Have you been contemplating a move and think 2021 may finally be your year? If you’ve been watching the local real estate market, you already know home prices are hitting record highs in many areas, but what does the real estate market look like outside of California? Let’s take a look!
In December many counties in California once again implemented stay-at-home orders due to COVID-19, and the United States as a whole is seeing new peaks every day. Even amidst this uncertainty, demand for homes has never been higher. Mortgage rates continue at all-time lows, and buyers are devoting more of their total spending to housing costs.
As we begin 2021, demand remains significantly high. Typically, the majority (55% to 70%) of American homebuyers are also home sellers, swapping their previous homes for something better suited to their changing needs. The current increase in price and decrease in supply, however, imply that more first-time homebuyers are entering the markets (a record-setting 2+ million first-time buyers), and more existing homeowners are buying second homes. For years, the amount of available housing has not kept up with demand, but the new wave of buyers has highlighted just how considerable the housing shortage is in the United States.
The Case-Shiller 20-City Home Price Index measures, in aggregate, the cost of a home across 20 major U.S. cities. It also serves as a barometer for the overall health of the economy. As we can see in the chart above, home prices have moved significantly higher over a short period of time, reaching record highs. Many of the major U.S. cities are also experiencing a rise in home prices.
At a national level, the supply of homes relative to demand is the lowest it has ever been since the data were first tracked in 1963. Because of technological advances, virtual tours, and faster document processing, homes can be sold quickly, thereby reducing the supply of homes for sale at a much faster rate.
The current situation creates a feedback loop that drives prices higher. The most desirable benefit, especially when there are multiple offers on a property, is that the property will be sold for the highest possible price. That home then becomes a comparable property for other homes nearby, driving up prices in the neighborhood when they, in turn, go on the market.
Median single-family home prices continued to increase substantially year-over-year with median home prices of $1.05 million in Alameda and $787,250 in Contra Costa. Total inventory remained far lower than last year, down 9%. Like the rest of the country, demand is outpacing new supply, which buoys East Bay home prices.
At both the national and local levels, home builders simply cannot build quickly enough to bring sufficient supply to the market to satiate demand.
Overall, the housing market has shown its resilience through the pandemic and remains one of the safest asset classes. As always, Arrive Real Estate Group remains 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 have shared above. 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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