January 23, 2021
Our team is committed to serving all of your real estate needs while incorporating safety protocol to protect all of our loved ones.
As your local real estate experts, we feel it’s our duty to give you, the latest information you need to understand our local real estate market better. Whether you’re buying or selling, we want to make sure you have the most pertinent information. We have put together this monthly analysis breaking down specifics about the market.
As we all navigate this together, please don’t hesitate to contact us with any questions or concerns. We’re here to support you.
– Thao Dang, DRE #00846794, and Brian Ng, DRE #01348634
Welcome to our January newsletter. This month, we cover the state of employment in the United States and the likelihood of meaningful stimulus. We also dive into how the Democratic Party’s majority control over Congress and the White House could affect asset prices and interest rates.
Most of California (around 98% by population) is under a stay-at-home order due to COVID-19, and the United States as a whole is seeing new peaks every day. With the approval of several vaccines, we finally have a glimmer of hope to move out of the pandemic. However, we know that transmission mitigation measures will still be necessary through 2021 at least. The pandemic has substantially raised a demand for housing, and we suspect that demand will continue through this year. Mortgage rates remain at all-time lows, and buyers devote more of their total spending to housing costs.
As we enter the new year, we continue to provide you with the most up-to-date market information to feel informed in your buying and selling decisions.
In this month’s newsletter, we cover the following:
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 homeowners 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.
Demand shows no sign of decline in the near term. Today, housing is one of the best investments one can make, as it has been historically.
January Housing Market Updates for Silicon Valley
The median single-family home price declined slightly month-over-month, which is normal for the late autumn season. Year-over-year, single-family home prices increased considerably in San Mateo and Santa Cruz, up 10% and 20%, respectively. Inventory has continued to decline, as fewer homes have come to market and sales have remained high, contributing to the price increases.
As you can see in the graph below, median condo prices were up across counties. Santa Cruz had a substantial year-over-year median price increase.
Single-family home inventory was lower through 2020 relative to 2019. Home sales climbed after the initial months of the pandemic (March through May). Generally, buyers and sellers left the market in April and May, causing pent-up demand. Since June, sales have increased and showed unseasonably high levels in November 2020 for single-family homes and condos. Usually, we expect sales to decline in the autumn and winter months, but homes were selling extremely high rates. We can attribute this to fewer holiday obligations in 2020, allowing more focus on home buying. Single-family home inventory dropped in November due to unusually high sales numbers. It is likely to decline further as we make our way through the winter months.
The number of condos on the market declined significantly in November. Fewer new listings came to market, and sales inched nearly as high as new supply.
Days on Market (DOM) was higher in December, attributed to sold homes on the market for longer than average. Normally, rising DOM indicates a slowing market, but that is not the case for Silicon Valley. Inventory built to a level that demand could not meet, so homes stayed on the market longer than usual. As we will see, the pace of sales affects the Months of Supply Inventory (MSI) and has contributed to the low MSI over the past several months.
We can use MSI as a metric to judge whether the market favors buyers or sellers. The average MSI is three months in California (far lower than the national average of six months of supply), which indicates a balanced market. An MSI is lower than three means that buyers dominate the market and there are relatively few sellers (i.e., it is a sellers’ market), while a higher MSI means there are more sellers than buyers (i.e., it is a buyers’ market). The MSI dropped below one for single-family homes, which firmly favors sellers. The MSI for condos also declined to 2.1, indicating a sellers’ market as well.
In summary, the high demand in Silicon Valley has sustained home prices. Inventory for single-family homes and condos will likely decline further into the new year. Fewer sellers will likely come 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. The data show that housing has remained consistently strong through this period.
We anticipate new listings to slow through the holiday months. The autumn/winter season tends to see a slowdown in activity, although we did see a new trend toward the end of 2020 with higher-than-normal sales.
As always, we remain committed to helping our clients achieve their current and future real estate goals. Our team of experienced professionals is happy to discuss the information we’ve shared in this newsletter. Please contact us with any questions about the current market or to request an evaluation of your home or condo.
Stay up to date on the latest real estate trends.
March 4, 2024
BUYER'S REAL ESTATE TIPS
March 3, 2024
March 1, 2024
BUYER'S REAL ESTATE TIPS
March 1, 2024
How to Choose the Ideal Smaller Home
You’ve got questions and we can’t wait to answer them.