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Real Estate Market Update January Part 2

Real Estate

Real Estate Market Update January Part 2

With Covid vaccinations underway, we finally have a glimmer of hope to move out of the pandemic. However, we know that transmission mitigation measures will still be necessary throughout the year. The pandemic has substantially raised demand for housing, and we suspect that demand will continue. Mortgage rates remain at all-time lows, and buyers are devoting more of their total spending to housing costs. Let’s take a look at what economic factors may affect the real estate market on a national and local level.

Economic Topics and Trends

According to the ADP private payrolls, the U.S. lost 123,000 jobs in December 2020, marking the first loss since April. Economists had predicted there would be an increase in jobs, however, they did not anticipate larger companies, especially in leisure and hospitality, laying off employees due to reimplementation of stricter COVID-19 restrictions.

Job growth is one of the clearest indicators of economic health, so the December jobs contraction underscores a slowing of the recovery and the need for government stimulus. Under the new presidential administration, government stimulus is far more likely but will take some time to implement. With aid, businesses will be able to continue operating and will likely be able to hire significant numbers of employees back, setting the recovery back on course.

To help struggling businesses and people, the government will have to spend significant amounts of money. Heavy fiscal spending is often associated with higher inflation. Currently, inflation is around 1.2% (the Federal Reserve targets 2%), and with the expected increase in government spending, the expected inflation will rise as well. Ultimately, money today is worth more than money in the future. Not only can you buy more today, but real interest rates (inflation-adjusted interest rates) will be lower as well, making a home bought today cost less than its future price!

The financial circumstances on the individual level are highly variable, now more than ever. Those who have been unaffected (or even positively affected) financially are likely saving more money than ever. Strict COVID-19 restrictions have largely cut travel, dining, and entertainment expenses, allowing potential home owners to devote more of their income toward buying a home that they love. With historically low mortgage rates and an expected increase in inflation, it’s never been cheaper to finance a home.

Housing Market Updates for the East Bay

The median single-family home rose to an all-time high in Contra Costa. Alameda was flat month-over-month but still near peak median price. Year-over-year, single-family home prices increased considerably, up 15% in Alameda and a massive 27% in Contra Costa.

Single-family home inventory was lower through 2020 relative to 2019. Home sales climbed after the initial months of the pandemic and since June, sales have increased and continued to show unseasonably high levels. Usually, we expect sales to decline in the autumn and winter months, but homes were selling at extremely high rates. We can attribute this to fewer holiday obligations in 2020, allowing more focus on homebuying. Ultimately resulting in Days on Market (DOM) continuing to decline for single-family homes over the last 12 months.

In summary, the high demand in the East Bay has sustained home prices. Inventory for single-family homes will likely remain low further into the year, potentially lifting prices higher. Overall, the housing market has shown its resilience through the pandemic and remains one of the safest asset classes. The data shows that housing has remained consistently strong throughout this period.

As always, we continue to provide you with the most up-to-date market information so that you feel supported and informed in your buying and selling decisions. At Arrive Real Estate Group, we are committed to helping our clients achieve their current and future real estate goals. Our team of experienced professionals are happy to discuss the information we’ve shared in this newsletter. We welcome you to contact us with any questions about the current market or to request an evaluation of your home.

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