December 2020 Bay Area Real Estate Market "Sudol Report"
There are a lot of question marks for the market in the coming year, but for now Bay Area home prices are still trending up a bit, as most higher paying jobs are still in place and consumer confidence has increased since the election. The Bay Area median home price increased 3.8% Month to Month in October (from 1.06M to 1.1M), which was also a 17% year to year increase from $940,000 in October/2019. Although Napa county actually saw a whopping 16.7% month to month “drop” from $900,000 to $749,380. San Mateo and San Francisco counties also saw “slight” month to month home price median drops in October and San Francisco actually saw a 1.5% “year to year” drop vs October/19’.
While the California housing market as a whole begins to exhibit signs of seasonal slowdown, housing demand continues to stay above last year’s level as interest rates remain on a downward trend. It’s hard to say wow much the Bay Area-wide lockdown will slow the sales momentum, but prospective buyers seem to be more prepared this time around and that should alleviate some of the negative effects the lockdown order exerts on the market.
It appears that our market climbed back solidly after Thanksgiving, a week that is traditionally slow for housing. Weekly closed sales ending December 5th increased 31.8% from the prior week, while pending sales rose 3.5% week-over-week. In addition to the weekly increase, the state housing market had a strong start for the last month of the year, with home sales outperforming last year by more than 30%.
A trend that started at the beginning of the pandemic continues to be a change in consumers’ housing preferences, according to the latest Annual Housing Market Survey. With remote working becoming the norm, buyers’ housing demand continues to evolve. Since the Coronavirus outbreak, more than 2 of 5 realtors (43.6%) saw a change in buyers’ preferences in the property type they want to change. Of those changes, 39% of realtors who responded said their buyers are opting for a bigger home; 35% said buyers are opting for a property with more rooms; 37% said buyers are less concerned about the commute time to work; 37% said buyers are opting to live in a suburb rather than a city; 26% said buyers are opting to live in rural areas rather than cities or suburbs.
Once most people are vaccinated and life goes back to normal, a large % of tech jobs are expected to go back to large shared urban and suburban offices, but a significant % of tech workers will continue to work from home offices in suburbs and rural areas.
This shift from Bay Area cities to suburbs and rural areas should continue to spread out the overall Bay Area affluence and continue to lift up the values of our outlying counties communities in the 2020’s.
Recent news of large Bay Area tech giants moving their headquarters to Austin, including Oracle, Tesla, and HP Enterprise, is a bit troubling, but they’re supposedly going to continuing employing people in the Bay Area and I don’t think it will have a major effect on our real estate market. Although I do think it’s a trend to keep an eye on in 2021.
Overall, heading into the 2020 Winter Holidays, the Bay Area Real Estate Market continues to hold up strong in the face of the heated pandemic. We’re currently seeing the typical seasonal trend of waning sales volume and lessening inventory.
But with mass Covid vaccinations expected by Spring time and a new Covid relief bill about to be passed, high consumer confidence and historically low mortgage rates should fuel buyer demand in the coming months as the new year brings a new slate of listings and sale activity increases. Home prices should continue to rise slightly in the coming Winter, assuming inventory levels are stable and mortgage rates stay near the current levels.
Mortgage Rate News - December 2020
Mortgage rates fell to another record low last week as the Federal Reserve said it would hold interest rates near zero amid a fragile economic recovery. The average interest rate on a 30-year fixed-rate mortgage dropped to 2.67%, the lowest level in the nearly 50 years of Freddie Mac’s survey. The 15-year fixed-rate mortgage dropped to 2.21%.
Assuming good credit and at least 20% down payment/equity, the rate for a typical 30-Yr Fixed Conforming Loan (w/0 Pts) is now at about 2.625%, while a typical 30-Yr fixed High Balance Conforming Loan (w/0 Pts) is at about 2.75%.
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