability Index (HAI) measures the percentage of households that can afford to purchase a median-priced, single-family home in California. C.A.R. also reports affordability indices for regions and select counties within the state. The index is considered the most fundamental measure of housing well-being for home buyers in the state.

CAR Market Minute – April 5, 2021

As we enter the traditional home buying season, REALTORS® remain upbeat about the current housing market conditions. There are reasons to feel good about the market, despite rates rising high in recent weeks.  With a strong growth in employment in March and a surge in consumer confidence to the highest level in the year, the economy is slowly recovering and life is hopefully getting back to somewhat “normal” in the second half of the year. Tight supply, however, remains a concern as it continues to hold back demand and continues to put pressure on affordability.

REALTORS® Feel Upbeat about the Market: California REALTORS® felt positive about the market as we entered the month of April.  More than half (54.7%) of them expected sales to improve in the upcoming week, while nearly seven out of ten believed prices to increase from the prior week.  Both measures reached the highest level since C.A.R. started tracking members’ weekly market sentiment in July 2020. Those who had a listing appointment also hit the highest level (40.4%) since late August, and 49 percent think active listings will rise in the upcoming week.

Pending Home Sales Hold back by Tight Supply: U.S. pending home sales dipped slightly by 0.5 percent from a year ago after eight consecutive months of year-over-year gains, according to the National Association of Realtors® (NAR). Tight housing inventory was the primary reason for the slowdown, as there were just 1.03 million homes for sale at the end of February, a 29.5 percent decline compared to a year ago. On a month-to-month basis, pending home sales were down 10.6 percent in February with all regions showing a decline.

Consumer Confidence Hits One-Year High: Consumer confidence in the U.S. surged in March and reached the highest level since the pandemic started a year ago. The index increased to 109.7 in March from 90.4 in February and was the third consecutive month with a gain from the prior month. The higher-than-expected number surpassed even the top-end of most forecasts by a sizable margin. Government fiscal stimulus, lower number of COVID cases, continued success in vaccine roll outs, and the reopening of businesses were all contributing factors to the optimism. While the index remains below a pre-pandemic level posted in February of last year, the increase in optimism is an encouraging sign that we are moving in the right direction.

Job Market Continues to Make Progress: With success in vaccine roll outs improving public health and easing COVID restrictions, economic activities started picking up and firms began ramp up hiring to meet increased consumer demand. Employers added 916k in March as the recovery gained momentum, easily beating consensus expectations. Hiring last month was broad based with almost all major industry reporting gains. Unemployment rate declined 0.2 percentage point to 6.0 percent in March 2021, the lowest since twelve months ago. While the unemployment rate is still above the pre-pandemic level and there is still a lot of ground to recover, the labor market is showing signs of a faster recovery than previously anticipated.

Mortgage Applications Moderate in Recent Weeks but Remain Elevated: With higher rates cooling refinancing activity, mortgage applications decreased 2.2 percent from one week earlier. The Purchase Index decreased 1 percent compared to the prior week but was 39 percent higher than the same week one year ago, as purchase activity dropped sharply due to the pandemic. The refinance share of mortgage activity dipped 3 percent on a week-to-week basis and was 32 percent down from the same week of last year. Refinance activity continued to pull back, as the pool of borrowers who can benefit from a refinance further shrinks with recent rate hikes.

Construction Spending Declines in February but Still Up over the Year: Severe weather have damped construction activity during February, as total construction spending fell 0.8 percent. On a year-over-year basis though, total spending is up 2.3 percent.  Residential spending registered a decline of -0.2% from the prior month but was up a robust 21.1 percent from a year ago. Single-family expenditures inches up 0.1 percent during the month, while multifamily dipped 1.4 percent.

 

Asking prices of newly listed homes reach all-time high

Buyers becoming discouraged amid high homes prices and bidding wars

HousingWire, April 2, 2021, 1:14 pm By Tim Glaze


Home prices are sky-high, and a recent report from Redfin underlines that point with some staggering data.

Median home-sale prices increased 17% year-over-year to $335,613 – a record high, per data taken from more than 400 metro areas during the four-week period ending March 28, 2021. And asking prices of newly listed homes rose 14% year-over-year to $353,500, another all-time high.

Pending home sales were up 38% from the same period in 2020 — and up 28% from the same period 2019 — but pending sales grew just 0.9% from Redfin’s previous four-week report.

Sales in general are still high, per Redfin Chief Economist Daryl Fairweather — 59% of homes that went under contract in the current four-week period had an accepted offer within the first two weeks on the market — but the recent low numbers suggest some homebuyers have reached their limit on high home prices and bidding wars.

“Add to the mix a dwindling number of homes for sale and rising mortgage rates, and the typical family that is still searching for an affordable house may have missed the boat,” Fairweather said. “First-time homebuyers who were already stretching their budgets will have to make bigger compromises on size and location or resign to renting for another year.”

Active listings fell 42% according to the report, spurring would-be buyers to submit offers that are significantly over asking price and making the market difficult to navigate for first-time homebuyers and other price-conscious buyers. Redfin reported that 47% of homes that went under contract in the current four-week period had an accepted offer within one week of hitting the market – yet another all-time high. And 41% of homes sold for more than their listed home price, which was 16 percentage points higher year-over-year.

Fairweather’s suggestion for those would-be buyers: look at condominiums and other more realistic purchases, build some equity, and wait this out.

“[President Joseph Biden’s] infrastructure plan aims to incentivize zoning for multifamily homes, which could increase the supply of affordable homes and provide even more people a path to homeownership,” Fairweather said. “But, there is no guarantee the incentives would be enough for local governments to change their zoning practices.”

The aforementioned infrastructure plan, dubbed the American Jobs Plan, aims to inject $213 billion into housing with the building of 500,000 homes in low- and middle-income areas. And two million affordable homes and commercial buildings would be built and renovated over the next decade as part of the initiative.

 

Glen Bell – (510) 333-4460   jazzlines@sbcglobal.net

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Glen’s SF East Bay Real Estate Market Update January 31, 2021 http://glenbell.agent.rpeastbay.com/2021/02/11/glens-sf-east-bay-real-estate-market-update-january-31-2021 http://glenbell.agent.rpeastbay.com/2021/02/11/glens-sf-east-bay-real-estate-market-update-january-31-2021#respond Thu, 11 Feb 2021 19:09:51 +0000 http://glenbell.agent.rpeastbay.com/?p=821 January 31, 2021 – Real Estate Market Numbers By Glen Bell   (510) 333-4460 Here’s a quick summary of what’s going on in the San Francisco East Bay real estate market as of January 31st, 2021. I’d like to start out with a quick quote coming from CAR chief economist Jordan Levine: “Home prices, which usually […]

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January 31, 2021 – Real Estate Market Numbers

By Glen Bell   (510) 333-4460

Here’s a quick summary of what’s going on in the San Francisco East Bay real estate market as of January 31st, 2021.

I’d like to start out with a quick quote coming from CAR chief economist Jordan Levine:

“Home prices, which usually peak during the summer, were unseasonably strong in December,” he said in a news release accompanying the report. “The imbalance between supply and demand continues to fuel home price gains as would-be home sellers remain reluctant to list their homes during the pandemic.”

“Home sales should remain elevated into the first half of 2021, as motivated buyers take advantage of the increased purchasing power,” he said.

Yes, sales were up in December but down slightly in January. Pendings are down by 5% from December but up by 34.7% compared to last year. Inventory on the other hand has increased by 20% from last month. However, still below last year’s levels by 14%. This is the lowest inventory level for a January that I’ve seen since I began tracking statistics in 2007. Based on normal seasonal influences, we typically see a steady increase from the beginning of the year through to the end of September followed by a decrease coming into the holidays. We have an 18 day supply of homes for sale today. Last year at this time, there was a 21 day supply.

Our supply and demand ratio is now at 1.87 indicating a strong “sellers’ market.” Last year at the end of January, we were at 1.20. The year before that, .78.

We’re seeing a migration coming out of SF and South Peninsula. Some movement to the East Bay, some to the Central Valley and some even out of the state altogether. This is primarily due to being able to work at home, high cost of living, state & local taxes, smoke, traffic, housing affordability, job relocations, etc

We’re also seeing a softening in some of those markets plus rents have been coming down. The Condo market continues to be sluggish.

 

Here are some highlights for the 39 East Bay Cities that I track:

  • The month’s supply for the combined 39 city area is 18 days. Historically, a 2 to 3 months’ supply is considered normal in the San Francisco East Bay Area. As you can see from the graph above, this is normally a repetitive pattern over the past four years. Supply is less when compared to last year at this time, of 21 days.

  • Our inventory for the East Bay (the 39 cities tracked) is now at 1,161 homes actively for sale. This is fewer than what we saw last year at this time, of 1,348. We’re used to seeing between 3,000 and 6,000 homes in a “normal” market in the San Francisco East Bay Area. Pending sales decreased slightly to 2,172, much higher than what we saw last year at this time of 1,613.

  • Our Pending/Active Ratio is 1.87. Last year at this time it was 1.20.
  • Sales over the last 3 months, on average, are 4.8% over the asking price for this area, Higher than what we saw last year at this time, of 1.6%.

Recent News

California Association of Realtors Market Minute

February 8, 2021

Housing demand is stronger than normal so far in 2021, while tight supply continues to put upward pressure on housing values. Robust price growth will not ease up until some balance between supply and demand is restored. Recent survey results suggest that the housing market could be getting more listings in the coming weeks, possibly because of the improving pandemic situation and a recovering economy.

Signs of Improvement on the Supply Side:  While the number of active listings remained near the lowest level since the pandemic began, the rate of decline appeared to be leveling off. Last week’s average daily new listings, in fact, had its first weekly increase in three weeks based on the weekly MLS data. Survey results also suggest a bounce back in supply as 46.5 percent of those who responded to the survey – the highest level in five weeks – believed listings would go up in the following week. Over a third (35 percent) had a listing appointment last week, which was the highest level since early November 2020. Sellers also became more positive about the market as only 6.4 percent of them removed their home from the market, significantly below the 24.1 percent recorded in early June, and was the lowest level since then.

Home Prices Not Expected to Ease: Despite a possible improvement on the supply side of the market, upward pressure on prices continued to build up. All parties involved – buyers, sellers, and agents – agreed that home prices will likely remain on their upward trend in the short term. Three of five REALTORS® (61.3%) who responded to the weekly survey believed that prices would go up in the upcoming week, nearly doubled the level observed in late July and was the highest level in at least the last six months. The share of buyers who expected lower prices also has dropped by more than half from 66.7 percent in early June 2020 to 32.7 percent in the latest week. Meanwhile, the share of sellers who reduced price to attract buyers dipped to the lowest level of 6.8 percent in the last seven months.

Overall Homeownership Rate Rose but Black Homeownership Fell: U.S. homeownership rose in the last quarter of 2020, increasing to 65.8 percent from 65.1 percent in the same period a year earlier. The homeownership rate for white Americans in the fourth quarter of 2020 reached a nine-year high of 74.5 percent, and Hispanic American homeownership rate rose to the highest fourth quarter rate in three years at 49.1 percent. Homeownership rate for Black Americans, however, fell to 44.1 percent, the lowest rate since the first quarter of 2020. So, while the overall homeownership rate might have improved due to favorable lending environment, the economic recession is having a more negative effect on Black American homeownership than other ethnic groups.

Interest Rates Flat and below Recent High: Mortgage rates were unchanged in the past week and remained near record lows, after increasing briefly for a couple weeks in January. The short spike in rates was due to concerns that higher likelihood of passing new fiscal stimulus could spark inflation sooner than anticipated. Those concerns have subsided in recent weeks and rates have moderated since then. While rates could fluctuate as more economic data become available throughout the year, the average 30 year fixed-rate average will likely stay close to 3 percent in 2021.

Unemployment Rate Declined for Mixed Reasons, but Better Days Ahead: The labor market recovery continued with the unemployment rate dropping 0.4 percentage points to 6.3 percent in January. Despite the unemployment falling to the lowest level since March 2020, the labor market condition is less upbeat than suggested by the indicator. First, the increase of 49k jobs in January only partially reversed the job loss of 227k reported by employers in December. In addition, the sharp decline in the unemployment came as the labor force participation rate edged lower to 61.4 percent and 406,000 workers left the labor force.  The employment conditions, nevertheless, look brighter in the days ahead as vaccine rollouts are expected to improve, while additional fiscal stimulus in the work should help strengthen hiring conditions.

 

How The Condo Market Stalled in 2020, Even as Single-Family Homes Soared

By Nicole Bachaud, Zillow, February 8, 2021

 

  • As the market heated up for single-family homes in 2020, the condo market cooled, with rising inventory and a higher share of listings with price cuts.
  • Median sales price for condos rose year-over-year, but fell behind single-family homes.
  • Condos may provide an attractive entry point for those looking to own, especially in heated markets.

Housing market performance in urban and suburban areas was broadly similar in 2020, but the nation’s condo market failed to keep pace with the single-family home segment across a broad range of indicators last year. It could indicate that while our preferences for where to live may not have changed much during the pandemic, the type of homes we prefer may have.

Sales and price growth for condos ended 2020 generally lower than for single-family residences (SFRs) while inventory levels were generally higher, according to a Zillow analysis of listing and price data. Still, it remains to be seen how permanent these shifts will be in the face of sky-high housing demand and the enduring affordability of condos for a large pool of buyers eager to get a foot in the door, unfazed by condos’ cozier space and perhaps attracted by the sometimes amenity-rich condo lifestyle.

There was a considerable year-over-year spike in for-sale condo inventory nationwide compared to single-family inventory starting early summer 2020, a potential sign that condo-owners were vacating their homes and trading up for more space and privacy. Even so, this year-over-year increase in condo inventory happened in the midst of steep overall inventory declines, potentially providing homebuyers with modestly more options in a tight market.

Echoing the national trend, annual growth in condo inventory exceeded growth in SFR inventory in 48 of the nation’s 50 largest metro areas. New Orleans and Charlotte were the only exceptions.

Around the same time as inventory levels were rising, the share of condo listings that had at least one price cut also rose above that of SFR listings — the first time that occurred, since at least early 2019, offering further evidence of a softening condo market.

This trend was also mirrored in many local markets, most notably in several west coast metros. In Seattle, the share of condo listings with a price cut was more than 50% higher than the share of single-family homes by October (21% compared to 13.2%, respectively). The majority of California markets and some on the east coast also mirrored this trend, along with markets including Minneapolis, Nashville and Atlanta — an indication that the softening condo market was not only concentrated in dense coastal areas.

Diverging median sales prices between condos and single-family homes offered another sign of softening. The median list price for condos nationwide ended 2020 slightly higher than SFRs, but growth in median sale price has slowed. Throughout last year, single-family homes fetched a consistently higher median final price than condos, but the gap began widening last fall as year-over-year growth in condo prices flattened while SFR prices kept surging.

These differences in list price and sale price may be partly explained by composition differences between listings and sales counts for these two markets. When broken out by value tier, the largest year-over-year increases in for-sale condo listings were in the highest value tier, even as overall condo inventory began to rise. In other words, there were relatively more higher-value condo listings on the market than less-pricey options, contributing in part to condo’s higher median list price. That could be explained in part by where these condo listings were — in general, listings of condos in typically more expensive urban areas grew more than more-affordable suburbs or rural areas, also contributing to higher list prices.

On the sales side, annual growth in sales among the highest-priced single-family homes exceeded growth in other segments, explaining the recent rapid increase in overall SFR sale prices as relatively more, more-expensive, homes sell. For condos, annual growth rates were broadly similar by the end of the year for all but the lowest-priced segment, where growth lagged behind. But these small differences weren’t enough to bring the overall condo median sale price to single-family levels. It is interesting to note that while growth in overall median sales prices for condos is plateauing, the gap in annual sales growth between the highest valued tier and the rest of the condo market has closed.

Condo communities in different markets are responding differently to the pandemic and a softening market. In some metro areas, including Las Vegas and Houston, condo fees — also known as HOA fees or dues — have risen. In other areas, including Washington, DC, Baltimore and other east coast markets, condo fees are falling. These fees often cover maintenance and other costs associated with condo-specific amenities including pools, gyms and community centers — perks that are generally attractive to many buyers, but which may be closed, limited and/or more expensive to operate during the ongoing pandemic.

Condos provide a unique opportunity for prospective buyers looking for a foot in the door, especially in markets where house prices have risen out of reach or where proximity to urban centers is a priority. Many of the factors that make a condo lifestyle attractive to many, including more-communal living and easy access to desirable amenities including gyms, pools and community spaces, may have lost some of their shine during the pandemic. But in a post-pandemic world, it is likely these amenities will come back in full force and again become an attractive selling point.

What Will Real Estate Look Like In 2021? 3 Homebuying Trends You’ll See This Year

By Blake Morgan, Forbes, February 8, 2021

Chances are, you or someone you know has bought or sold a house in the last 10 months. No matter if you are moving across the street or across the country, it’s all part of a record-setting real estate boom.

The Covid-19 pandemic has affected every industry, but perhaps none as surprisingly as real estate. Triggered by job and financial changes, the push to stay at home and low interest rates, a record number of people have bought homes during the pandemic, even as a recession lingers and unemployment rates remain high. And the trend will continue throughout 2021.

The real estate boom is far from over. Here are three key homebuying trends to look for in 2021.

Record-Setting Pace

Homes aren’t just selling, they’re selling at a record-setting pace. The Covid-fueled real estate boost caused an average of 42% of home listings nationwide to sell in two weeks or less. One survey found that more than half of homebuyers say the pandemic accelerated their homebuying process. In the competitive San Diego market, 55% of homes are off the market in less than weeks, with an average of just 20 days on the market.

The record-setting pace is good news for sellers but makes for a difficult experience for buyers. In many cases, potential buyers are outpriced in the competitive market or

However, the record-setting pace could start to slow slightly during 2021. Houses were flying off the market because of a supply shortage and an increase in demand, largely due to a spring freeze in buying, paired with low interest rates and changing job situations. But as supply and demand start to balance out as the year progresses, look for the competitive seller’s market to slow down, but not by much.

In 2021, Zillow expects 6.9 million existing home sales, which is the most since 2005. The projected 21.9% one-year gain in sales is the largest since the early 1980s. An increasing number of millennials are buying houses, and with Gen Z closing in on prime homebuying age, the market demand should hold steady throughout 2021 and into the future.

Perhaps good news for buyers is that 2021 won’t be such a steady rush. Due to the pandemic, typical homebuying seasons went out the window in 2020, creating a free for all. But as things return to a new type of normal in 2021, look for homebuying seasons to return, with a surge of buyers in the spring and summer months and things cooling down towards winter.

Changed Budgets, Higher Prices

The homebuying surge comes in the middle of financial strain and high unemployment numbers. So although many people are buying homes, they aren’t always stretching their budgets. Research found 63% of homebuyers were forced to lower their budget by an average

of $28,400 due to the pandemic. At the same time, 65% of buyers backed out of buying a home, most often due to budget.

When paired with record-low interest rates, lower budgets can still get buyers more home than they could have bought a year ago. Interest rates are likely to stay low throughout 2021 but will start to increase in the second half of the year. Buyers or people who were thinking of buying within the next few years are now speeding up their timelines to make their money go further.

Lowered budgets are changing what some homebuyers are looking for, leading to growth in less expensive regions. In some cases, buyers with lowered budgets are shopping for homes below their price range in hopes of being able to put in an above-list price offer.

Although individuals are lowering their personal budgets, the markets as a whole are increasing. A rise in demand is actually raising home prices. Nearly one in four buyers who purchased between April and June 2020 paid $500,000 or more, an increase from 14% of buyers in the preceding nine months. Experts predict that home prices will increase 5.7% in 2021 to reach new heights.

Leaving Cities And High-Tax Areas

The move to remote working has pushed people out of cities and led to an increase in homebuying in the suburbs. Suburban areas have seen higher home sales growth than urban areas, and many homebuyers have increased their willingness to commute when they return to work in the office.

In the suburbs, homebuyers are more likely to find traits that are increasingly desirable: larger houses for more time spent at home, dedicated office space and personal outdoor space, as well as proximity to beaches, trails and open space.

The top 10 most competitive real estate markets during the pandemic are Seattle, Omaha, Lexington, Denver, Indianapolis, Portland, Oklahoma City, Sacramento, Oakland and Tulsa. These areas will continue to thrive in 2021, especially in their suburban areas.

Aside from leaving urban centers, many people are leaving high-tax areas. Some of the world’s richest people, including Elon Musk, who recently overtook Jeff Bezos as the richest person in the world, are leaving high-tax areas like California in favor of lower taxes. Musk moved himself and the headquarters of SpaceX from California, the state with the highest income tax, to Texas, a state with no income tax. Joining the ranks include Splunk CEO Doug Merritt, who also moved to Texas, Oracle co-founder Larry Ellison, who relocated to Hawaii and even Tom Brady, who recently bought a Miami mansion.

The effects of the ultra-rich leaving high-tax areas will be felt throughout their cities. Others may follow in their footsteps to take advantage of lower taxes, especially as remote work opens up the potential to work from anywhere, and finances are tight for many people. 

What will real estate look like in 2021? In most cases, a continuation of the incredible growth of 2020. Even during a pandemic and recession, homes will continue to sell at a breakneck pace.

Here’s what home prices look like right now for each Bay Area county

By Susie Neilson, San Francisco Chronicle, January 29, 2021

The coronavirus pandemic and struggling economy couldn’t keep a lid on Bay Area home prices, which hit new records in 2020, according to a new report.

The median price for a single-family home in the Bay Area was $1.06 million in December, a slight decrease from November but a 16.4% increase from December 2019, according to a report from the California Association of Realtors released this month. Sales were up 40.2% in the region from 2019, according to the report.

San Mateo County’s median home price rose from $1.65 million in November to $1.7 million in December, making it the most expensive Bay Area county in which to purchase a home. Previously San Francisco, with a median home price of $1.697 million in November, had been the most expensive. But the city’s median home price had decreased slightly to $1.58 million by December.

San Mateo County had knocked San Francisco out of the top spot in December 2019 as well, the report showed. The median price that month was $1.475 million in San Mateo County and $1.45 million in San Francisco.

The median refers to the middle price for all homes in a set, where half sold for less and half for more.

California’s median home price in December reached a record $717,930, a 16.8% increase from December 2019. Active listings fell 47.1% from 2019, a figure the report attributed to homeowners’ wariness to sell during the pandemic. Coupled with low interest rates on mortgages, the decrease in supply helped drive prices up, according to Realtors association Chief Economist Jordan Levine.

“Home prices, which usually peak during the summer, were unseasonably strong in December,” he said in a news release accompanying the report. “The imbalance between supply and demand continues to fuel home price gains as would-be home sellers remain reluctant to list their homes during the pandemic.”

The 30-year fixed mortgage interest rate dipped to 2.68% in December, down from 3.72% last year, according to the report.

Association President Dave Walsh added that mortgage interest rates should remain low well into this year, keeping the housing market strong.

“Home sales should remain elevated into the first half of 2021, as motivated buyers take advantage of the increased purchasing power,” he said.

Experts optimistic about housing market in 2021

Despite four months of declines in pending home sales, low mortgage rates and federal stimulus should bolster market

By By Tim Glaze, HousingWire, January 29, 2021

U.S. pending home sales dipped to the tune of 0.3% in December following a 2.6% drop in November, according to a report from the National Association of Realtors. It’s the fourth consecutive monthly decline, but many industry observers see big potential for the housing market in the year ahead.

Contract signings rose 21.4% from December 2019, with all regions (Northeast, Midwest, South, West) reaching double-digit year-over-year increases. Realtor.com’s Housing Market Recovery Index showed significant contract growth, specifically in Portland, Las Vegas, Denver, Los Angeles, and Boston.

“Despite some weakness in pending sales in recent months, existing home sales continue to happen at breakneck pace, and December’s pending home sales suggest that the housing market is largely holding onto these gains,” said Danielle Hale, realtor.com chief economist. “Greater participation of sellers and builders in the months ahead will make home sales possible while easing some of the pressure on price growth, which is currently rising at a double-digit percent rate and has been for almost six months.”

The overall drop in pending home sales over the final quarter of 2020 can be contributed to a lack of inventory in the housing market, according to Lawrence Yun, NAR’s chief economist.

“There is a high demand for housing and a great number of would-be buyers, and therefore sales should rise with more new listings,” Yun said. “This elevated demand without a significant boost in supply has caused home prices to increase and we can expect further upward pressure on prices for the foreseeable future.”

Added Ruben Gonzalez, Keller Williams’ chief economist: “It may be several months before substantial progress is made in terms of available supply, and price growth will likely continue to accelerate until conditions improve.”

Home prices soared 9.5% in November compared with 12 months ago, according to CoreLogic‘s Case-Shiller index – the largest increase since May 2014.

But a promising 2021 for homebuyers is on the horizon, Yun said, with low mortgage rates and a fiscal stimulus expected to be passed by the Biden administration, which should bolster the housing market.

“I expect the 30-year fixed mortgage rate to average 3%, with the Federal Reserve refraining from any rate increases this year,” he said. “There will also be slower home price appreciation – likely 6.6% – as increased confidence from homebuilders will ultimately lead to an increase in housing starts.”

With rates remaining low, existing-homes sales are likely to reach 6.49 million in 2021, Yun said. That would be a 15% increase from 5.64 million in 2020.

Pending home sales saw a drop only in the Midwest, which reported a 3.6% drop. The Northeast (3.1%), South (0.1) saw increases in the December Pending Home Sale Index, while the housing market in the West remained unchanged.

 

Glen Bell – (510) 333-4460   jazzlines@sbcglobal.net

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Glen’s SF East Bay Real Estate Market Update November 30, 2020 http://glenbell.agent.rpeastbay.com/2020/12/11/glens-sf-east-bay-real-estate-market-update-november-30-2020 http://glenbell.agent.rpeastbay.com/2020/12/11/glens-sf-east-bay-real-estate-market-update-november-30-2020#respond Fri, 11 Dec 2020 19:54:45 +0000 http://glenbell.agent.rpeastbay.com/?p=791 November 30, 2020 – Real Estate Market Numbers By Glen Bell   (510) 333-4460   Here’s a quick summary of what’s going on in the San Francisco East Bay real estate market as of September 30th. I’d like to start out with a quick quote coming from Zillow and Rismedia: “More sellers are making their way […]

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November 30, 2020 – Real Estate Market Numbers

By Glen Bell   (510) 333-4460

 

Here’s a quick summary of what’s going on in the San Francisco East Bay real estate market as of September 30th.

I’d like to start out with a quick quote coming from Zillow and Rismedia:

“More sellers are making their way onto the market, but it’s still not enough to offset a supply shortage as a frenzy of buyers look to take advantage of low interest rates. According to Zillow’s most recent Weekly Market Report, buyer demand is still outpacing new supply.”

Yes, sales are up. Pendings are up by 37.5% compared to last year. Inventory on the other hand is down. It’s been flat over the last 5 months before taking a large 25.4% drop in Novemeber. This is 27.5% lower than what we saw last year in November. Based on normal seasonal influences, we typically see a steady increase from the beginning of the year through to the end of September followed by a decrease coming into the holidays. We have a 24 day supply of homes for sale today. Last year at this time, there was a 30 day supply.

Although there was a big “pause” in the market mid-March through mid-May due to COVID-19 Shelter in Place, we’ve bounced back, picking up where we left off early spring in what now looks like a strong sellers’ market again.

You can see this based on the supply and demand ratio that I keep track of. We’re at 1.98 indicating a “sellers’ market.” Last year at the end of November, we were 1.20. The year before that; .71.

We’re starting to see a migration coming out of SF and South Peninsula. Some movement to the East Bay, some to the Central Valley and some even out of the state altogether. This is primarily due to being able to work at home, high cost of living, state & local taxes, smoke, traffic, housing affordability, job relocations, etc

We’re also seeing a softening in some of those markets plus rents have been coming down.

 

Here are some highlights for the 39 East Bay Cities that I track:

  • The month’s supply for the combined 39 city area is 24 days. Historically, a 2 to 3 months’ supply is considered normal in the San Francisco East Bay Area. As you can see from the graph above, this is normally a repetitive pattern over the past four years. Supply is less when compared to last year at this time, of 30 days.

  • Our inventory for the East Bay (the 39 cities tracked) is now at 1,590 homes actively for sale. This is fewer than what we saw last year at this time, of 1,905. We’re used to seeing between 3,000 and 6,000 homes in a “normal” market in the San Francisco East Bay Area. Pending sales decreased to 3,145, much higher than what we saw last year at this time of 2,287.

  • Our Pending/Active Ratio is 1.98. Last year at this time it was 1.20.

 

  • Sales over the last 3 months, on average, are 6.2% over the asking price for this area, Higher than what we saw last year at this time, of 2.1%.

2021 housing market forecast: What will fuel home sales?

Next year will be a seller’s market

By Daryl Fairweather, The Housing Wire, December 9, 2020

Even as the pandemic nears its end, its impact on the way we work and live will in many ways be permanent, and Americans will migrate to homes that fit their new lifestyles.

We already saw much of this movement in 2020, as home sales surged over 20% this fall, but many homeowners were nervous about listing during the pandemic and will be ready to sell in droves next year. This will send home sales to highs not seen since before the Great Recession of 2008.

In 2021, migration will continue to set records as more than 30% of homebuyers will look to leave their current metro area. The normalization of remote work means that Americans will continue to move to suburban and rural areas, or decide to move to cities that fit their personal preferences instead of just their careers.

The increase in movement will mean many more Americans will have new neighbors. A large majority of Americans are open-minded about moving to a place where their neighbors don’t share their ethnic or religious background. Small towns could start attracting more residents with high-income tech jobs.

We could see more people moving in next door to neighbors who have different backgrounds or beliefs. I am actually part of this trend—I moved from highly liberal Seattle to a swing county in Wisconsin in the fall of this year.

As more Americans move across the country, they’ll need to lean on technology more than ever to help them buy homes. We saw buyers get familiar with these tools during the pandemic. Views of 3D walkthroughs on Redfin have increased 560% since February.

Video tours, where an agent views a home while the buyer is on a video call, represented less than 1% of all tour requests on Redfin before the pandemic, but at the height of the initial stay-at-home orders in early spring surged to about a third of home tours. Since that initial surge, video tours have held steady through the summer and fall, representing about one in 10 home tours. By the end of spring, 45% of recent homebuyers reported they had made an offer on a home sight-unseen during their home-search process.

Making sight-unseen offers can be a winning strategy for buyers seeking out highly desirable homes in a competitive market, especially if they are moving in from out of town and don’t have time to travel to visit homes. Virtual home tour technology coupled with increasing migration will cause more than half of homebuyers to make offers sight-unseen during their search for a home in 2021.

Throughout the pandemic, buyers have become more confident using the technology available to them, and in 2021, we’ll see more home sales as a result.

People who may not have relied on technology before – like your grandparents, or friends with higher health risks – will explore a video tour and realize that it gives them plenty of information to make their buying decision. And since migration is going to drive much of the housing market in 2021, buyers will feel more willing to move out of the city and into a vacation town if they can virtually walk through the homes on the market in their new location and visualize what their new life will be like.

Overall, 2021 will still be a seller’s market, with homes selling faster and more people buying homes than in 2020, but a growing number of buyers will find themselves in their dream homes in new corners of the country—especially those who partner with savvy agents who leverage technology to help them win.

 

Housing Market Forecast and Predictions for 2021

By Veronica Bradley, DSNews, December 8, 2020

 

Shelter-at-home orders and other measures were put in place just before springtime this year, which is usually the best time of year for listing and selling homes. However, 2021 poses to be a much more stable year for real estate, according to Realtor.com.

Low inventory, a higher number of buyers than sellers, and historically low mortgage rates sent housing prices upwards quickly. It also made fall the hot time of year for sellers instead of the warmer months.

But 2021 should send things back to where they once were and continue pushing new trends that were emerging even before the pandemic.

Since mortgage rates of around 3% have become the norm, they don’t feel as exceptional and won’t entice buyers as they have in the recent past.

Realtor.com predicts home sales to come in at 7.0% above 2020, building momentum through the spring and continuing through the end of the year. Economic growth from coronavirus vaccines and more normal consumer spending will fuel this trend.

As for home prices, they’re still going up, but they’re slowing down. 2020 is looking to end 7.6% over 2019. But 2021 should only increase by around 5.7%. This will be aided by many millennials trading up and adding inventory to the market.

Speaking of inventory, 2020 saw half a million fewer homes on the market than the previous year. However, “newly listed homes” should be more numerous by the end of 2021. And we may even see an increase in inventory—a first since 2019.

The big trends to watch out for, however, are an increase in first-time buyers, people wanting at-home offices, and suburban migration.

Millennials make up the largest generation, and on their heels are the Gen-Zers who are entering their home-buying years. The older Millennials, those approaching 40, will be looking to trade up and purchase bigger homes to accommodate growing families. These two generations have been able to save money due to shelter-in-place orders and less going out in general, meaning they’ll have more money for down payments.

Remote work was already a growing trend before the pandemic forced more white-collar workers to stay in their homes. And it looks like many will continue to primarily work away from the office, adding to the appeal of the suburbs. Look for an increase in listings mentioning home office space or even close-to-home remote-working options, like coffee shops.

Since commutes have changed, so has the need to be downtown. More people are comfortable with the idea of commuting further if they have to than before, according to a summer survey.

Sellers will continue to have the upper hand throughout the entire year due to an accelerated buying process—thank you, lower inventory. But all in all, 2021 should feel more normal and predictable than 2020.

 

2021 Housing Market Forecast and Predictions

2021 National Housing Market Forecast and Predictions: Back to Normal

By Danielle Hale, Chief Economist for Realtor.com, December 2, 2020

To say 2020 was a year of surprises is an extreme understatement. What started off as a bright year for the housing market and the economy was soon derailed by a global pandemic and severe economic recession. As detailed by my colleague, George Ratiu, the economic rebound has been sharp, but is by no means complete and created distinct winners and losers among sectors in the economy. Read more detailed thoughts on the overall economic context and outlook, here. One of the big winners has been the housing market, which saw home sales and prices hit decade-plus highs following decade lows in the span of just a few months. We expect housing’s winning streak to continue in 2021 as seasonal trends normalize and some of the frenzied momentum fades thanks to fresh affordability challenges. Below you’ll find our forecast and housing market predictions on key trends that will shape the year ahead.

Realtor.com 2021 Forecast for Key Housing Indicators

Housing Indicator Realtor.com 2021 Forecast
Mortgage Rates Average 3.2% throughout the year, 3.4% by end of year
Existing Home Median Sales Price Appreciation Up 5.7%
Existing Home Sales Up 7.0%
Single-Family Home Housing Starts Up 9%
Homeownership Rate 65.9%

Seasonality and 2020 Context: The Baseline

In 2020, the seasonal pattern for home sales and other metrics was thrown out of whack by the timing of the coronavirus arrival as well as the shelter-at-home orders and other measures that were rolled out to arrest the spread of the virus. These measures were implemented just before what’s normally the best time of year for sellers to list a home for sale, and housing inventory never fully made up the gap as buyers returned in earnest before sellers. This uneven return of buyers and sellers created a housing market frenzy that pushed the number of sales to decade highs while time on market dropped to new lows. This trend persisted well into the fall, a time when normal seasonal trends typically favor home buyers over sellers, thus buyers hoping for the usual break in 2020 were likely disappointed. Understanding this backdrop will be key to evaluating the data as it comes in for 2021 as we expect the housing market to settle into a much more normal pattern than the wild swings we saw in 2020. Year over year trends will need to be understood in the context of the unusual 2020 base year.

Home Sales

After whipsawing in tremendous fashion in early 2020, the housing market more than regained its early-year momentum to finish at new highs for home sales in the fall. For the year, we expect 2020 home sales to register slightly higher (0.9%) than the 2019 total thanks to the strong, if delayed, buying season. Going into 2021, we expect home sales activity to slow from those frenzied levels which represented underlying housing demand as well as make-up buying for a spring season many buyers missed out on plus a sense of urgency brought on by record low mortgage rates. As sub-3 percent mortgage rates start to feel less exceptional, buyers may not react with the same immediacy to take advantage of them, initially, though as rates start to rise in the second half of 2021, buyers may feel the need to hurry purchases along to lock in a low rate. Additionally, as make-up buying from the disruption of spring 2020 fades, home purchases will be propelled by underlying demand in 2021. This demand will come from a healthy share of Millennial and Gen-Z first-time buyers as well as trade-up buyers from the Millennial and older generations.

We expect home sales in 2021 to come in 7.0% above 2020 levels, following a more normal seasonal trend and building momentum through the spring and sustaining the pace in the second half of the year. While home sales are expected to lose some momentum over the last months of 2020, the shallower than normal seasonal slowdown creates a higher base of activity leading into 2021 that is roughly maintained for the first half of the year. As vaccines for the coronavirus become broadly available to the public, and economic growth reflects the resumption of more normal patterns of consumer spending, home sales gain even more in the second half of the year.

Home Prices

With the already limited inventory of homes for sale relative to buyers pushed further out of balance by the pandemic that brought out buyers in mass and kept many sellers pondering their options, home prices skyrocketed surging up more than 10 percent over year-ago levels by the late fall. We expect the momentum of home price growth to slow as more sellers come to market and mortgage rates settle into a sideways pattern and eventually begin to turn higher. The large number of buyers in the market, including many Gen-Zers looking to buy their first-home and Millennials who are both first-time and trade-up buyers will keep upward pressure on home prices, but rising numbers of home sellers will provide a better relief valve for that pressure.

We expect home prices in 2020 to end 7.6% above 2019, after a seeing near record high boost in the summer and early fall, but beginning to decelerate into the holidays. From there, we expect price gains to ease somewhat in 2021 and end 5.7% above 2020 levels, decelerating steadily through the spring and summer, and then gradually reaccelerating toward the end of the year.

Inventory

Although the housing market is healing and by many measures doing better than before the pandemic, inventory remains housing’s long haul symptom. There were an insufficient number of homes for sale going into 2020 in large part due to an estimated shortfall of nearly 4 million newly constructed homes. Much to the surprise of many, the coronavirus and recession did not lead to a distressed seller driven inventory surge as we saw in the previous recession, but further reduced the number of homes available for sale. Starting in fall 2020 the housing market saw more than half a million fewer homes available for sale than the prior year. We expect to see an improvement in the pace of inventory declines starting just before the end of 2020 that will continue into Spring 2021, so that while the number of for-sale homes will be lower than one year ago, the size of those declines will drop. We expect a more normal seasonal pattern to emerge which will contrast with the unusual 2020 base and lead to odd year over year trends, but taken as a whole we expect inventories to improve and, by the end of 2021, we may see inventories finally register an increase for the first-time since 2019.

While total inventories will remain relatively low thanks to strong buyer demand, the number of new homes available for sale and existing home sellers, what we call “newly listed homes,” will be more numerous which will help power the expected increases in home sales.

Key Housing Trends

2021 TRENDS: Millennials & Gen Z

The largest generation in history, millennials will continue to shape the housing market as they become an even larger player. The oldest millennials will turn 40 in 2021 while the younger end of the generation will turn 25. Older millennials will be trade-up buyers with many having owned their first homes long enough to see substantial equity gains, while the larger, younger segment of the generation age into key years for first-time homebuying. At the same time, Gen Z buyers, who are 24 and younger in 2021, will continue their early foray into the housing market.

In early 2020, younger generations, including Millennials and Gen Z, were putting down smaller downpayments and taking on larger debts to take advantage of low mortgage rates despite rising home prices. In fact, only a quarter of respondents to a summer survey reported lowering their monthly mortgage budget or not changing their home search criteria in response to lower mortgage rates. The other three-quarters said low rates would enable them to make a change to their home search, and the most commonly cited change was buying a larger home in a nicer neighborhood.

We expect these trends to persist as rising home prices require larger upfront down payments as well as a bigger ongoing monthly payment due to the end of mortgage rate declines. Early in the pandemic period, there was concern that temporary income losses could prove to be particularly disruptive to younger generations’ plans for homeownership, as these were the groups expected to face income disruptions that might require dipping into savings which would otherwise be used for a down payment. Thus far, these disruptions have not had an effect on overall home sales, and some home shoppers report an ability to save more money for a downpayment as a result of sheltering at home, but we are still not completely through the pandemic-related economic disruption.

2021 TRENDS: Remote Work

As we discussed in early 2020, the ability to work from home is not new. In fact, as long ago as 2018, roughly one-quarter of workers worked at home, up from just 15 percent in 2001. More recently, a scan of real estate listings on realtor.com in early 2020 showed that in the ten metro markets where they are most common, as many as 1-in-5 to 1-in-3 home listings mentioned an “office.” Remote working was already more common among home shoppers than the general working population, with more than one-third of home shoppers reporting that they worked remotely even before the coronavirus. Additionally, remote working has gained an unprecedented prominence in response to stay-at-home orders and continued measures to quell the spread of the coronavirus. Another 37 percent of home shoppers reported working remotely as a result of the coronavirus. While a majority of home shoppers reported a preference for working remotely, three-quarters of workers expect to return to the office at least part-time at some point in the future. However, the ability to work remotely was a factor prompting a majority of respondents to buy a home in 2020. This was the case even when most expected to return to offices sometime in 2020. As remote work extends into 2021 and in some cases employers grant employees the flexibility to continue remote work indefinitely, expect home listings to showcase features that support remote work such as home offices, zoom rooms, high-speed internet connections, quiet yards that facilitate outdoor office work, and proximity to coffee shops and other businesses that offer back-up internet and a break from being at home, which can feel monotonous to some, to become more prevalent

2021 TRENDS: Suburban Migration

With remote work becoming much more common, home shopping in suburban areas had a stronger post-COVID lockdown bounceback than shopping in urban areas, starting in the spring and continuing through the summer. These trends, which have been visible in rental data as well, suggest that city-dwellers—freed from the daily tether of a commute to the office and looking for affordable space to shelter, work, learn, and live—were finding the answer in the suburbs. In fact, a summer survey of home shoppers showed that while a majority of respondents reported no change in their willingness to commute, among those who did report a change, three of every four reported an increased willingness to commute or live further from the office.

Even before the pandemic, homebuyers looking for affordability were finding it in areas outside of urban cores. The pandemic has merely accelerated this previous trend by giving homebuyers additional reasons to move farther from downtown.

Housing Market Perspectives

What will 2021 be like for buyers?

The housing market in 2021 will be much more hospitable for buyers as an increased number of existing sellers and ramp up in new construction restore some bargaining power for buyers, especially in the second half of the year. Still-low mortgage rates help buyers afford home price increases that will be much more manageable than the price increases seen in 2020. With companies continuing to allow workers more flexibility, we see the inner as well as outer suburbs and smaller towns continuing to entice home buyers and builders. Areas that can ramp up affordable housing supply will benefit and see an influx of buyers.

While buyers will be able to visit homes in person, a strong preference for most shopping to buy, they will take advantage of the industry’s acceleration toward technology to check out homes, explore neighborhoods, and research the purchase online, saving time and energy to focus on a more selectively curated list of homes to view in person.

Although the pace will slow from late 2020’s frenzy, fast sales will remain the norm in many parts of the country which will be a challenge felt particularly for first-time buyers learning the ins and outs of making a major decision in a fast-moving environment. Buyers who prepare by honing in on the neighborhood and home characteristics that are must-haves vs. nice-to-haves and lining up financing including a pre-approval will have an edge.

What will 2021 be like for sellers?

Sellers will be in a good position in 2021. Home prices will hit new highs, even though the pace of growth slows. Buyers will remain plentiful and low mortgage rates keep purchasing power healthy, but monthly mortgage costs will rise as mortgage rates steady and home prices continue to rise. Sellers hoping to see further double-digit price gains will likely be disappointed, but those setting reasonable expectations can expect to see a timely sale and will want to focus on their next move.

 

What To Expect in 2021’s Housing Market: This Is How Much Home Prices Will Rise

By Clare Trapasso, Realtor.com | Dec 2, 2020

Few will be reluctant to say goodbye to 2020. With vaccines rolling out, the days of the deadly pandemic that bludgeoned the nation’s economy seem to be numbered. Good riddance! But the soaring home prices that became a hallmark of the COVID-19 crisis may be here to stay.

Realtor.com®’s 2021 housing forecast predicts record-high prices will continue rising in 2021, delivering a blow to first-time buyers and those on a budget. Mortgage interest rates, which hit historic lows this year and helped fuel the go-go growth in U.S. housing markets, are also expected to tick up again, making monthly housing payments ever more expensive.

So folks shouldn’t hold their breath for a bargain.

However, the pace of the wild price growth seen in 2020 will slow. Prices are expected to jump 5.7% next year as a result of more properties forecast to hit the market, particularly in the second half of next year. While still unwelcome news for buyers, the double-digit price hikes seen this year aren’t expected to carry over into the new year.

“We expect affordability to become a bigger challenge. It’s going to make [housing] more expensive,” says realtor.com Chief Economist Danielle Hale. “[But] home prices will rise slower than this year, on the upper end of what we consider normal price growth.”

The forecast anticipates mortgage rates will begin slowly going up toward the last half of 2021, reaching 3.4% by the end of the year. Mortgage rates are currently at an all-time low of just 2.72% for 30-year fixed-rate loans in the week ending Nov. 25, according to Freddie Mac. While a roughly 70 basis point rise isn’t dramatic, it will make those monthly mortgage payments even pricier. This has the potential to price out some buyers or force others to purchase cheaper abodes in less desirable locations.

However, even higher prices, and therefore higher required down payments, aren’t likely to keep the hordes of determined buyers at bay.

Sales of existing homes (i.e., previously lived in abodes) are projected to increase 7% in 2021. That’s coming as folks stuck inside their homes for months on end are seeking larger residences or ones with different features. Younger millennials are competing with older members of Generation Z for starter homes, and baby boomers are downsizing. Many apartment dwellers are also seeking homes on their own.

Ironically, it’s those high prices that are keeping prices from rising even further.

“Home prices can’t outpace income growth indefinitely. The higher prices rise, the harder it is for more buyers to get into the market. That tends to dampen demand,” says Hale. That means that with less competition, prices don’t have as much room to rise.

Watch: Economic Update: Are We Making Progress Yet?

———

The bright spot for buyers is that more homes are likely to become available in the last six months of 2021. That should give folks more options to choose from and take away some of their urgency. With a larger selection, buyers may not be forced to make a decision in mere hours and will have more time to make up their minds.

The inventory bump is expected to be due to a combination of more sellers listing their properties as well as builders completing more abodes. Realtor.com predicts single-family housing starts, which are homes that have begun construction but aren’t yet completed, will rise 9%. And it’s sorely needed as there was an estimated shortfall of almost 4 million new homes heading into this year.

The new construction, while often more expensive than existing homes, are likely to appeal to move-up buyers looking for larger abodes with the latest amenities. Once those folks purchase these brand-new abodes, they typically list their existing homes, adding more inventory to the market.

“A lot of that new construction is not necessarily targeted at first-time buyers,” says Hale. “But we have seen builders shift what they’re building to better reach first-time home buyers.”

While 2021 is expected to be another banner year for sellers, most are also buyers. And while they can use their home equity to help finance their new abode, they’re still likely to be affected by the inventory shortage and loftier home prices and mortgage rates.

“Sellers are still expected to get top dollar for their home sales,” says Hale. “The biggest challenge is finding their new home.”

However, if 2020 has taught us anything, it’s that everything can change in an instant. If the nation undergoes additional lockdowns due to COVID-19, then fewer homes may go up for sale and the market could slow. If everything goes well with the vaccines being rolled out early, then the housing market could benefit with additional inventory and sales.

Another wildcard is the possibility of sustained economic pain. The country could still fall into a double-dip recession if unemployment remains high and businesses continue to suffer. Most folks need jobs to afford home purchases. If the economy doesn’t improve, it could put a dent in the market.

“The value of housing is tied to the economy,” says Hale. “As long as the economy continues to rebound, I expect the housing market will do well.”

Bay Area exodus accelerates at year-end as some seek to avoid tax hikes in 2021

By Mark Calvey, SF Business Times, November 24, 2020

The Bay Area exodus, which accelerated amid Covid, appears to be gaining more steam in the final months of 2020. Moving out of the state by year-end could help those leaving avoid being hit by a California income tax increase next year that might be retroactive to the start of 2021.

“I’m seeing an acceleration of clients — not to mention friends and neighbors — leaving California,” Paul Bleeg, a partner with accounting firm EisnerAmper in San Francisco, told me Tuesday. “The destinations vary: Montana, Nevada, Tennessee, Florida, Texas, Utah and elsewhere.”

Bleeg said factors fueling the acceleration include anticipation that California taxes will move higher in the year ahead and the shift to working from home amid the pandemic.

“The majority of those moving are people who’ve been working from home for several months or more and now realize they could pay less in taxes by working out of state,” Bleeg said. “Once they get the OK from their employer to work remotely in another state, away they go.”

California has a history of raising income taxes retroactively to the start of the year, as the state did in 2012, when taking the top tax rate to 13.3% — the nation’s highest. This year, proposed legislation to raise the top rate to 16.3%, again retroactively, didn’t pass. But many expect the state to consider a tax hike again in 2021.

Those who have left in recent weeks include Ron Suber, a prolific fintech investor who moved from San Francisco to Boulder, Colorado, in late September. Suber may be blazing a trail, given the reaction he’s receiving from his decision to leave California.

“The number of calls, emails, inquiries and outreach over the past two months has been staggering,” Suber told me Tuesday from his new hometown. “It’s not about ‘why’ but about ‘where.’ Many are currently doing their due diligence on where they might go.

“It’s not just to the warm and zero-state-income-tax states,” Suber said, noting that some are considering moves to Arizona, Utah, Oregon and Colorado, among other destinations.

  1. Others that have recently moved from the Golden State include Dropbox (NASDAQ: DBX) CEO Drew Houstonand Splunk (NASDAQ: SPLK) CEO Douglas Merritt, who both recently purchased homes in Austin, with plans to make the Texas capital their permanent home, The Information reported this week, noting that some Splunk employees are already asking executives whether they too should move to Austin. Palantir co-founder Joe Lonsdale is also moving from San Francisco to Austin, taking the headquarters of his venture firm, 8VC, with him. Palantir recently moved its headquarters from Palo Alto to Denver.

Keith Rabois, a veteran of Paypal, LinkedIn and Square, said this month that he too is moving, to Florida.

RECOMMENDED

The U.S. Census Bureau’s state-to-state migration figures released this month showed that the exodus was roaring even before Covid struck. Texas was the most popular destination for those leaving the Golden State in 2019.

While the early migration to California was evident in wagon trains crossing the plains, today’s exodus out of the state can be seen on a variety of social media.

Suber’s post on LinkedIn announcing that he was heading to Boulder received more than 135,000 views, with more than 170 people weighing in on his decision.

“Sure you won’t miss the fires, traffic, homelessness and high taxes, Ron Suber?” one person commented. “Congrats on yet another strong, strategic move.”

 

Glen Bell – (510) 333-4460   jazzlines@sbcglobal.net

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Glen’s SF East Bay Real Estate Market Update September 30, 2020 http://glenbell.agent.rpeastbay.com/2020/10/17/glens-sf-east-bay-real-estate-market-update-september-30-2020 http://glenbell.agent.rpeastbay.com/2020/10/17/glens-sf-east-bay-real-estate-market-update-september-30-2020#respond Sat, 17 Oct 2020 18:09:08 +0000 http://glenbell.agent.rpeastbay.com/?p=763 September 30, 2020 – Real Estate Market Numbers By Glen Bell   (510) 333-4460 Here’s a quick summary of what’s going on in the San Francisco East Bay real estate market as of September 30th. I’d like to start out with a quick quote coming from Zillow and Rismedia: “More sellers are making their way onto […]

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September 30, 2020 – Real Estate Market Numbers

By Glen Bell   (510) 333-4460

Here’s a quick summary of what’s going on in the San Francisco East Bay real estate market as of September 30th.

I’d like to start out with a quick quote coming from Zillow and Rismedia:

“More sellers are making their way onto the market, but it’s still not enough to offset a supply shortage as a frenzy of buyers look to take advantage of low interest rates. According to Zillow’s most recent Weekly Market Report, buyer demand is still outpacing new supply.”

Yes, sales are up. Pendings are up by 30% compared to last year. Inventory on the other hand is down. It’s been flat over the last 5 months. Based on normal seasonal influences, we typically see a steady increase from the beginning of the year through to the end of September. Since May 1st our inventory is actually down by 2.7%. In fact, it’s the lowest I’ve seen for a September since I started tracking statistics going back to 2008. I’ve made this same statement each month since May. We have a 36 day supply of homes for sale today. Last year at this time, there was a 48 day supply.

Although there was a big “pause” in the market mid-March through mid-May due to COVID-19 Shelter in Place, we’ve bounced back, picking up where we left off early spring in what now looks like a strong sellers’ market again.

You can see this based on the supply and demand ratio that I keep track of. We’re at 1.51 indicating a “sellers’ market.” Last year at the end of September, we were .76. The year before that; .71. In fact this is the highest we’ve seen this number in September since our recovery began in 2012 and 2013.

Days on market are also starting to come down.

We’re seeing a bit of a migration coming out of SF and South Peninsula. Some movement to the East Bay, some to the Central Valley and some even out of the state altogether. This is primarily due to being able to work at home, high costs, smoke, traffic, etc

We’re seeing a softening in some of those markets plus rents have been coming down

 

Here are some highlights for the 39 East Bay Cities that I track:

 

  • The month’s supply for the combined 39 city area is 36 days. Historically, a 2 to 3 months’ supply is considered normal in the San Francisco East Bay Area. As you can see from the graph above, this is normally a repetitive pattern over the past four years. Supply is less when compared to last year at this time, of 48 days.

  • Our inventory for the East Bay (the 39 cities tracked) is now at 2,129 homes actively for sale. This is fewer than what we saw last year at this time, of 3,226. We’re used to seeing between 3,000 and 6,000 homes in a “normal” market in the San Francisco East Bay Area. Pending sales increased to 3205, higher than what we saw last year at this time of 2,463.

  • Our Pending/Active Ratio is 1.51. Last year at this time it was .76.
  • Sales over the last 3 months, on average, are 3.1% over the asking price for this area, Higher than what we saw last year at this time, of 2.7%.

 

Recent News

Bay Area home buyers scoop up shrinking inventory at furious pace

By Kathleen Pender, SF Chronicle Oct. 19, 2020 

The Bay Area real estate market continued its roaring recovery in September, as buyers took advantage of ultra-low mortgage rates to scoop up a shrinking number of homes for sale at an astonishing pace.

The median price for an existing, single-family home in the Bay Area was $1,060,000 in September, which was down 0.7% from August’s all-time high but up 20.5% from September of last year, according to a California Association of Realtors report issued Monday.

Statewide, the median price set a fourth consecutive monthly record, rising to $605,680, up 0.8% from August and 17.6% year over year.

More alarming for prospective home buyers: The median number of days it took to sell a California single-family home fell to 11 in September, the lowest number recorded since the association started keeping track in 1982 and down sharply from 24 in September 2019. In the Bay Area, the median time on market narrowed to 13 days in September from 15 in August and 23 in September 2019.

“Buyer demand remains robust. We see that in the mortgage applications, we see that in the price numbers for the Bay Area, in the unsold inventory numbers which declined. That is driving this rebound in sales, but it is also making the market more competitive. Homes are selling quicker and for buyers, there’s not a lot of inventory to choose from,” said Jordan Levine, the association’s deputy chief economist.

Agent Justin Palmer of Avenue 8 represented a family that is closing this week on a home in the Oakmore section of Oakland. It was listed at $1.2 million, attracted multiple offers and sold in less than two weeks for $1.45 million. It has almost 3,200 square feet so on a price-per-square-foot basis, “it was really good and it appraised for a higher number than they bought it for,” Palmer said.

The buyers had been renting in San Francisco. “Like most people, this year made them reevaluate their lives and preferences. They were seeking a little more space so they could both work from home and wanted more space for their young child,” Palmer said. The seller was a widow ready to downsize.

The sale epitomized what has been going on in the Bay Area. “Oakland in general this year has been on fire,” although condos are cooler than single-family homes. “We’ve seen such a large migration from San Francisco, people needing more space, whether that’s outdoor space or room for a second office,” Palmer said. The pandemic has absolutely pulled sales forward. “I think a lot of people’s five-year plans were condensed into 2020.”

On a month-to-month basis, the median price paid for a home in September fell in Solano, Contra Costa and San Mateo counties, (down 2.9%, 2.7% and 2.2%, respectively), and rose in all other Bay Area counties, led by Napa and Marin (up 3.8 and 2.5%, respectively).

Year over year, prices rose in all Bay Area counties, ranging from 8.1% in San Francisco to 20.6% in San Mateo.

Sales remained brisk, up 2.6% month-to-month and 34.2% year over year. They were especially strong in San Francisco and Marin counties, up 90.2% and 53.4% respectively, year over year. The report includes sales of existing, single-family detached homes advertised on a Multiple Listing Service. It excludes new construction and condominiums, which make up a larger percentage of sales in San Francisco than in other counties.

Condos, especially in the city’s downtown and South of Market areas, have been arguably the weakest spot in the Bay Area as buyers have cooled on communal, high-rise living during a pandemic. However, separate data from the Realtors association shows that San Francisco condo sales in September were up about 30% from August and 63% from last September, not as robust as single-family home sales but hardly a slowdown. The median price paid for a San Francisco condo in September was about $1.2 million, down 4.2% from August and down 7.8% year over year.

Condos were “more of a mixed bag,” with a “big increase in sales even as the price has softened,” Levine said.

For the Bay Area as a whole, condo sales last month were up 11% from August and 36% from last September while prices rose 2.5% and 6.4%, respectively.

“We do see more weakness on the rental side of the market due to the nature of the downturn we are in, where the effects of this pandemic-related shutdown have been borne by folks at the lower end of the income spectrum,” who tend to be renters, Levine said.

That could deter some investors from buying lower-end properties to rent out, which could explain some of the relative weakness in condo pricing.

Sales in resort communities remained especially brisk in September as buyers unable to travel clamored for vacation homes, often where they could work remotely. South Lake Tahoe home sales increased 105.4% year over year.

Ultra-low mortgage rates and constrained supply, especially for lower-priced homes, have fueled price increases. The number of active listings statewide fell 56% year over year for homes priced at less than $1 million, compared to a 30.4% drop for those listed between $1 million and $3 million and a 19.4% decrease for homes over $3 million.

Mary Edwards, a Coldwell Banker agent in San Anselmo, said the market is still “going pretty crazy,” partly because “we didn’t have a true springtime like we usually have in February, March and April” because of shelter-in-place restrictions.

She and her business partner, Linda Gridley, listed a home on Paradise Drive in Tiburon in late September for $2.8 million. “We were marketing it as, ‘Have a resort in your own backyard staycation.’ It had a boat dock and a private beach,” Edwards said. More than 60 people, most from San Francisco, came to see it. “We took offers a week later and it closed in seven days, all cash, no contingencies” to a San Francisco couple for $3,088,888. “I know several clients who were going to buy a second home in Tahoe but decided to stick around and get a bigger place” in Marin.

“With the statewide home price hitting new highs for the past four months, it’s sounding like a broken record as California home sales and prices continue to outperform expectations,” the association’s chief economist, Leslie Appleton-Young, said in a press release. “However, with the shortest time on market in recent memory, an alarmingly low supply of homes for sale, and the fastest price growth in six and a half years, the market’s short-term gain can also be its weakness in the longer term as the imbalance of supply and demand could lead to more housing shortages and deeper affordability issues.”

California home prices to grow more slowly next year, Realtors forecast, but sales may be stronger

Kathleen Pender, San Francisco Chronicle, Oct. 13, 2020

Ultra-low mortgage rates and pent-up demand for single-family homes will offset continued economic uncertainty and a supply shortage in 2021, with the net result being a 3.3% increase in California home sales and a modest 1.3% increase in the median price next year versus 2020, according to a California Association of Realtors forecast published Tuesday.

With only a few months left to go, sales this year are expected to be 4.5% lower than last year but prices are likely to be 8.1% higher. Last year at this time, the association predicted that 2020 sales would increase 0.8% and prices would rise 2.5%, but that was before the coronavirus pandemic upended forecasts of all kinds.

Sales this year were weaker than expected mainly because shelter-in-place orders brought the real estate market to a near standstill for several months starting in March, although sales have since rebounded.

“Prices were a lot stronger (than anticipated) because we were not forecasting mortgage rates to go down to 2.8%,” said Jordan Levine, the association’s deputy chief economist.

Some of this year’s price increase was driven by sales of luxury and second homes. The median is the price at which half of homes sold for more and half for less, and can be influenced by a change in the mix of high- and low-end homes being sold. Robust sales of multimillion-dollar homes are “pumping up the median price,” Levine said. “The stock market came back a lot faster than the labor market. That enabled a quicker recovery at the upper end.”

It’s more evidence that pandemic “really had a disproportionate impact. People in professional services tend to be higher-income individuals and were able to carry on” better than people in lower-paying occupations.

In 2021, “we do expect the market to shift more toward owner-occupant, entry-level homes,” Levine said. That’s why price gains next year will be “a little more muted” than this year.

Rising interest rates could threaten affordability, but the association predicts that 30-year fixed mortgage rates will average 3.1% in 2021, down from 3.2% in 2020 and from 3.9% in 2019, and still low by historical standards.

The association’s forecast covers existing single-family homes, not condos or new construction. It did not break out forecasts for regions within the state, but San Francisco is expected to be the strongest in the state, according to Selma Hepp, deputy chief economist with CoreLogic.

She predicted that between August 2020 and August 2021, the median price of existing, single-family homes and condos will rise 7.8% in San Francisco and San Mateo counties, 6.9% in Santa Clara and San Benito counties, 4.5% in Alameda and Contra Costa counties, 2% in Marin County, 13.2% in Napa County and 0.6% in Sonoma County.

By comparison, she expects prices will be 5% higher throughout California and flat nationwide.

One reason the Bay Area will do better than most is because it has a lower percentage of homes in forbearance and higher average homeowner equity than most places.

Homeowners with government-backed mortgages who have a financial hardship because of the coronavirus can request a forbearance, which allows them to postpone payments, without incurring penalties, for up to 12 months. Next year, as their forbearance period expires, many will be able to work out a modification and keep their homes, but if they can’t, some may be forced to sell and that could put downward pressure on prices.

The more equity they have in their homes, the more options they will have, such as refinancing, Hepp said. The average homeowner equity in San Francisco and San Mateo counties is just over $1 million, she said. The statewide average in the second quarter of this year was $408,000, second only to Hawaii with $450,000 in average homeowner equity. The U.S. average was $185,000.

In September, economists with the UCLA Anderson School of Management said construction of new housing will be an area “of particular strength” in the California economy next year. They predicted “a quick recovery to pre-recession levels, with residential building permits almost back to their 2020 first quarter level by year’s end.”

Jerry Nickelsburg, director of the UCLA Anderson Forecast, said low interest rates, the state’s chronic housing shortage, pent-up demand and “some movement on the regulatory side,” making it easier to build new units, will encourage developers to build. By the fourth quarter of 2022, he expects permit issuance, for rental and owner-occupied housing statewide, will hit 130,000 units on an annualized basis, compared with an estimated 117,400 units at the end of this year and 110,000 units at the end of last year. That increase of about 12,600 units over the next two years includes the replacement of some homes destroyed by wildfires.

“That means an increase in demand for construction workers. That is a bright spot when some of our sectors that are lagging behind,” Nickelsburg said. “It’s not a barn-burner, but it’s a bright spot.”

Home Prices Up 14%, But Price Growth May Wane Soon

Redfin, October 5, 2020

he median home sale price increased 14% year over year to $319,769—the highest on record, according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. The 14% jump was the largest since August 2013. Since the four-week period ending July 5, home prices have increased 6.5%. Over that same period in 2018 and 2019, prices declined an average of 4.2%

Below are other key housing market takeaways for 434 U.S. metro areas during the 4-week period ending September 27.

  • The median asking price of new listings was up 12.8% from a year earlier. This growth rate has been declining since the four-week period ending August 30, when it peaked at 15.7%.
  • Pending home sales climbed 30% year over year.
  • New listings of homes for sale were up 5% from a year earlier. Year-over-year growth in new listings have been above 5% since the four-week period ending August 16.
  • Active listings (the number of homes listed for sale at any point during the period) fell 28% from 2019 to a new all-time low. The rate of year-over-year supply declines has remained consistent at this level for the past few months.
  • 45.8% of homes that went under contract had an accepted offer within the first two weeks on the market. This has also held relatively steady for the last 17 weeks.
  • The average sale-to-list price ratio, which measures how close homes are selling to their asking prices, rose to 99.4%—an all-time high and 1.2 percentage points higher than a year earlier.
  • For the week ending September 27, the seasonally adjusted Redfin Homebuyer Demand Index was up 34.8% from pre-pandemic levels in January and February.
  • Mortgage applications decreased 2% week over week during the week ending September 25. For the week ending October 1, 30-year mortgage rates fell to 2.88%. Rates have been below 3% since late July.

“The question on everyone’s mind is ‘how fast can prices keep rising?’,” said Redfin chief economist Daryl Fairweather. “Although the housing market is still red-hot, there are some early signs we may be nearing peak price growth. Sellers’ asking prices are still up significantly from last year, but by a lower rate than they were growing during the summer. Mortgage applications are also beginning to wane, and more new listings are coming onto the market. This is likely to be as good as it gets for home sellers, who definitely have had it very good for a very long time.”

Lack of strong growth in new listings is likely a direct result of the ongoing pandemic. In a recent survey of over 1,400 homebuyers and sellers, 20% of respondents said that now is a bad time to sell a home, up from just 9% in the first quarter of the year. In the same survey 38% of home sellers said that they have health or safety concerns due to the coronavirus pandemic, compared to just 8% of homebuyers who cited coronavirus as a concern.

People are leaving San Francisco. After decades of growth, is the city on the decline?

By Roland Li, SF Chronicle, October 10,2020

Plunging BART and Muni ridership. The weakest online sales tax collections in the state. A 20% drop in apartment rents. Spiking office vacancies.

PEOPLE ARE LEAVING SAN FRANCISCO. AFTER DECADES OF GROWTH, IS THE CITY ON THE DECLINE?

San Francisco’s bleak economic vital signs over the past six months strongly suggest residents are leaving amid record job losses, the entrenchment of remote work, and a coronavirus pandemic that shows no signs of ending.

It’s still unclear how many people have left, but moving vans and Medium posts tell the story of an ongoing migration. Weakness in the rental market and virtually flat online spending during shelter-in-place show that residents aren’t just staying home, they’re leaving, experts say. The city’s ability to attract new residents or lure old ones to return will be critical to avoid punching a giant hole in a local budget that has swelled to almost $14 billion.

In an increasingly virtual economy where daily goods are delivered not for convenience but out of pandemic-driven necessity, all you have to do is count the Amazon boxes.

Between April and June, the nine counties across the Bay Area saw big drops in brick-and-mortar sales taxes as orders to stay home took effect, ranging from a 17% drop in Santa Clara County to a 53% drop in San Francisco, compared to the prior year. But eight of the counties — everywhere but San Francisco — saw major jumps in online sales taxes, as high as 36% for Contra Costa County.

San Francisco saw only a 1% increase in the tax collected on online sales. That figure was by far the worst not only in the region, but among California’s 20 largest counties. Los Angeles County saw a 31% increase in online sales taxes, San Diego County saw a 38% jump and Sacramento County saw a 32% spike.

“That’s a sign to me that people aren’t here,” said Ted Egan, San Francisco’s chief economist.

The empty streets are reminiscent of the aftermath of the dot-com bust of the early 2000s, said Noni Richen, president of the Small Property Owners of San Francisco, an advocacy group.

Her members have former tenants who have left the city because, after losing their jobs or having classes shifted to online, they saw no reason to stay.

“There is a decline in occupancy,” Richen said. “They’re moving home to mom and dad or somewhere cheaper.”

Real estate data firm Zumper reported a 20% annual decline in San Francisco’s median one-bedroom rents this month, the largest drop among major cities. Inventory of for-sale homes and condos reached a 15-year high amid a flood of new listings, though prices for single-family homes are still rising, according to brokerage Compass.

One difference compared to the dot-com days is that tech titans like Google and Facebook, which have major offices in both San Francisco and Silicon Valley, have not cut jobs. Richen said she was encouraged that the companies have not scaled back, though they are allowing workers to stay remote until next summer.

“I think San Francisco will recover,” Richen said. “I think they will bounce back.”

Between February and August, the labor force in the San Francisco-Redwood City-South San Francisco metro area was down 4.5%, higher than the 4.1% drop for the state and 2.3% drop nationally. It’s consistent with evidence that urban areas have been hit harder than the rest of the country and could reflect people moving out of San Francisco, according to the Federal Reserve Bank of San Francisco.

Chris Thornberg, founding partner of research firm Beacon Economics, said talk of San Francisco’s doom and decline is overblown.

“As soon as the virus is under control, the economy is going to bounce back like nobody’s business,” he said, predicting a recovery in San Francisco by next spring. “I don’t think you need a vaccine.”

He said that excessive restrictions on business reopenings were unnecessary and ineffective. “I don’t think there’s any way to stamp this disease out by shutting down the economy,” he said.

But San Francisco officials remain cautious. There is still no timetable for when nonessential office workers can return. More tech companies — who now dominate the ranks of San Francisco’s largest private employers — are embracing remote work, for longer time periods or in some cases indefinitely.

“That opens up a huge question: When are they going to come back? Are they going to come back?” Egan said.

Bay Area rents keep plummeting, especially in S.F. — the latest data by city

By Kellie Hwang, SF Chronicle, October 2, 2020

Housing rents continue to decline in the Bay Area amid the coronavirus pandemic, especially in San Francisco, which has notoriously had the country’s highest rental prices after overtaking New York City years ago.

According to the most recent reports from private listing websites Apartment List and Zumper, rental prices have plummeted 20% in the city so far this year compared with the same time last year.

Zumper found the median cost of a one-bedroom in San Francisco last month was $2,830. The company analyzes rental data from more than 1 million active listings across the country. It includes new construction and excludes listings that are currently occupied or no longer available.

“Not only is this drop among the largest yearly decreases Zumper has ever recorded in our history of tracking rental prices, but it was also the first time the median one-bedroom price in San Francisco dipped below $3,000,” said data analyst Neil Gerstein in an email. “These combined trends show just how drastically the market has changed in the nation’s most expensive city to rent.”

Apartment List reported a considerably lower September median cost for a one-bedroom in San Francisco, at $2,240. The median for a two-bedroom apartment was $2,590, a 5.2% decline from the previous month. Its methodology differs from Zumper’s: It starts with statistics from the Census Bureau and Department of Housing and Urban Development, and it includes rents for older units and those in lower-income neighborhoods.

By either measure, the Bay Area continues to be the priciest market for renters in the nation. Zumper found that the top five rental markets in the country includes three Bay Area cities: San Francisco tops the list, with San Jose and Oakland coming in fourth and fifth, respectively.

San Jose’s rental prices haven’t changed much from last month at $2,230 for a one-bedroom, and decreased 1% for a 2-bedroom at $2,770. In Oakland, the median cost for a one-bedroom declined 3% to $2,130, and decreased 1% for a two-bedroom to $2,770.

Nationally, Zumper listed New York as the No. 2 most expensive rental market and Boston as No. 3. New York’s rents dropped 4% from the prior month to $2,600. Gerstein said that while New York City has also had historic price drops during the pandemic and renters appear to be taking advantage of declining rent in both cities, there is a notable difference.

“New York’s migration inflows have returned to pre-March levels, while San Francisco’s have not,” he said. “Both cities continued to experience large migration outflows, but the differences in the two cities’ migration inflows may explain their diverging price trends and could lead to rental prices in New York stabilizing faster than in San Francisco and overtaking the top spot.”

And nationally, Zumper’s report shows a decrease of 0.1% from the previous month for a one-bedroom to $1,231, with the year-over-year decline at 0.6%.

In the San Francisco metro area, Apartment List showed Oakland had the least expensive rents, at $1,770 for a one-bedroom and $2,090 for a two-bedroom.

A number of East Bay cities did not see much of a rent decline from the previous year: Pleasanton and Walnut Creek each decreased only 0.1%, and Hayward went down 0.9%.

High housing costs keep Californians poor

By DAN WALTERS | Orange County Register, September 20, 2020

 

Congratulations California, you’ve done it again.

The Census Bureau has once again found that California has the highest real-world poverty rate of any state, 17.2 percent over the previous three years and much higher than the national rate.

The “supplemental” poverty rate includes factors ignored by the outdated “official” poverty rate, such as living costs. And our sky-high living costs, particularly for housing, impoverish at least 7 million Californians.

We topped the poverty charts even as California’s overall economy was booming in the 2017-19 period. The state now is mired in its worst recession since the Great Depression, thanks to the COVID-19 pandemic, and poverty has surely increased.

A new report from the California Policy Lab at the University of California reveals that in August nearly 20 percent of California’s workers were drawing unemployment insurance benefits, calling it “startlingly high.”

Moreover, even before recession struck, the Public Policy Institute of California, using methodology similar to that of the Census Bureau, had calculated that as high as our “supplemental poverty rate” may be, roughly the same number of Californians are in “near-poverty.” Combining the two categories means that about a third of the state’s residents are struggling to keep their heads above water.

The major driver of California’s high poverty indices is, as mentioned earlier, that too many Californians must spend too much of their incomes on housing due to meager construction.

The reasons for the failure to meet housing demand are many but one long-ignored factor — the insanely high cost of building so-called “affordable” housing — is beginning to be recognized.

Last year, I wrote about a $28 million city-financed project to rehabilitate 74 dilapidated, low-rent apartments in Sacramento and noted that it worked out to $378,000 per unit, markedly higher than the median cost of a detached, single-family home in Sacramento at the time.

Last week, two more examples found their way into print.

The Los Angeles Times did a deep dive into the tortured history of a low-income housing project in Solana Beach, a wealthy seaside community in San Diego County. Times reporters found that it originally was to cost $414,000 per unit, but by the time the developer pulled out after a decade of trying to line up financing and permits, it had exploded to $1.1 million.

The Times called it “an alarming example of how political, economic and bureaucratic forces have converged to drive up the cost of such housing at a time when growing numbers of Californians need it.”

“California leads the nation in the cost of building government-subsidized apartment complexes for low-income residents,” the Times said, reporting that its “analysis of state data found that apartments cost an average of about $500,000. In the last decade, the price tag has grown 26 percent, after adjusting for inflation.”

Solana Beach is not alone. The Times reported that in Alameda, an island community in San Francisco Bay, a low-income development called Everett Commons cost $947,000 per unit.

Meanwhile, back in Sacramento, city housing officials are still spending too much to get too little. The Sacramento Bee reported that redeveloping the downtown Capitol Park Hotel into tiny, 250-square-foot units for low-income residents costs more than $445,000 per unit, higher than the median price for a detached single-family home. At $1,100 per square foot of living space, it is double what a luxury suburban home would cost.

These are outrageous numbers, driven by bureaucratic tangles, misplaced environmental restrictions and high mandated labor costs, and unless state officials do something about them, we will never solve our housing shortage and we will continue to have shamefully high rates of poverty.

Glen Bell – (510) 333-4460   jazzlines@sbcglobal.net

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Glen’s SF East Bay Real Estate Market Update August 31, 2020 http://glenbell.agent.rpeastbay.com/2020/09/07/glens-sf-east-bay-real-estate-market-update-august-31-2020 http://glenbell.agent.rpeastbay.com/2020/09/07/glens-sf-east-bay-real-estate-market-update-august-31-2020#respond Mon, 07 Sep 2020 17:52:00 +0000 http://glenbell.agent.rpeastbay.com/?p=741 Glen’s SF East Bay Real Estate Market Update August 31, 2020   Here’s a summary of what’s going on in the San Francisco East Bay real estate market as of August 31st. I’d like to start out with a quick quote coming from Zillow and Rismedia: “More sellers are making their way onto the market, […]

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Glen’s SF East Bay Real Estate Market Update

August 31, 2020

 

Here’s a summary of what’s going on in the San Francisco East Bay real estate market as of August 31st. I’d like to start out with a quick quote coming from Zillow and Rismedia:

“More sellers are making their way onto the market, but it’s still not enough to offset a supply shortage as a frenzy of buyers look to take advantage of low interest rates. According to Zillow’s most recent Weekly Market Report, buyer demand is still outpacing new supply.”

Yes, sales are up. Pendings are up by 24% compared to last year. Inventory on the other hand is down. In fact, it’s the lowest I’ve seen for an August since I started tracking statistics going back to 2008. We have a 36 day supply of homes for sale today. Last year at this time, there was a 45 day supply.

Here are some highlights for the 39 East Bay Cities that I track:

Sales are up from last month, but similar to what we saw last year at this time. Although there was a big “pause” in the market mid March through mid May due to COVID-19 Shelter in Place, we’ve bounced back, picking up where we left off early spring in what now looks to be a strong sellers market again. Prices continue to move upward, showing an 8.7% increase from last August’s median price point. However, it’s a bit of a mixed bag. More homes seem to be “sitting,” and taking longer to sell. We’re seeing more price reductions with more transactions falling out. Buyer’s are attracted to affordable, move-in homes with curb appeal as long as these rates remain at record lows.

Inventory remains relatively flat in August. This again, as in June and July, was unexpected. We normally expect to see more inventory by now. Our inventory available is 28.2% lower than what we saw last year at this time. This represents a 36 day supply of homes, compared to a 45 day supply last year at the end of August. This is the lowest I’ve seen for an August since I started tracking numbers in 2008. I’ve made this statement now four months in a row. The number of pendings improved only slightly compared to July, a good sign that we still have buyers. The number of pendings are 24.4% higher when compared to last year at this time.

The pending/active ratio continued to move upwards, moving even more into a sellers market similar to what we saw at the beginning of the year.  This is much higher when compared to last years’ number of .85. We’re now at 1.47. It’s the strongest market favoring sellers since the beginning of 2018. The pending/active ratio has been a benchmark that we’ve used as a measure of supply and demand to determine whether we’re in a buyer’s or a seller’s market. Typically, a number well above 1, (less inventory with more pendings) favors sellers. A number below 1 favors buyers.

  • The month’s supply for the combined 39 city area is 36 days. Historically, a 2 to 3 months’ supply is considered normal in the San Francisco East Bay Area. As you can see from the graph above, this is normally a repetitive pattern over the past four years. Supply is less when compared to last year at this time, of 45 days.

  • Our inventory for the East Bay (the 39 cities tracked) is now at 2,125 homes actively for sale. This is fewer than what we saw last year at this time, of 2,958. We’re used to seeing between 3,000 and 6,000 homes in a “normal” market in the San Francisco East Bay Area. Pending sales increased to 3,131, higher than what we saw last year at this time of 2,516.

  • Our Pending/Active Ratio is 1.47. Last year at this time it was .85.
  • Sales over the last 3 months, on average, are 2.3% over the asking price for this area, lower than what we saw last year at this time, of 3.0%.

 

Recent News

 

The Future of California Real Estate: Can the Golden State Survive?

By Clare Trapasso, Realtor.com, September 3, 2020

California has long captured the nation’s imagination with its promises of the rich life, from the days of the gold rush to the rise of Hollywood and its star-making machine, to today’s booming tech sector. With its breathtaking shoreline and strong economy, the state has become indelibly known as a place abounding in opportunities—for those eager to seize them.

Lately, however, California’s luster seems to be dimming.

A severe housing shortage, exacerbated by the coronavirus pandemic, had led to the most expensive home prices in the nation. Wildfires this summer have devastated the northern part of the state. In the midst of a deep recession, many Californians are being priced out of their communities. Others are questioning why they’re shelling out so much money each month to live there—especially with companies in places like Silicon Valley allowing employees to work from home, wherever in the world that home may be.

It’s all converging at once to test the state’s true appeal. Despite the odds, can the Golden State’s real estate market remain, well, golden?

“Nobody in their right mind would bet against California,” says real estate professor Christopher Leinberger of George Washington University, in Washington, DC. However, “the Golden State can’t be golden forever with the ridiculousness of the home prices.”

California’s home list prices reached a record high in August—and have experienced the second-loftiest increases in the nation, according to the latest data from realtor.com®. (Only Utah saw bigger price gains.) Nine of the 10 most expensive metropolitan areas in the nation are in the state. (We included only the 300 largest metros, which encompass the main city and surrounding suburbs, towns, and smaller urban areas.) The state’s median price tag was $720,050 in August—up a jaw-dropping 23.7% from a year earlier.

That’s more than 10 times California’s median household income of $70,489 in 2018, according to the latest U.S. Census Bureau data.

The price hikes are due to the dearth of homes for sale. The shortage has been going on for years, but it’s been compounded by the COVID-19 crisis. Shut in their abodes for months on end, Americans are seeking larger homes for working and schooling their children. But there simply aren’t enough properties to satisfy demand, with the number of new listings down nearly 11.1% from August of last year on realtor.com.

Leslie Appleton Young, chief economist of the California Association of Realtors®, attributes some of that rapid run-up in prices to rich, white-collar workers who can now telecommute buying up luxury properties in more remote locations. In July, sales of homes priced at $3 million and up increased by about 76.6% year over year, she says. Homes priced at $1 million and up now make up about 20% of the state’s sales.

“The challenge is, you have the next generation of home buyers, [but] it’s very difficult to buy in California,” she says. “We’re losing people who simply can’t afford to be here.”

Many Californians were already being priced out

The lack of affordable housing is partly responsible for the nearly 3.25 million Californians who left the state from 2014 through 2018, according to the latest U.S. Census data. It’s also led giant tech companies like Google and Facebook, whose well-paid employees are partly responsible for the acceleration of prices in the San Francisco Bay Area, to pledge to build affordable housing in the area.

Looking at migration patterns in the U.S., “people have been leaving California and the Bay Area in higher numbers than they have been arriving,” says Patrick Carlisle, chief market analyst in the Bay Area for real estate brokerage Compass. “That outflow was being balanced by foreign immigration for years.”

More recently, however, that inflow of foreigners has declined.

Before the pandemic, Gov. Gavin Newsom boasted California had the fifth-largest economy—in the world. But COVID-19 has dealt the state’s economy a blow. California had a 13.3% unemployment rate in July, the sixth-worst in the nation, according to the U.S. Bureau of Labor Statistics.

“The housing supply in California is the No. 1 priority,” says Dowell Myers, a housing demographer at the University of Southern California, in Los Angeles. If the situation doesn’t improve, the lack of housing “will stifle employment growth and undercut the economy,” he says.

The quality of life could deteriorate enough to spur more folks to leave and deter others from moving in, he says.

Wealthier tech workers can still afford to drop nearly $1.2 million on a median-priced home in Silicon Valley’s San Jose metropolitan area, according to realtor.com’s August list prices.

But many others realize they can pay a fraction of that to live in other hip cities with growing tech hubs, like Austin, TX, with a median list price of roughly $400,000; Salt Lake City, at $490,000; and Nashville, TN, at $396,000. Even other West Coast tech hubs like Seattle and Denver are significantly cheaper, with median prices of $625,000 and almost $540,000, respectively.

Departing residents are “much more of a threat than a fire or an earthquake” to the state, says Myers. Although it attracts well-educated, high-earning millennials from other states as well as foreigners, California might see these higher-earning transplants leaving after a few years.

“They feel like they can’t possibly live where they want to live and buy a house,” says Myers. “California could hold more of the recruits if it had cheaper housing.”

George Washington University’s Leinberger blames NIMBY (“not in my backyard”) attitudes, which have stymied the creation of new housing throughout the state. While many residents support new construction, they don’t want it in their own communities. They worry that creating more dense housing, such as apartment, condo, and townhome complexes as well as smaller homes, could lower their own property values. They also say it would tax the existing infrastructure, like schools and local services, and exacerbate traffic issues.

Even well-meaning local regulations can drive up building costs and lead to long delays that can stretch over a decade between an application being submitted and a shovel going into the dirt.

“This is a self-inflicted wound,” says Leinberger of the housing shortage.

Could the pandemic prompt more people to leave California?

Although there has been a steady stream of Californians leaving their home state for years, the pandemic could accelerate that trend.

With more white-collar workers able to work remotely, some are heeding the siren song of more affordable homes, lower taxes, and a cheaper cost of living outside California’s borders. Others are remaining in state, but forsaking the expensive cities and moving into less-expensive areas.

“In the short term, California is going to see more people leaving due to the high cost of living combined with the ability to work remotely,” predicts realtor.com Senior Economist George Ratiu.

“People are willing to pay a premium to live there,” says Ratiu. “Perhaps that premium is being reevaluated by a lot of younger people.”

California could see winning and losing real estate markets

While some of California’s housing markets may be forced to slow down, others will likely keep accelerating.

“California’s a big place. You’re going to have winners and losers within the state,” says Mark Zandi, chief economist of Moody’s Analytics. “The housing markets in those urban cores are struggling. That will continue throughout the pandemic.”

In the Bay Area, sales for single-family homes in San Francisco and larger residences in the more suburban counties have been brisk while condo sales within the city limits have dropped off as a result of the pandemic, says Bay Area analyst Carlisle. That’s driven by wealthy, white-collar workers who are able to work remotely.

In addition to the surge in interest in expensive, sprawling homes north of San Francisco, in Marin County and  Napa and Sonoma, buyers with means are trading their rentals and smaller homes in high-priced, urban areas for larger homes in more affordable, inland communities in California. Some are leaving the state altogether for hip cities with strong job markets.

However, many more are staying put. Southern California, including Los Angeles and San Diego, could fare better than Northern California’s Bay Area as it’s a little less expensive, says Matthew Gardner, chief economist of Windermere Real Estate. Residents who work in the entertainment and other Southern California industries may be less able to work from home as the Bay Area tech workers.

“We’re not talking about cities being abandoned,” says Carlisle. “Shifts in markets are shifts in degrees. Except for something like the housing bust of 2008, [markets] slow down.”

And no matter what trials it’s currently going through, California is still, well, California.

“It’s hard to envision a large exodus,” says Appleton Young. “We are [still] the tech hub, we’re the entertainment hub, we’re rich in natural resources and natural beauty.”

Zillow: Buyer Demand Continues Outpacing New Supply

By RISMedia Staff, August 31, 2020

 

More sellers are making their way onto the market, but it’s still not enough to offset a supply shortage as a frenzy of buyers look to take advantage of low interest rates. According to Zillow’s most recent Weekly Market Report, buyer demand is still outpacing new supply.

For the week ending Aug. 22, newly pending sales were up 16.5 percent YoY—the biggest increase since mid-February. In addition, homes are selling faster—coming off the market in just 13 days, which is also 13 days sooner than last year.

While the inventory gap is narrowing, new for-sale listings were still down 10.6 percent YoY that week. And because of the quick market turnaround, total for-sale inventory has fallen further below last year’s level—as of last week, there were 29.8 percent fewer homes on the market than the same time last year.

This is causing prices to continue rising. For the week, the median U.S. list price was $345,255—8.3 percent higher YoY and the biggest annual change since the week ending July 13. The median sale price was $277,500—5.1 percent over last year’s number. 

 

Home Prices Hit Record Highs. Is It a Bubble About to Burst?

By Clare Trapasso, Realtor.com, Aug 24, 2020

The nation’s surging home prices don’t seem to care about the recession the country is mired in. They can’t be bothered by the deadly coronavirus pandemic or the double-digit unemployment that’s come as a result. Instead, prices are defying logic, expectations, and even belief, as they shoot up to record highs amid an unprecedented health and economic crisis.

It has all led some to wonder: Are some markets getting too hot? Could a significant correction be around the corner?

Such questions have become louder in recent weeks, in the face of some startling growth numbers, particularly in some high-priced California and less expensive Rust Belt, Midwestern, and Southern markets.

In some of these metropolitan areas, prices have shot up by more than 20% in the past year alone. Just how sustainable is this seemingly irrational home price exuberance, anyway? Could we be entering the dreaded bubble territory once again?

Nationally, the median home list price rose 10.1% year over year in the week ending Aug. 15, according to the most recent realtor.com® figures. No one predicted such a dramatic increase compared with 2019—when the economy was strong, no one had heard of COVID-19 and social unrest hadn’t exploded.

In fact, many experts predicted prices would flatten, if not fall.

Reality check: If there is a current-day bubble, it bears little resemblance to the gigantic bubble created by subprime mortgages, which burst into the Great Recession. Then came the mass foreclosures, plummeting home values, and the scores of homeowners suddenly underwater on their mortgages.

This year’s sky-high prices are driven by a rush of buyers competing for a very limited supply of properties. More demand than supply equals higher prices.

“Some markets are overvalued,” says Javier Vivas, realtor.com’s director of economic research. “Growth of prices in a recession is pointing in that direction. Some markets are seeing increased risks of price corrections.”

Instead of another real estate fire sale, certain parts of the country could see price hikes slow down or flatten, or prices even come down—by just a little. That could happen if prices rise so high that homeownership becomes too expensive for the majority of would-be buyers.

So instead of a bubble popping, it’s more that home prices could come back to reality.

Typically, market corrections happen fairly quickly, within two or three months, as priced-out buyers make a beeline for the sidelines, says Vivas. This year, record-low mortgage interest rates are muddying the picture.

Rates under 3% for the first time ever are driving more buyers into the market and allowing them to stretch higher on what they’re willing to pay. Lower rates mean lower monthly mortgage payments. That’s allowing sellers to ask—and receive—more for their properties.

Those who weren’t able to buy in the spring because of the pandemic—along with buyers desperate for larger, single-family homes with big backyards after sheltering in place for months—are adding to the rising demand.

However, worries about the pandemic have led to a record-low number of homes for sale, as sellers decided to wait out the health crisis. Meanwhile, many builders were forced to pause projects in some parts of the country. That’s led the scrum of competing buyers to bid up prices in an effort to secure a property.

Most striking in 2020’s home price ramp-up is the fact that’s happening in some of the nation’s most expensive and cheapest markets alike.

“In the inexpensive markets, you have a ton of space for prices to grow. You can see them overheat and absorb that overheating better,” says Vivas. That’s unlike the already high-priced coastal areas.

“The outlook for them is a faster and broader correction, [with] slight declines in home prices.”

Price corrections could happen by the end of the year in areas where prices have risen very high—along with local unemployment rates, says CoreLogic’s chief economist, Frank Nothaft.

Why won’t we see another Great Recession-era housing bubble?

The sky-high prices of 2020 are being driven by an influx of buyers bidding up prices on a historically low number of homes on the market. Until more properties come online, that dynamic is unlikely to change.

The Great Recession had the opposite problem: There were many more homes available than qualified buyers.

In the aftermath of the housing bust, it’s become harder for buyers without good jobs and strong credit to score mortgages. This weeds out riskier borrowers. And unlike the last go-around, when builders were erecting residences at what seemed like a break-neck pace, the under-building of the last few years has exacerbated the housing shortage.

Even if the economy doesn’t improve by next year and a vast swath of Americans remain unemployed, we are not likely to see the flood of foreclosures that characterized the housing crash, partly because government protections could be extended.

“It doesn’t feel at all like last time, when the market was getting all pumped up by easy mortgage credit,” says Mark Zandi, chief economist of Moody’s Analytics.

Some of the nation’s most expensive housing markets are getting costlier by the day.

Median list prices surged in the Santa Maria, CA, metropolitan area, which includes tony Santa Barbara, CA. They were up no less than 44%annually in July, to reach $1,795,050.

That was the largest increase in the nation, despite the relatively high percentage of locals out of work (12%). In the Los Angeles metro area, prices increased by 24%, to a median $994,150.

They were considered two of the country’s potentially most overvalued markets, due to their massive price hikes, despite double-digit unemployment rates.

Gerd-Ulf Krueger, president of Krueger Economics, doesn’t expect prices in the Los Angeles area to slow down, let alone fall, unless residents on the higher end of the income spectrum (i.e., the 1%) lose their jobs or receive salary cuts.

While the unemployment rate in the Los Angeles metro area topped 18%in June, those at the top have been largely spared the financial pain experienced by those on the lower income rungs.

“The income gaps are very severe” in the Los Angeles area, Krueger says. The problem has also been exacerbated by a lack of new construction in the region, making it even more difficult for buyers to find affordably priced properties.

Sellers “are a little over-enthusiastic. They are realizing the wealthier or more affluent middle class still have money to buy homes.”

Pennsylvania has the most metropolitan areas that have experienced both the highest price increases and high unemployment. This puts them at risk of price corrections.

In the Pittsburgh metro, median list prices rose 25% in July compared with a year earlier, a rise that could make the market overvalued. (Metros include the main city, surrounding suburbs and towns and smaller urban areas.)

“It’s just a product of supply and demand,” says Pittsburgh-based real estate agent Bobby West of Coldwell Banker Realty Services. “There are so few homes that are coming on the market, those that do are selling within 24 hours, with more than one offer.”

“It was a mad rush” when real estate services reopened after the pandemic shutdown, says West. “My bet is things will cool down into the fall and the winter months as far as pricing goes.”

However, with a median list price of just $249,950—about 40% less than the national median—prices still have room to rise.

The old steel town of Allentown, PA, and the surrounding metro area, have seen price increases comparable to Pittsburgh’s, as the supply of homes for sale has dwindled. Median list prices shot up 21% year over year, to reach $278,500 in July, according to realtor.com data.

The area is benefiting from folks leaving the New York City and Philadelphia areas and heading to Allentown, where they can afford more spacious homes—particularly if they’re now able to work remotely due to the pandemic, says local Keller Williams real estate agent Faith Brenneisen. The city is about 90 miles west of New York City and 60 miles north of Philadelphia—and its homes are selling for a fraction of the prices in those two cities.

She’s receiving seven to 10 offers per listing and offers running $20,000 to $30,000 over asking for homes priced in the sweet spot of $150,000 to $250,000.

Median list prices were up in Reading, PA, by 24% to $272,450 in July, compared with the previous year. In Wichita, KS, they rose 22% to $246,150, they were up 19% in Fayetteville, NC, to $219,800; they increased 18% in Philadelphia to $340,000; they grew 17% in Canton, OH,to $190,000 and 16% in Mobile, AL, to $215,350. All of these areas also had unemployment rates at or above 10% in June, according to the most recent data from the U.S. Bureau of Labor Statistics.

 

Glen Bell – (510) 333-4460   jazzlines@sbcglobal.net

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Glen’s SF East Bay Real Estate Market Update July 31, 2020 http://glenbell.agent.rpeastbay.com/2020/08/09/glens-sf-east-bay-real-estate-market-update-july-31-2020 http://glenbell.agent.rpeastbay.com/2020/08/09/glens-sf-east-bay-real-estate-market-update-july-31-2020#respond Sun, 09 Aug 2020 16:42:14 +0000 http://glenbell.agent.rpeastbay.com/?p=713 Glen’s SF East Bay Real Estate Market Update July 31, 2020 As a reference in describing the market we’re in, I’d like to start by quoting Leslie Appleton-Young, the Chief Economist for the California Association of Realtors, from an issue in the July/August magazine. “Since the pandemic hit the 2020 forecast has been a moving […]

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Glen’s SF East Bay Real Estate Market Update

July 31, 2020

As a reference in describing the market we’re in, I’d like to start by quoting Leslie Appleton-Young, the Chief Economist for the California Association of Realtors, from an issue in the July/August magazine.

“Since the pandemic hit the 2020 forecast has been a moving target. We are now monitoring market stats on a daily and weekly basis — waiting for the monthly sales and price report is not helpful in a market that is constantly changing. In a normal year we model demand and supply, making reasonable assumptions about the strength of the economy, frequently creating different scenarios to prepare, at least mentally, for exogenous factors. This year that has all been thrown out the window because just about everything is unknown. At the end of the day, the recovery in the economy is inextricably tied to the path of the virus, the relief response of the government and consumer behavior. In short, we simply don’t know.”

No doubt that the COVID-19 has had its effects on our local real estate market. We haven’t seen dramatic changes just yet. What we have seen is a “mixed” bag. Low inventory levels and low interest rates continue to be the story of this market.

What we’ve seen since COVID-19 began, is that many sellers decided to delay or postpone coming onto the market until some of the uncertainty subsides. Many buyers have jumped back on the fence and are holding off. The uncertainty of their job being in jeopardy, a loss in income, health fears, or seeing a “big hit” in their stock portfolio has taken its toll. Although there may be fewer buyers out there, there are still even fewer homes for sale. Many are getting gobbled up now.

The C0vid-19 market is such a “mixed” bag right now that it’s difficult to wrap your hands around it or even try to predict what’s coming down the pike. As I’ve said before; this is unchartered territory. Affordable homes in the right location that are in somewhat move-in condition seem to be getting the most attention. For a while, many buyers were reluctant to make big commitments on cash reserves for the “high end” market or big time fixers. That market seemed to be a little “soft” in many areas but now looks to be changing yet again. Buyers may also be shying away from the “close quarters” of the more expensive condos. However, the “right” house, in the “right” location will still experience a competitive market with multiple offers.

Income properties are more sensitive to risk aversion. Eviction moratoriums, rent reductions, local pre-tenant ordinances being passed, COVID-19 related payment deferrals, have all taken their toll and made these properties less attractive to buyers.

Here are some highlights for the 39 East Bay Cities that I track:

Sales are up from last month, but 23.3% lower than last year’s numbers. Prices have been up slightly through spring but are now beginning to flatten out during the summer months. More homes seem to be “sitting,” and taking longer to sell. We’re seeing more price reductions with more transactions falling out.

The seasonal drop in inventory followed our normal pattern during the holidays. We watched the number of homes decrease by nearly 60% over November and December. Last year was somewhat unusual because we saw a late season start and early season end. Inventory at the end of December was at its’ 2nd lowest level since I began tracking these 39 cities in 2006, with only 1163 homes for sale at the end of December. Our expectations normally are that new home listings begin to appear on the market as early as mid-January with a steady increase of inventory every month through to September, traditionally our high point.

Inventory decreased slightly in July by 1.2%. This again, as in June, was unexpected. We normally expect to see more than that in both months. That’s 36.4% lower than what we saw last year at this time. This represents a 36 day supply of homes, compared to a 51 day supply last year at the end of July. This is the lowest I’ve seen for a July since I started tracking numbers in 2008. I’ve made this statement now three month in a row. The number of pendings improved by a 8.3.7% compared to June, a good sign that we still have buyers. We’re also 17.8% higher when compared to last year at this time.

The pending/active ratio continued to move upwards, moving even more into a sellers market similar to what we saw at the beginning of the year.  This is much higher when compared to last years’ number of .78. We’re now at 1.44. It’s the strongest market favoring sellers since the beginning of 2018. The pending/active ratio has been a benchmark that we’ve used as a measure of supply and demand to determine whether we’re in a buyer’s or a seller’s market. Typically, a number well above 1, (less inventory with more pendings) favors sellers. A number below 1 favors buyers.

  • The month’s supply for the combined 39 city area is 36 days. Historically, a 2 to 3 months’ supply is considered normal in the San Francisco East Bay Area. As you can see from the graph above, this is normally a repetitive pattern over the past four years. Supply is less when compared to last year at this time, of 51 days.

 

  • Our inventory for the East Bay (the 39 cities tracked) is now at 2,159 homes actively for sale. This is fewer than what we saw last year at this time, of 3,395. We’re used to seeing between 3,000 and 6,000 homes in a “normal” market in the San Francisco East Bay Area. Pending sales increased to 3,118, higher than what we saw last year at this time of 2,646.

  • Our Pending/Active Ratio is 1.44. Last year at this time it was .78.
  • Sales over the last 3 months, on average, are 1.7% over the asking price for this area, lower than what we saw last year at this time, of 3.4%.

 

Recent News

 

Leslie Appleton-Young Chief Economist, CALIFORNIA ASSOCIATION OF REALTORS®

July/August 2020 Magazine Issue

 How has C.A.R. revised its housing forecast for 2020 to account for the coronavirus pandemic?

Since the pandemic hit the 2020 forecast has been a moving target. We are now monitoring market stats on a daily and weekly basis — waiting for the monthly sales and price report is not helpful in a market that is constantly changing. In a normal year we model demand and supply, making reasonable assumptions about the strength of the economy, frequently creating different scenarios to prepare, at least mentally, for exogenous factors. This year that has all been thrown out the window because just about everything is unknown. At the end of the day, the recovery in the economy is inextricably tied to the path of the virus, the relief response of the government and consumer behavior. In short, we simply don’t know.

Last August when we developed the 2020 forecast, we were looking at a good market constrained from being great by the twin hurdles of affordability and supply. On the foundation of a strong economy and attractive mortgage rates, we forecast that sales would be up slightly by 0.8 percent and the statewide median price would be up 2.5 percent to $607,900.

Fast-forward to the beginning of May with two months of pandemic-infused data under our belts, including horrific job losses: We revised the 2020 forecast done last fall to reflect the realities of the COVID marketplace with a -16.7 percent in sales and -3.7 percent in the median price. Just one month later, we had a few more weeks of data that were stronger than expected, revising the outlook for 2020 to -12.7 percent and the median price off just -1.1 percent. So we are updating our projections regularly, hoping for the best but always committed to getting an accurate picture of how the market is likely to evolve.

Some are worried about a repeat of the housing slump we saw during the Great Recession. How does the current situation compare to that of 2008?

So far it is very different. The Great Recession started in the housing finance sector with subprime lending and cash-out refis, putting those homeowners in harm’s way without a cushion to protect against falling prices. At the same time, the mortgage-backed securities created from these loans were rated to be less risky than they were and sold to investors around the world. When borrowers started to default on their loans, the crisis reverberated throughout the global financial system, financial institutions required government bailouts to survive, stock markets dove, and the economy slowed — the Great Recession was on.

Looking back, we can appreciate how relatively gradual the ramp up to September 2009 was compared to the speed of today’s drop. For example, it took two years for the cumulative total of initial claims for unemployment assistance to reach 37 million people. In 2020, there were 42.6 million Americans in this category in 11 weeks. Yes, 11 weeks.

Back to the housing slump. The key characteristic of the housing market in this period was the high level of foreclosed properties, the increase in inventory and, in California, the almost 60 percent drop in the statewide median home price. U.S. foreclosure filings increased 81 percent in 2008; in January 2009, 60 percent of the closings in California were REO (bank-owned properties). It was a time when short sales were the growth opportunity in real estate. Could that happen again today? It’s not likely for several reasons. The underwriting behind mortgages today is solid, household wealth is robust, the underlying fundamentals of the economy are strong, and demand for housing far outstrips the limited supply. Never say never, but a realistic look at today’s landscape does not suggest a repeat of the housing slump of 2009.

Do you think the pandemic will have a long-term impact on housing prices in California?

Not likely. The trajectory of California with a robust economy and an inadequate supply of housing is for continued appreciation of home prices over the long run. There are always scenarios in which a fall in prices in possible, but I don’t see any of them as likely at this point. In fact, as the economy emerges from its forced hibernation, the demand for different types of housing to accommodate the work-from-home world, along with geographic shifts fueled by the “work-from-anywhere” reality, will be game-changing. And on the foundation of low mortgage rates, these changes bode well for a continuation of the strong demand, constrained supply world the California market has inhabited for quite some time. That’s been our new normal.

Glen Bell – (510) 333-4460   jazzlines@sbcglobal.net

The post Glen’s SF East Bay Real Estate Market Update July 31, 2020 appeared first on Glen Bell.

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