2021 California Association of Realtors President Dave Walsh recently shared information on the current state of the housing market, projections for the year, and what to expect on the legislative agenda. Walsh told Realtors, "This is a very fast-moving market. Silicon Valley's housing market is 'red hot' right now."
Closed sales have rebounded, resort markets are booming, vacation sales hit their highest number in four years. Showings are up from 2020 despite the lockdown.
Walsh, however, cautioned, "This market, like all markets, can shift on a dime. What's really impacted us is still here."
The coronavirus is the wild card, as lots of uncertainty remains, even with a vaccine. The economy is bouncing back. U.S. GDP, which dropped to 3.5 percent in 2020 is projected to be 5.5 percent this year and 4.2 percent next year.
Walsh said full recovery will take time. Many are unemployed and hurting. The pandemic has disproportionally impacted those making $100,000 or less, especially Latinos, Blacks and Native Americans. Many small businesses may not make it back. He urged members to support their local businesses.
Tight supply combined with record low interest rates will continue to put upward pressure on prices. Mortgage interest rates have surged in the last two weeks to around 3.26 percent. Though historically interest rates are still unbelievably low, Walsh said the rise in rates will likely result in a pushback in the marketplace.
The share of first-time homebuyers was highest in 2020, but the housing shortage is hurting housing affordability. The statewide housing affordability index is at 27 percent, a far cry from 35 percent a year ago. The index is at 22 percent in Santa Clara County and 20 percent in San Mateo County.
The C.A.R. president said housing unaffordability is causing sellers to leave the state. Studies show California had a net loss of 135,000 people in 2020 and most of those leaving are in the 29-44-year-old age group.
Walsh said homeownership is the best way to increase wealth. Net cash gain of sellers in 2020 was at the highest in 15 years.
Increasing housing opportunities for Californians will help close the net worth gap. Walsh has had discussions with state and federal legislators toward this end. He strongly urged members to attend Legislative Day on April 27, so they can virtually meet their state legislators, who are truly engaged and want to hear from Realtors.
C.A.R. forecasts due to the housing shortage, the statewide median home price for a single-family home will continue to increase to a higher price level of $712,000, which would be an 8 percent increase from the median price of $659,000 in 2020. Interest rates could hover at 3 percent.
The state Realtor association also forecasts California closed sales will rise 11 percent from 411,900 last year to 458,000 in 2021. Walsh said sales could result in the highest number of closed sales in the state since 2009; in fact, he predicts 2021 will be "the best year ever for many agents."
Walsh further predicts California and Oregon will continue to "mirror" tenants' rights, further depressing the investor market; a federal first-time homebuyer tax credit incentive will come together in late 2021; and the Marriage Tax penalty will be eliminated. Walsh added that a SALT (state and local tax) repeal is a possibility, but Congress may focus on more important issues, like homeownership for historically disadvantaged people. He also noted the good news is 1031 exchanges are no longer likely on the chopping block.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
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