Let’s first take a quick look at how the real estate market is performing across the nation. Despite suboptimal major indicators, housing prices have risen considerably. Nationally, home prices have never been higher, and the high demand for single-family homes has dropped the Months of Supply Inventory to the lowest level ever, according to the National Association of Realtors. Not only are sales of existing homes up, but so are home building permits. The number of home building permits is the highest it’s been since the housing bubble burst in 2008.
The rise in housing demand and price under the current economic scenario speaks to three factors:
Many people have not experienced negative financial effects from the pandemic. An average person who did not lose their job may have even gained financially through a decrease in expenses. Less opportunity for travel, entertainment, and leisure activities could result in an increase in savings. At the same time, mortgage rates are historically low (2.78% as of November 5, 2020) and will remain low for the foreseeable future, making financing higher-priced homes more affordable. And finally, because so much time is currently being spent at home, buyers are willing to use more of their income to create nicer living spaces, buying larger homes, luxury furniture, and new appliances. In both the short and long terms, housing is one of the best investments one can make.
Turning to the local market, we are experiencing many of the same trends as we discussed on a National level. Median single-family home prices continued to substantially increase year-over-year with a median home price of $1.05 million in Alameda, an all-time high, and $783,000 in Contra Costa.
Total inventory continued to decline as the number of sold homes rose, far outpacing the new listings that came to market. Like the rest of the country, demand is outpacing new supply, which buoys East Bay home prices. Single-family home inventory is noticeably lower, and is likely to decline as we make our way into the winter months.
Single-family home sales have climbed since the initial months of the pandemic (March through May). Generally, buyers and sellers left the market in April and May, causing pent-up demand. Sales increased and are still near the highest level this year for single-family homes. Usually, we expect sales to decline in the autumn and winter months, but this year’s summer selling season was delayed and seems to be spilling into autumn.
The Days on Market (DOM) and Months of Supply Inventory are lower year-over-year. We can use Months of Supply Inventory (MSI) as a metric to judge whether the market favors buyers or sellers. An MSI lower than three means that buyers dominate the market. The MSI has remained at 0.8 for single-family homes, heavily favoring sellers.
In summary, the high demand in the East Bay has sustained home prices. Inventory for single-family homes will likely decline further as we enter the winter months with fewer sellers coming to market, potentially lifting prices higher. Overall, the housing market has shown its resilience through the pandemic and remains one of the safest asset classes. Economic indicators are in an anomalous state, meaning that they are out of trend with each other. The data show that housing has remained consistently strong through this period.
As always, Arrive Real Estate Group remains committed to helping our clients achieve their current and future real estate goals. Real estate continues to be an essential business and open for business. Keeping our clients safe is one of our top priorities. Our team of experienced professionals are happy to discuss the information we have shared and available to assist any way we can.
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