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Bay Area population in flux

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While California saw its first population decline since 1900, a handful of Bay Area cities saw an increase in both population and housing units. Santa Clara, Morgan Hill, and Mountain View all saw their housing units grow, with most being multifamily facilities.

Overall, however, The nine counties in the Bay Area added just 20,522 housing units in 2020. Most counties saw sharp declines in the development of new homes and apartments.

Albany, in Alameda County, saw its population decline by 9.6 percent while all the cities in Marin County decreased.

Real estate 2021 going forward

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With the economy slowly recovering, more and more people getting vaccinated, and an improved optimistic spirit it may not be too foolish to forecast what’s coming in the remainder of 2021.

  • Mortgage rates will rise. While still quite low, rates have been increasing and it’s expected this trend will continue.
  • Inventory should increase. As things slowly continue to improve, it is expected that more home owners consider moving in 2021, thus increasing inventory.
  • Millennials will drive the market. Currently the largest segment of the home buying population, over a quarter of millennials said they wanted to buy a home in 2021.

Zillow & Redfin

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These days both Zillow and Redfin are the top two websites to get a home estimate. But are they accurate?

Zillow uses “Zestimates” to get an idea of monthly costs for a property. Unfortunately, much of the data used to create the values are often dated. Zestimates have a 1.9 percent margin for error for homes on the market and 7.5 percent for the homes that aren’t.

Redfin has slightly more accurate estimating system: 1.71 percent error rate for homes on the market; 5.76 percent for homes that aren’t.

Both Zillow and Redfin are good starting points. However, it is recommended that homebuyers use a professional real estate agent and appraiser.

More housing inventory coming?

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According to a recent survey by realtor.com, approximately 10 percent of homeowners say they’re planning to list their home for sale before the end of the year. Moreover, 26 percent say they’re thinking of listing their home within the next three years. The majority of those hoping to sell are in the entry. level home category.

For the most part, many homeowners have been reluctant to sell for fear that they won’t be able to find a new home within their price range. In fact, 33 percent of current homeowners say they would be willing to sell sooner if there were more affordable homes on the market.

More young adults living with their parents

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As if massive student debt, high home prices, and low inventory weren’t enough, the pandemic of the last year has more young adults living with their parents than any other time since the Great Depression of the 1930s. The Pew Research Center estimates that approximately 52 percent of Americans aged between 18 and 29 are living with their parents.

Moreover, analysts predict this isn’t going to change anytime soon as vaccinations roll out but the effects of the pandemic linger.

Another interesting development is the increase in multigenerational homes which were purchased by 16 percent of buyers in 2020, up from 11 percent in 2019.

Bay Area homes moving quickly

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Bay Area homes are selling in 13 days on average, one of the fastest paces on record. The pandemic brought an end to most open houses so tours are being scheduled as soon as the house goes on the market. More often than not, multiple offers pur in – often considerable over the original price – within days.

According to the California Association of Realtors, the Area has about 1.5 months of inventory. Analysts expect demand to remain strong for the foreseeable future and inventory to remain low.

A good time to invest in the rental market?

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As we ease our way out of the pandemic, many are wondering if this is a good time to invest in the rental market, particularly single-family rentals. The fact that housing inventory will remain in short supply means that home values will continue to appreciate – good news for investors. The fact that interest rates are expected to rise means that some would-be homebuyers will be priced out of the market.

As home values rise, rental rates are expected to rise as well. Of course, eviction moratoriums provide a level of uncertainty in all this. Experts predict that the number of renters will keep vacancy rates low in most areas. In addition more homes are being built specifically for rental use only.

Where is the housing market headed?

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The times are certainly unprecedented: low interest rates, rising home prices, and all the uncertainty swirling around the economy as the country eases out of the pandemic into – what?

Many are beginning to foresee high inflation, rising interest rates as the rich get richer and many middle-income families are taking on too much debt. Will millennials ever be able to afford a home?

Many are concerned that the current housing boom is being driven by speculation; investors convincing homebuyers that they can afford the houses they are buying at exorbitant prices.

California consumer confidence rising

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For the fourth consecutive month, the Conference Board’s California Consumer Confidence Index rose, bringing it to February 2020 – pre=pandemic levels.

Some sections of the Index rose higher than others. The view of current business conditions, while rising nearly 16 points to 74.8, is still well below the February 2020 mark of 152.3.

On the other hand, the shoppers’ outlook for the future easily surpassed February 2020. Taken all together, the Index shows California consumer confidence is headed in the right driection.

Mortgage approvals declining

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As home prices continue to rise, mortgage lenders are becoming increasingly cautious in their lending practices. Nearly 70 percent of mortgages in 2020 went to those with a credit score of at least 760 while the median credit score for those receiving loans in the fourth quarter of 2020 was 786.

Lenders are increasingly concerned about borrowers losing their jobs due to the pandemic and some are report4edly asking those applying to sign a statement that they have no intention of requesting forbearance once they are approved. The legality of this is not clear.

Analysts expect mortgage rates to rise as the year goes on and it may be easier to acquire a loan at that point.