Hindsight is 2020 - Bay Area Housing Market Update
Hind sight is 20-20. We made quite a few jokes to that effect at the beginning of the year, but no one could have predicted how our lives have changed in 2020.
But finally, this crazy and unpredictable year is over. Let’s look back and use our newly gained experience to see what we can expect from this upcoming year, specifically in relation to the housing market.
Last February I predicted that the sale price will grow 5 to 7 percent setting a new record.
In reality 2020 home prices in Santa Clara and San Mateo counties increased by 7.1 percent from the year before, right at the upper end of the range I predicted. Is this my Nostradamus moment??? Median sale price reached $1,275,000, 2 percent above the previous peak from 2018.
This growth happened in the middle of severe business restrictions triggered by the mid-March shelter in place orders. The demand for the housing throughout the whole year was extremely high with half of the homes selling in 9 days or less everywhere across the Bay Area, the fastest pace of sales on record.
19,034 homes changed hands in 2020, roughly 300 more that in 2019. And while it was not a record setting number, almost $30B in real estate sold in our two counties, a new record rivaling GDPs of some countries.
Now, what should we expect from the real estate market this year? It really will depend on the path the recovery will take and the impact of work from home policies. The latest news from Google is that they’ve extended their work from home order till September of this year and are working on implementing a hybrid model with most employees coming back to the office part time.
"The company says employees should live within a commuting distance to their assigned office, where they are expected to show up three days a week".
Some companies like Twitter and Facebook are planning to allow working from home indefinitely. Others are providing incentives for the workers to stay local by slashing their salaries if relocating out of state while allowing to work remotely.
Here in the Bay Area the number of the new listings, the supply side, should increase comparing with the previous year. The stay at home and travel restrictions during the spring of 2020 prevented some homeowners from listing their houses for sale. As the result, the seasonal trends got skewed, pushing much of the sales activity into fall.
We are expecting more homes coming to the market starting at the end of January, beginning of February increasing the available inventory above the usual seasonal levels we experienced in recent years.
The market won’t have any trouble absorbing the increased supply due to the long-time shortage of housing and interest rates staying at all-time lows. We would expect the Bay Area home prices to continue growing at a rate similar to 2020, mirroring the national trends.
Danielle Hale, Chief Economist of realtor.com says: “We expect sales to grow 7 percent and prices to rise another 5.7 percent on top of 2020’s already high levels.”
Mark Fleming of First American predicts: “Mortgage rates are expected to remain low for the foreseeable future and millennials will continue forming households, keeping demand robust, even if income growth moderates. Despite the best intentions of home builders to provide more housing supply, the big short in housing supply will continue into 2021 and likely keep house price appreciation flying high.”
To summarize the lessons we’ve learned from 2020 as well as my expectations for this year:
First, the pandemic did not slow the real estate market last year and won’t be an obstacle in 2021.
Second, economic downturns and recessions do not equal a housing crisis.
And third, the space we live in has never been as important as it is now – here in the Bay Area we have been stuck indoors for more than 9 months and we’ve learned so much about how important it is for your house to be comfortable and functional.
We work only with a small number of buyers and sellers at a time to be able to provide our 5-star service. Call me or send me a text so we can start planning your next move together!