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Our team is committed to continuing to serve all your real estate needs while incorporating safety protocol to protect all of our loved ones.

In addition, as your local real estate experts, we feel it’s our duty to give you, our valued client, all the information you need to better understand our local real estate market. Whether you’re buying or selling, we want to make sure you have the best, most pertinent information, so we’ve put together this monthly analysis breaking down specifics about the market.

As we all navigate this together, please don’t hesitate to reach out to us with any questions or concerns. We’re here to support you.

Rama Mehra, LIC #01463395


The Big Story

What to expect when you’re expecting inflation

Quick Take:

The Local Lowdown

The housing market cools after a white hot year

Quick Take:

THE BIG STORY

Inflation: Short-lived or long-term?

By now, you’ve likely run across a headline regarding the large inflation jump we’ve experienced over the past six months. Even if you haven’t, you’ve probably noticed a general increase in prices for things like gas and food over the past couple of months.

The last significant long-term inflationary period was in the 1970s when inflation expectations created a feedback loop largely because unions were common and had more bargaining power. As prices rose, union workers demanded higher pay, which increased operating costs and fueled rising prices.

inflation market update bay area

But 2020-21 is quite different from the 1970s. Currently, companies are using inflation as a mostly bad-faith excuse to raise prices during a time of record corporate profits, which will benefit companies as consumers bear the burden of rising costs. This is likely the unfortunate feedback loop we will see during the next six months.

Case-Shiller 20-City Composite Home Price Index East Bay December 2021 Market Update

All that to say, as consumer costs rise, we might see demand for housing decline. With fewer experiences to spend money on during the pandemic, savings shot up, allowing potential homebuyers to reach their down payment goals far more quickly than expected. Inflation will cut into our ability to save. 

Corporate Profits East Bay December 2021 Market Update


Unlike a normal business cycle, the pandemic is still disrupting the global supply chain, with fewer dock/port workers and truck drivers as well as continued international travel restrictions. This is compounded by the pandemic-related shifts in consumer preferences: consumers are choosing physical goods rather than services. The demand for physical goods isn’t unique to the U.S., either — the whole world is trying to recover economically with a move toward physical goods, which is stressing the supply chain. The good news, however, is that inflation will likely fall around summer 2022 and shouldn’t mimic the decade-long inflationary period of the 1970s. The bad news is that it isn’t coming down today.

Total Existing Home Sales in the United States East Bay December 2021 Market Update



Although not necessarily a strict supply chain issue, the rising cost of housing can definitely be tied to supply. In the U.S., the supply of houses for sale is still near the all-time low reached in April. At the same time, demand remains high for homes, and we are on pace to have around a million more homes sold in 2021 than in a typical year, based on the long-term average. In other words, more homes are selling despite the historically low inventory. Because inflation diminishes the purchasing power of a dollar over time, buyers face pressure to buy sooner rather than later, further increasing demand for homes. Coupling inflation with historically low mortgage rates creates incentives to buy now even with the run-up in prices.

The market remains competitive for buyers, but conditions are making it an exceptional time for homeowners to sell. Low inventory means sellers will receive multiple offers with fewer concessions. Because sellers are often selling one home and buying another, it’s essential that sellers work with the right agent to ensure the transition goes smoothly. 

15 and 30-Year Fixed Mortgage Rates East Bay December 2021 Market Update

THE LOCAL LOWDOWN

Home prices hit a ceiling (mostly)

After single-family home prices appreciated significantly in the first half of the year, it makes sense that prices are declining in the third and fourth quarters. North Bay prices experienced the most substantial decrease in the second half of the year, although all regions declined. That said, the East Bay, Silicon Valley, and San Francisco showed remarkably consistent price appreciation for the year, up 19% across those regions.

Condo prices declined less significantly in the second half, except for the North Bay condos, which rose to a record high. Although the price appreciation wasn’t as pronounced for condos as it was for single-family homes, we expect price appreciation to slow going into the winter months, a seasonal norm.

Greater Bay Area Median Home Price East Bay December 2021 Market Update
Greater Bay Area Median Price Changes East Bay December 2021 Market Update
Bay Area Regions' Median Prices - Single-Family Homes East Bay December 2021 Market Update
Single-Family Home Prices by County East Bay December 2021 Market Update
Bay Area Regions' Median Prices- Condos East Bay December 2021 Market Update
Condo Prices by County East Bay December 2021 Market Update

Home supply peaked at a low level

Despite the increase in single-family home inventory in 2021, we’re still at a historic low. The summer months typically have the highest inventory. In 2021, total inventory didn’t come close to last year’s level and was even further away from pre-pandemic levels. Even though we’re seeing some price correction after the first half of the year, the sustained low inventory will lift prices. Sales in the Greater Bay Area have been incredibly high, again highlighting demand in the area.

East Bay Inventory - Single Family Homes East Bay December 2021 Market Update
Days on the Market East Bay October 2021
MSI by County East Bay October 2021

Homes are selling fast — really fast

Homes are selling faster than at any point in the past 15 years. The Days on Market reflects the high demand for homes in the Greater Bay Area. Buyers must put in competitive offers above the list price of the home. 

Months of Supply Inventory (MSI) quantifies the supply/demand relationship by measuring how many months it would take for all current homes for sale on the market to sell at the current rate of sales. The average MSI is three months in California, which indicates a balanced market. An MSI lower than three indicates that there are more buyers than sellers on the market (meaning it’s a sellers’ market), while a higher MSI indicates there are more sellers than buyers (meaning it’s a buyers’ market). MSI in the Greater Bay Area is historically low for single-family homes and condos, indicating a sellers’ market.


There are a lot of things to consider before making an important decision like buying or selling a home. If you have any further questions about the market, or are in need of a real estate professional by your side at all times, don’t hesitate to give us a call at 925-415-0835!

Our team is committed to continuing to serve all your real estate needs while incorporating safety protocol to protect all of our loved ones.

In addition, as your local real estate experts, we feel it’s our duty to give you, our valued client, all the information you need to better understand our local real estate market. Whether you’re buying or selling, we want to make sure you have the best, most pertinent information, so we’ve put together this monthly analysis breaking down specifics about the market.

As we all navigate this together, please don’t hesitate to reach out to us with any questions or concerns. We’re here to support you.

Rama Mehra, LIC #01463395


The Big Story

Where can home prices go from here?


Highs (price) and lows (inventory) in the housing market

Income is one of the largest predictors of home price growth, second only to available supply. Consumers have more money to spend, which in turn drives up prices. But the increases in income haven’t kept up with the rise in home prices, especially in the last two years. In 2020, home prices increased 10% according to the Case-Schiller 20-City Composite Index, while median income decreased by 1%.

Case-Shiller 20-City Home Price Composite East Bay November 2021 Market Update


The disconnect between income and home prices is happening for two reasons. First, the ability to take on debt means that income doesn’t necessarily need to increase at a 1:1 ratio with home prices. Second, the pandemic changed buyer preferences, increasing the demand for homes and dropping inventory to previously unseen lows. 

Income Growth Index in California East Bay November 2021 Market Update



Because home price increases outpaced income growth, homebuyers needed to take on more debt to buy a home than they would have a few years ago. But due to the drop in interest rates, the monthly payment, even on a higher-priced home, becomes more affordable. For every 1% decrease in a 30-year mortgage rate, the price of the home can increase 13% without a change in monthly payment (and vice versa). For example, the monthly payment on a $1,000,000 mortgage at 4% is almost identical to the monthly payment for a $1,130,000 mortgage at 3%, a $130,000 difference. 

15 and 30-year Fixed Mortgage Rates East Bay November 2021 Market Update


The pandemic also changed buyer preferences. Rather than spending roughly half of our time at home, which is the norm, we were faced with endless time in our living spaces. (You remember — you were there.) As of September 2021, the United States has 59% fewer homes on the market, and 53% of that happened in the last two years. We were happy to see more homes on the market in the second quarter of 2021 because the increased supply helped satiate the high buyer demand, but we are already seeing the seasonal shift to fewer homes coming to market. Inventory will likely remain super low in the coming fall and winter months. 

The market remains competitive for buyers, but conditions are making it an exceptional time for homeowners to sell. Low inventory means sellers will receive multiple offers with fewer concessions. Because sellers are often selling one home and buying another, it’s essential that sellers work with the right agent to ensure the transition goes smoothly.


The Big Story Data

Housing Inventory in the United States East Bay November 2021 Market Update

Local Update

The market is cooling but it’s still not a buyers’ market


Home prices moved similarly to stocks in 2021

The growth rates in 2021 are highly unusual and unsustainable; for example, home prices would more than double every four years at a 20% growth rate. After huge single-family home price appreciation in the first half of the year, it made sense that prices declined in the third quarter. During the summer months (July–September), Alameda County home prices declined 2% from July through September 2021, up 21% for the year. During the same time period, Contra Costa home prices experienced an even steeper decline: a drop from 28% in June to 16% in September. 

Median Home Prices (Single-Family Homes)

East Bay Median Home Prices Single Family Homes East Bay November 2021 Market Update
East Bay Median Price Changes Single Family Homes
East Bay November 2021 Market Update

Median Home Prices (Condos)

Condo prices are near all-time highs in the East Bay. In the first half of the year, condo prices increased 13% in Alameda and 9% in Contra Costa. In the third quarter, prices contracted in Alameda, up 12%. In Contra Costa, however, prices climbed even higher, up 13% for the year through September 2021. Although the price appreciation wasn’t as pronounced for condos as it was for single-family homes, the growth rates for condos in 2021 are also unsustainable.

East Bay Median Home Prices Condos East Bay November 2021 Market Update
East Bay Median Price Changes East Bay November 2021 Market Update

More supply, no problem (Single-Family Homes and Condos Inventory)

Despite the increase in single-family home inventory in 2021, we’re still at a historic low. August and September are typically the months with the highest inventory every year. In 2021, total inventory didn’t come close to last year’s level and was even further away from pre-pandemic levels. Even though we’re seeing some price correction after the first half of the year, the sustained low inventory will lift prices. Currently, Alameda has more condo inventory than the pre-pandemic levels, but Contra Costa doesn’t. This could explain why condo prices pulled back in the third quarter in Alameda but rose in Contra Costa. Sales in the East Bay have been incredibly high, again highlighting demand in the area.

East Bay Inventory Single Family Homes East Bay November 2021 Market Update
East Bay Inventory Condos East Bay November 2021 Market Update

Homes are selling fast – really fast (Days on Market and Months of Supply Inventory)

Homes are selling faster than at any point in the last 15 years. The Days on Market reflects the high demand for homes in the East Bay. Buyers must put in competitive offers, which, on average, are 5–10% above the list price of the home. 

East Bay Days on Market East Bay November 2021 Market Update



Months of Supply Inventory (MSI) quantifies the supply/demand relationship by measuring how many months it would take for all current homes for sale on the market to sell at the current rate of sales. The average MSI is three months in California, which indicates a balanced market. An MSI lower than three indicates that there are more buyers than sellers on the market (meaning it’s a sellers’ market), while a higher MSI indicates there are more sellers than buyers (meaning it’s a buyers’ market). MSI in the East Bay has indicated a sellers’ market for over five years now. Currently, both single-family home and condo MSIs are historically low, firmly indicating a sellers’ market.

Days on Market East Bay November 2021 Market Update
East Bay Months of Supply Inventory East Bay November 2021 Market Update
MSI by County September 2021 Market update

Our team is committed to continuing to serve all your real estate needs while incorporating safety protocol to protect all of our loved ones.

In addition, as your local real estate experts, we feel it’s our duty to give you, our valued client, all the information you need to better understand our local real estate market. Whether you’re buying or selling, we want to make sure you have the best, most pertinent information, so we’ve put together this monthly analysis breaking down specifics about the market.

As we all navigate this together, please don’t hesitate to reach out to us with any questions or concerns. We’re here to support you.

Rama Mehra, DRE #01463395

Welcome to our October newsletter, where we’ll explore residential real estate trends in the Greater Bay Area and across the nation. This month, we examine the state of the U.S. housing market now that much-needed supply has come to the market. We also explore why the worker shortage may not be as detrimental to the economy as was originally expected because of the renewed growth of entrepreneurship.  

With the increase in supply, we’ll probably see the beginning of some market cooling — but in the context of the hottest housing market in history. Housing inventory in the United States continued to rise in August, up 30% from the record low in April 2021. We’re happy to see more homes on the market because they will help satiate the high buyer demand. Although this increase in housing inventory is meaningful, there are still 74% fewer homes on the market than a year ago. The housing market will likely start to see some price corrections as it returns to a steadier state of growth. 

While we, at first, worried that the worker shortage could hurt the economy, it looks like the rise in entrepreneurship is helping to boost production and improve the economy. We often look at jobs to gauge the health of the economy: more employed workers usually mean more production and more wealth, which, in turn, means appreciating asset prices. For many months, unemployment stood at around 10 million workers; however, we have started to meaningfully close the unemployment gap, and unemployment has been reduced to 8 million workers. As risks from the delta variant wane, we’ll likely see more unemployed workers reentering the workforce. 

Despite the high rate of unemployment and record number of job openings, U.S. production is climbing rapidly. In terms of GDP, which is the broadest measure of goods and services produced, our economic recovery could reach where we would likely be if the pandemic had never happened within the next year. It cannot be overstated how rare it would be to return to pre-recession GDP, but we might just get there. A potential factor in the rise of both production and job openings is the resurgence of entrepreneurship, which is often associated with higher production. 

We remain committed to providing you with the most current market information so you feel supported and informed in your buying and selling decisions. In order to better explore how the above national trends in the economy and housing market are affecting the Greater Bay Area, this month’s newsletter will cover the following:


Key Topics and Trends in October

In the long term, employment and GDP reveal much about the economic climate and typically trend with housing prices. GDP, according to the U.S. Bureau of Economic Analysis, gained 1.6% quarter-over-quarter in 2nd Quarter (2Q) 2021, which is about 1% higher than the long-term quarterly growth rate of 0.6%. To get back to pre-pandemic GDP levels, we need to continue to outpace the long-term growth rate. The substantial infusion of cash into the economy has boosted GDP, and we are on pace to fully recover. 

The chart below illustrates the cost of the COVID recession and the projection at GDP’s current growth rate. While it depicts U.S. GDP from 2016 to 2Q 2021, it also illustrates economic patterns that occur in all recessions. GDP tends to grow at a fairly consistent rate during economic expansions. The green line exemplifies the expected GDP, had the pandemic never happened. As that green line shows, we are below where GDP was expected to be in 2Q 2021. In other words, we’re still underwater. However, unlike typical recoveries, which return to a steady-state of growth but at a lower level, the current growth rate is far higher than normal and should bring us back to our pre-pandemic trajectory by the end of the 2nd Quarter 2022.

Real GDP in the United States October 2021 Greater Bay Area Market Update

Another Source of Economic Growth

Another large government-sponsored infusion of cash into the economy is very unlikely to happen. We may, however, have another source of economic stimulus: the massive growth in entrepreneurship over the last 16 months. From 2004 to 2019, the United States averaged 2.8 million new business applications per year. In 2020, there were 4.36 million, and in 2021, there have been 3.68 million as of August. This means that over the past 20 months, the United States has seen 8 million new business applications.

The competitive nature of our economy incentivizes new business owners to produce, creating jobs and stimulating growth. While new businesses are not as stable as more mature companies, they are often more nimble than larger companies and can produce with fewer hurdles.

Business Application in the United States October 2021

The large number of new business applications may also explain why established companies have found it difficult to fill job openings. It seems that a large number of workers may now be working for themselves. Although the difficulty with hiring employees poses troubling challenges to employers, it thankfully may not indicate a struggling economy.

Job Openings in the United States October 2021

Home prices tend not to experience meteoric rises if the economy is in dire straits. Because home prices have increased so rapidly over the last two years, we can assume that the economy is doing well. In the last five years, housing inventory has decreased by around 940,000 (59%). Over 700,000 of those homes were sold in the last two years alone. Due to the pandemic, housing demand rose to historically high levels and mortgage rates fell to historic lows. As shown in the chart below, we’re currently hovering near all-time low mortgage rates, which will likely remain for the rest of the year. Low rates incentivize buying due to the lower monthly payment.

Fixed Mortgage Rates October 2021

Even with rising inventory, the market remains competitive for buyers, but conditions are making it an exceptional time for homeowners to sell. Low inventory means sellers will receive multiple offers with fewer concessions. Because sellers are often selling one home and buying another, it’s essential that sellers work with the right agents to ensure the transition goes smoothly.


October Housing Market Updates for the Greater Bay Area

During August 2021, in the Greater Bay Area, the median single-family home price declined further from the all-time high reached in June. Year-over-year, Greater Bay Area prices increased considerably, up 18%.

Greater Bay Area Median Home Price October 2021
Greater Bay Area Median Price Changes October 2021

The median price movements across the Greater Bay Area regions were mixed. San Francisco, Silicon Valley, and East Bay home prices declined month-over-month, while North Bay home prices increased. However, year-over-year, every county in the Bay Area is higher than last year with the exception of Monterey.

Bay Area Regions' Median Prices- Single Family Homes October 2021
Single-Family Home Prices by County October 2021

As you can see in the graphs below, median condo prices were mixed across regions and counties. Counties in the North Bay and Silicon Valley saw the largest gains.

Bay Area Regions' Median Prices - Condos October 2021
Condo Prices by County October 2021

Single-family home inventory began to climb at the start of 2021 in anticipation of the spring season, when more sellers typically come to market, but has begun to decline once again. To gain a full picture of the current market, we must view it in the context of last year. In 2020, fewer people wanted to leave the Greater Bay Area, and more people wanted to move here. This trend drove inventory down to record low levels. New listings, therefore, improve the current market conditions. In August 2021, the total inventory in the Greater Bay Area had fewer homes for sale than it did in August 2020, so the higher number of new listings is a positive development for the housing market. The sustained low inventory will likely cause prices to remain stable or appreciate throughout 2021.

North Bay Inventory - Single-Family Homes October 2021
East Bay Inventory - Single-Family Homes October 2021
Silicon Valley Inventory - Single-Family Homes October 2021

San Francisco Inventory - Single-Family Homes October 2021

Both single-family homes and condos spent less time on the market in August 2021 than they did in August of last year. As we’ll see, the pace of sales has contributed to the low Months of Supply Inventory (MSI) over the past several months.

Greater Bay Area Days on Market October 2021
Days on Market by County October 2021

We can use MSI as a metric to judge whether the market favors buyers or sellers. The average MSI is three months in California, which indicates a balanced market. An MSI lower than three indicates that there are more buyers than sellers on the market (meaning it’s a sellers’ market), while a higher MSI indicates there are more sellers than buyers (meaning it’s a buyers’ market). In August 2021, single-family home MSI remained below two months of supply, indicating that the market still strongly favors sellers.

Greater Bay Area Months of Supply Inventory October 2021
MSI by County August 2021

Summary

In summary, the high demand and low supply in the Greater Bay Area have driven home prices up over the last year, but the huge price appreciation is slowing. Inventory will likely remain historically low this year with the sustained high demand in the area. Overall, the housing market has shown its value through the pandemic and remains one of the most valuable asset classes. The data show that housing has remained consistently strong throughout this period. 

We expect the number of new listings to slow in the coming months. However, the current market conditions can withstand a high number of new listings, and more sellers may choose to enter the market to capitalize on the high buyer demand. We expect the high demand to continue, and new houses on the market to sell quickly.

As always, we remain 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’ve shared in this newsletter. We welcome you to contact us with any questions about the current market or to request an evaluation of your home or condo.

Planning to buy or sell your home? Give us a call: 925-415-0835!

Our team is committed to continuing to serve all your real estate needs while incorporating safety protocol to protect all of our loved ones.

In addition, as your local real estate experts, we feel it’s our duty to give you, our valued client, all the information you need to better understand our local real estate market. Whether you’re buying or selling, we want to make sure you have the best, most pertinent information, so we’ve put together this monthly analysis breaking down specifics about the market.

As we all navigate this together, please don’t hesitate to reach out to us with any questions or concerns. We’re here to support you.

Rama Mehra, DRE #01463395

Welcome to our September newsletter, where we’ll discuss residential real estate trends in the East Bay and across the nation. This month, we’ll examine the state of the U.S. housing market now that more supply has come to the market and explore the impact of iBuyers and fin-tech companies’ influences on the housing market. 

From 2012 through 2019, the seasonality of the housing market was incredibly stable. For seven years, we consistently saw fewer sales in the winter months and higher sales in the spring and summer months. In 2020, however, we saw a shift. The usual seasonality gave way to super-high demand that remained consistent throughout the year, even after the initial pandemic shock from April to June 2020 faded. Then, in winter 2020 and early spring 2021, inventory decreased to historically low levels. Now we are far enough into summer to comfortably see pre-2020 seasonal trends return. 

Demand for homes has remained quite high, which has increased the use of all-cash offers that often serve as differentiators for sellers who receive multiple offers. The National Association of Realtors (NAR) reports that cash sales rose from 16% to 23% year-over-year in July. The increase in cash offers often pushes out first-time homebuyers who don’t have hundreds of thousands (or millions) of dollars on hand. At the same time, we are seeing fin-tech iBuyers (algorithmic instant cash buyers), which is still in its infancy, targeting first-time buyers as a means to stay competitive by making them all-cash buyers. This dynamic could drive demand even higher if fewer buyers are priced out of the market.

As we navigate this period of high buyer demand and low supply, we remain committed to providing you with the most current market information so you feel supported and informed in your buying and selling decisions. In this month’s newsletter, we cover the following:


Key Topics and Trends in September

Housing inventory started falling steadily in April 2020 in response to the pandemic, and the steady seasonal norms in supply vanished completely. As you can see from the chart below, we are starting to see a hint of seasonality return with the inventory increase over the summer months, albeit at a much lower level. As inventory crossed below the 600,000 level, sales began to slow; there simply weren’t enough homes to meet buyer demand, which created a hyper-competitive market for buyers. We are pleased to see inventory increase to alleviate some of the extreme demand.

Housing Inventory in the United States East Bay Area Market Update September 2021

The chart below, which illustrates sales over the last 12 months, reveals that sales often trend with inventory, but with a one-month lag. In other words, more sales are recorded when more inventory comes online during the previous month. For most of 2021, even though we were on pace to have a record number of home sales, the rate of sales was slowing. That deceleration, however, has reversed as more homes have come to the market.

Inventory and Sales East Bay Area Market Update September 2021

The last year has taught us that uncertainty around the pandemic has positively correlated to home sales. People are spending more time at home, and the Federal Reserve is expected to keep mortgage rates low. As shown in the chart below, we’re currently hovering at historically low mortgage rates, which will likely remain for the rest of the year. Low-rate financing incentivizes buying, which has been one reason for the high demand over the last 18 months.

30-Year Fixed Interest Rate East Bay Area Market Update September 2021

All-Cash Purchases

The housing market’s competitiveness has increased the number of all-cash purchases to the highest level we’ve seen in the last 10 years. In July 2021, NAR reported that 23% of home sales were cash purchases, which marks a 7% increase from 2020. The competitive nature of the current market has priced out many first-time homebuyers, but we could see that shift with the emergence of iBuyers, who can quickly purchase a home in cash. The speed with which buyers need to secure financing is often part of the problem for first-time buyers. iBuyers can offer the speed and financing necessary for a competitive offer. 

With such low supply and high demand for homes, we could see the market become even more competitive if fewer buyers are priced out of the market. Currently, a low percentage of sales involve iBuyers; however, if iBuyers become more common, supply could trend even lower than it already is.

All-Cash Home Purchases East Bay Area Market Update September 2021

While the market remains competitive for buyers, conditions are making it an exceptional time for homeowners to sell. Lower inventory means sellers will receive multiple offers with fewer concessions. Because sellers are often selling one home and buying another, it’s essential that sellers work with the right agent to ensure that the transition goes smoothly.


September Housing Market Updates for the East Bay

During July 2021, in the East Bay area, the median single-family home price remained the same month-over-month in Alameda County, but declined in Contra Costa County. Year-over-year, both Alameda and Contra Costa continue to show large price increases. Those price gains, however, seem to be decelerating, which is not surprising considering the magnitude of the price increases over the last year.

East Bay Median Home Prices Single Family Homes

Year-over-year, single-family home prices rose significantly in Alameda and Contra Costa.

East Bay Median Price Changes Single-Family Homes

As you can see in the graph below, median condo prices increased in the East Bay; but, like single-family home prices, they remain slightly off-peak.

Condo Prices by County

Single-family Homes Inventory

Single-family home inventory rose slightly over the first seven months of 2021, which is to be expected in the spring/summer season when more sellers typically come to market. In order to gain a full picture, we have to examine total inventory for the first half of 2021 in comparison to last year. In 2020, fewer people wanted to leave the East Bay, while more people wanted to move to the area. This trend drove inventory down to record low levels. New listings, therefore, improve the current market conditions. However, currently, new listings are barely outpacing demand. In July 2021, the East Bay had nearly 650 fewer homes for sale than it did in July 2020, which reflects a 13% decline. Furthermore, when we compare the current inventory to the pre-pandemic levels of July 2019, the number of homes for sale has declined by 30%. Although the seasonal trends seem to be returning, the sustained low inventory will likely cause prices to appreciate throughout 2021.

East Bay Inventory Single Family Homes

Condos Inventory

The number of condos on the market rose slightly in July 2021 as new listings outpaced sales. Condo demand remains incredibly high in the East Bay, and new listings are selling quickly.

East Bay Inventory Condos

Both single-family homes and condos spent far less time on the market in July 2021 than they did in July of last year. As we’ll see, the pace of sales has contributed to the low Months of Supply Inventory (MSI) over the past several months.

Months of Supply Inventory (MSI)

East Bay Days on Market
Days on the Market by County

We can use MSI as a metric to judge whether the market favors buyers or sellers. The average MSI is three months in California, which indicates a balanced market. An MSI lower than three means that there are more buyers than sellers on the market (that is, it’s a sellers’ market), while a higher MSI means there are more sellers than buyers (that is, it’s a buyers’ market). In July 2021, single-family home MSI remained below one month of supply, while condo MSI rose slightly above one month of supply. Both condo and single-family home MSI indicate that the market still strongly favors sellers.

East Bay Months of Supply Inventory September 2021
MSI by County September 2021

Summary

In summary, the high demand and low supply in the East Bay have driven home prices up over the last year, but the huge price appreciation is slowing. Inventory will likely remain historically low this year with the sustained high demand in the area. Overall, the housing market has shown its value through the pandemic and remains one of the most valuable asset classes. The data show that housing has remained consistently strong throughout this period. 

We expect the number of new listings will continue to increase in the remaining summer months. The current market conditions, however, can withstand a high number of new listings, and more sellers may also enter the market to capitalize on the high buyer demand. As we navigate the summer season, we expect the high demand to continue, and new houses on the market to sell quickly.

As always, we remain 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’ve shared in this newsletter. We welcome you to contact us with any questions about the current market or to request an evaluation of your home or condo.

Call us at 925-415-0825 today for any questions that you might have.

Our team is committed to continuing to serve all your real estate needs while incorporating safety protocol to protect all of our loved ones.

In addition, as your local real estate experts, we feel it’s our duty to give you, our valued client, all the information you need to better understand our local real estate market. Whether you’re buying or selling, we want to make sure you have the best, most pertinent information, so we’ve put together this monthly analysis breaking down specifics about the market.

As we all navigate this together, please don’t hesitate to reach out to us with any questions or concerns. We’re here to support you.

Rama Mehra, DRE #01463395

Welcome to our August newsletter, where we’ll explore residential real estate trends in the East Bay and across the nation. This month, we examine the state of the U.S. economic recovery using Real Gross Domestic Product (GDP)1, the potential effects of the Delta variant on the housing market, and the ways in which the homebuyer profile changed over the last year.

In terms of GDP, which is the broadest measure of goods and services produced, our economic recovery stands at about 70% of where we would likely be if the pandemic had never happened. Unfortunately, the Delta variant has diminished the likelihood of the pandemic ending with any sort of speed and caused a return to mask mandates in many parts of the country. Although full lockdowns are unlikely, high case counts and a return to near-universal masks and social distancing will disrupt our economic recovery. 

The uncertainty surrounding the Delta variant and its effects on the economy caused rates to fall. Participants in our financial markets know that the Federal Reserve will try to stabilize the U.S. financial markets in times of uncertainty. At this point, it’s a given. The further decline in interest rates reflects that. Mortgage rates are now extremely close to the all-time low. At the same time, however, prices have risen, and the profile of homebuyers has shifted. More homebuyers are investors and full-cash buyers. With low-rate financing and a high number of qualified buyers, the rising prices haven’t reduced the demand for homes as one might expect. 

As we navigate this period of high buyer demand and low supply, we remain committed to providing you with the most current market information so you feel supported and informed in your buying and selling decisions. In this month’s newsletter, we cover the following:

1Real GDP is inflation-adjusted GDP. All references to GDP use Real GDP figures.

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Key Topics and Trends in August

We’re about a year past the initial economic devastation caused by the pandemic. The second quarter of 2020 saw the largest single-quarter drop in GDP in history (-9%). GDP and employment together reveal much about the economic climate and typically trend with housing prices, but they do not explain the current rise in home prices. We’ll still discuss GDP and employment, however, because they are useful longer-term indicators. 

The U.S. Bureau of Economic Analysis reported a 1.6% quarter-over-quarter gain to GDP in 1st Quarter (1Q) 2021, which is about 1% higher than the long-term quarterly growth rate of 0.6%. We need to outpace the long-term growth rate to get back to pre-pandemic levels. If it weren’t for the Delta variant, we might actually get there. The substantial infusion of cash into the economy has boosted GDP, but we’re still only at 70% of pre-pandemic levels. At the same time, there are about 10 million fewer jobs due to the pandemic. As the Delta variant runs through the country, our recovery will likely stall and the loss in GDP could be permanent. 

The chart below illustrates the cost of a recession. While it depicts U.S. GDP from 2016 to 1Q 2021, it also illustrates economic patterns that occur in all recessions. GDP tends to grow at a fairly consistent rate during economic expansions. The green line illustrates the expected GDP had the pandemic never happened. As that green line shows, we are 30% below where GDP was expected to be in 1Q 2021. In other words, we’re still underwater despite the impressive quarterly increases in GDP.

Real GDP in the United States East Bay Area Market Update August 2021

The fresh uncertainty surrounding the Delta variant caused rates to drop. The Federal Reserve is expected to support the financial markets by infusing money into them, which lowers rates and, in this instance, causes inflation to rise. As shown in the chart below, we’re currently hovering at historically low mortgage rates, which will likely remain for the rest of the year. Low rates and inflation both incentivize buying. When consumers know that the dollar’s purchasing power is diminishing quickly, it makes more sense for them to buy a home sooner rather than later.

30-Year Fixed Interest Rate East Bay Area Market Update August 2021

As we look at the last 12 months of annualized home sales in the chart below, we can see that sales rose significantly since last June. Although the rate of sales decelerated from January to May 2021, it rose again in June, which is a seasonal norm. More homes are coming to market and being bought quickly due to the excess demand. In 2020, incentives to purchase a home translated to the most homes sold in a year since 2006. Although we’re only halfway through 2021, it’s safe to say that home sales will outpace those in 2020.

Existing Home Sales East Bay Area Market Update August 2021

Demand for homes hasn’t diminished as prices soared over the last year. In a typical year, we would expect that a 20% increase in home value would price many potential homebuyers out of the market, thereby causing a price correction. In this instance, we’ve found that to be half true. First-time homebuyers are usually the first to get priced out of the market. Over the past year, we are seeing fewer first-time buyers coming into the market. However, even though there may be fewer buyers in one category, there are plenty of buyers in other categories to make up for them.  In this case, we are seeing more investors coming into the market. Cash sales have jumped considerably, and homes are selling extremely quickly. As a result, it looks like prices will climb higher in the near future.

Homebuyer Shifts East Bay Area Market Update August 2021

While the market remains competitive for buyers, conditions are making it an exceptional time for homeowners to sell. Low inventory means sellers will receive multiple offers with fewer concessions. Because sellers are often selling one home and buying another, it’s essential that sellers work with the right agent to ensure the transition goes smoothly.


August Housing Market Updates for the East Bay

During June 2021, in the East Bay, the median single-family home price declined from the May peak. However, year-over-year, both Alameda and Contra Costa Counties continue to show large price increases.

Median Home Prices for Single Family Homes East Bay Area Market Update August 2021

Year-over-year, single-family home prices rose significantly in Alameda and Contra Costa.

Median Price Changes of Single-Family Homes East Bay Area Market Update August 2021

As you can see in the graph below, median condo prices increased in the East Bay but, similarly to single-family homes, remain slightly off peak.

Condo Prices by County June 2021

Single-family home inventory rose slightly over the first six months of 2021, which is expected in the spring/summer season when more sellers typically come to market, and then declined in June. Total inventory for the first half of 2021 must be looked at in the context of last year to gain a full picture. In 2020, fewer people wanted to leave the East Bay, while more people wanted to move to the area. This trend drove inventory down to record low levels. New listings, therefore, improve the current market conditions. However, currently, new listings are barely outpacing demand. In June 2021, the East Bay had nearly 750 fewer homes for sale than it did in June 2020, which is a 15% decline. Furthermore, when we compare the current inventory to June 2019 (pre-pandemic) levels, the number of homes for sale has declined by 33%. The sustained low inventory will likely cause prices to appreciate throughout 2021.

East Bay Inventory - Single-Family Homes East Bay Area Market Update August 2021

The number of condos on the market rose slightly in June 2021 but seems to have stabilized overall. Condo demand remains incredibly high in the East Bay, and new listings are selling quickly.

East Bay Inventory Condos East Bay Area Market Update August 2021

Both single-family homes and condos spent far less time on the market in June 2021 than they did in June of last year. As we’ll see, the pace of sales has contributed to the low Months of Supply Inventory (MSI) over the past several months.

East Bay Days on Market East Bay Area Market Update August 2021

We can use MSI as a metric to judge whether the market favors buyers or sellers. The average MSI is three months in California, which indicates a balanced market. An MSI lower than three means that there are more buyers than sellers on the market (meaning it’s a sellers’ market), while a higher MSI means there are more sellers than buyers (meaning it’s a buyers’ market). In June 2021, the MSI remained below one month of supply for single-family homes and condos, indicating that the market strongly favors sellers.

East Bay Months of Supply Inventory East Bay Area Market Update August 2021
MSI by County East Bay Area Market Update August 2021

Summary

In summary, the high demand and low supply present in the East Bay have driven home prices up. Inventory will likely remain low this year with the sustained high demand in the area. Overall, the housing market has shown its value through the pandemic and remains one of the most valuable asset classes. The data show that housing has remained consistently strong throughout this period. 

We expect that the number of new listings will continue to increase in the remaining summer months. The current market conditions, however, can withstand a high number of new listings coming to market, and more sellers may also enter the market to capitalize on the high buyer demand. As we navigate the summer season, we expect the high demand to continue, and new houses on the market to sell quickly.

As always, we remain 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’ve shared in this newsletter. We welcome you to contact us with any questions about the current market or to request an evaluation of your home or condo. Call 925-415-0835!

Our team is committed to continuing to serve all your real estate needs while incorporating safety protocol to protect all of our loved ones.

In addition, as your local real estate experts, we feel it’s our duty to give you, our valued client, all the information you need to better understand our local real estate market. Whether you’re buying or selling, we want to make sure you have the best, most pertinent information, so we’ve put together this monthly analysis breaking down specifics about the market.

As we all navigate this together, please don’t hesitate to reach out to us with any questions or concerns. We’re here to support you.

Rama Mehra, DRE #01463395

Welcome to our July newsletter, where we’ll explore residential real estate trends in the East Bay and across the nation. This month, we examine how buyer demand might shift during the rest of the year, taking into account the historically low inventory, record high prices, and the Federal Reserve Bank’s incentives to keep interest rates low despite rising inflation.

We’ve entered into an economic situation that is uncommon, at least in recent history, with rising inflation and high unemployment. The Federal Reserve Bank (the Fed) has two goals known as the dual mandate: price stability (inflation) and maximum sustainable employment. The pandemic, of course, threw a sizable wrench in the economic machine, causing mass unemployment from which we are still recovering. Easy monetary policy brought more money into circulation and a drop in interest rates.

The low-rate environment spurred homebuying across the country, lowering available inventory and driving home prices to record highs. Most potential buyers are flush with cash and have high credit scores, which has created an incredibly competitive environment. How will the massive price increases we’ve seen over the last year affect demand? And how will the market respond to a price correction?

As we navigate this period of high buyer demand and low supply, we remain committed to providing you with the most current market information so that you feel supported and informed in your buying and selling decisions. In this month’s newsletter, we cover the following:

Key Topics and Trends in July

The past year saw the highest sales volume and fastest price increases on record nationally. We want to take a closer look at this massive buyer demand, and the ways in which it’s affecting the housing market. 

At the start of the pandemic, the housing market looked incredibly unstable: buyers and sellers were pulling out of deals, sales volume and inventory dropped, and unemployment skyrocketed. The uncertainty around the housing market was short-lived, however, and it became clear that homes were going to have a remarkable year.

The Fed’s easy monetary policy over the last year has caused a swift rise in inflation, about 5%. After a decade of relatively low inflation, often under 2% annually, consumers are noticing the price jumps. In fact, there was slightly more inflation during the year from May 2020 to May 2021 than there was during the three-year period from 2017 to 2020. The price increases are partly due to monetary policy and partly due to global supply chain disruptions caused by the pandemic. As the pandemic fades on a more global basis and supply chains stabilize, prices should correct, at least to an extent. For the moment, the Fed has decided to keep interest rates low and continue infusing money into the economy.

Employment Level in the United States

Even though inflation has become more noticeable, the Fed still must consider the employment rate. As you can see from the chart below, employment hasn’t reached pre-pandemic levels, and the growth rate has slowed. Because employment typically grows at such a constant rate, we still have around 10.5 million fewer employed people than if there had never been a pandemic.

Employment Level in the United States Bay Area Market Update July 2021

Mortgage Rates

The Case-Shiller 20-City Home Price Index, which measures the aggregate home prices in the 20 largest metro areas, rose 15% year-over-year in April 2021, marking one of the sharpest increases in history. The Fed also has incentives to prevent the housing market from crashing. A sharp drop in home prices would wipe out significant wealth and put many new homeowners underwater. These are huge disincentives to change the current path. 

As shown in the chart below, we’re currently hovering at historically low mortgage rates, which will likely remain for the rest of the year. As mentioned earlier, low rates incentivize buying, as does inflation. When consumers know the dollar’s purchasing power is diminishing more quickly, then buying a home sooner rather than later makes more sense.

30-Year Fixed Interest Rate Bay Area Market Update July 2021

Existing Home Sales

In 2020, incentives to purchase a home have translated to the most homes sold in a year since 2006. Although we’re only halfway through 2021, it’s safe to say that home sales will outpace those in 2020.

Existing Home Sales Bay Area Market Update July 2021

As we look at the last 12 months of annualized home sales in the chart below, we see sales slowing. This is largely caused by the lack of inventory. There are simply not enough homes to meet the current demand. Even if some potential buyers get priced out, the housing market will not see much of a change.

Existing Home Sales Bay Area Market Update July 2021

The environment, therefore, is right for demand to outpace supply in 2021. We’ve reached near-perfect conditions for qualified buyers—high credit scores, large down payments, and low-rate financing—so we anticipate a competitive landscape for buyers throughout the year. 

While the market remains competitive for buyers, conditions are making it an exceptional time for homeowners to sell. Low inventory means sellers will receive multiple offers with fewer concessions. Because sellers are often selling one home and buying another, it’s essential that sellers work with the right agent to ensure the transition goes smoothly.

July Housing Market Updates for the East Bay

During May 2021, in the East Bay, the median single-family home and condo prices rose to new all-time highs.

East Bay Median Home Prices Bay Area Market Update July 2021

Year-over-year, single-family home prices rose significantly in Alameda and Contra Costa.

East Bay Median Price Changes Bay Area Market Update July 2021

As you can see in the graph below, median condo prices increased considerably in the East Bay, and are now at all-time highs.

Condo Prices by County Bay Area Market Update July 2021

Single-family home inventory began to climb at the start of 2021, but declined in May, as sales remained high. In 2020, fewer people wanted to leave the East Bay, while more people wanted to move to the area. This trend caused an increase in population, which drove inventory down to record low levels. New listings, therefore, improve the current market conditions. In May 2021, the East Bay had nearly 16% fewer homes for sale than it did in May 2020. The sustained low inventory will likely cause prices to appreciate throughout 2021.

East Bay Inventory Singe-Family Homes Bay Area Market Update July 2021

The number of condos on the market declined slightly in May 2021 to last year’s levels. Condo demand remains incredibly high in the East Bay.

East Bay Inventory Condos Bay Area Market Update July 2021

Both single-family homes and condos spent far less time on the market in May 2021 than they did in May of last year. As we’ll see, the pace of sales has contributed to the low Months of Supply Inventory (MSI) over the past several months.

East Bay Days on Market Bay Area Market Update July 2021
Bay Area Market Update July 2021

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), which indicates a balanced market. An MSI lower than three means that there are more buyers than sellers on the market (meaning it’s a sellers’ market), while a higher MSI means there are more sellers than buyers (meaning it’s a buyers’ market). In May 2021, the MSI was less than one month of supply for single-family homes and condos, indicating that the market strongly favors sellers.

Bay Area Market Update July 2021
Days of the Market by County Bay Area Market Update July 2021

Summary

In summary, the high demand and low supply present in the East Bay have driven home prices up. Inventory will likely remain low this year with the sustained high demand in the area. Overall, the housing market has shown its value through the pandemic and remains one of the most valuable asset classes. The data show that housing has remained consistently strong throughout this period. 

We expect that the number of new listings will increase in the summer months. The current market conditions, however, can withstand a high number of new listings coming to market, and more sellers may also enter the market to capitalize on the high buyer demand. As we navigate the summer season, we expect the high demand to continue, and new houses on the market to be sold quickly.

As always, we remain 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 in this newsletter. We welcome you to contact us with any questions about the current market or to request an evaluation of your home or condo. Call us today! (925) 415-0835

Our team is committed to continuing to serve all your real estate needs while incorporating safety protocol to protect all of our loved ones.

In addition, as your local real estate experts, we feel it’s our duty to give you, our valued client, all the information you need to better understand our local real estate market. Whether you’re buying or selling, we want to make sure you have the best, most pertinent information, so we’ve put together this monthly analysis breaking down specifics about the market.

As we all navigate this together, please don’t hesitate to reach out to us with any questions or concerns. We’re here to support you.

Rama Mehra, DRE #01463395

Welcome to our June newsletter, where we’ll dive into residential real estate trends in the Greater Bay Area and across the nation. This month, we examine how the money supply is affecting asset price valuations and interest rates. 

The increase of money supply started accelerating around 2000 and, since that time, with the exception of the past couple of months, inflation has been extremely low. At the same time, asset prices, like stocks and real estate, have risen considerably. Low inflation suggests that consumers are saving more than they are spending on goods and services. With more money in circulation, interest rates drop. In fact, mortgage rates are hovering near all-time lows, just under 3%. 

With low-interest rates, more money in circulation, and fewer opportunities to spend money over the last year, homebuyers have flooded the market—and we expect this high housing demand to continue for at least the next 12 months. In addition, most potential buyers are flush with cash and have high credit scores, which has created an incredibly competitive environment and caused housing inventory to drop to historically low levels.

As we navigate this period of high buyer demand and low supply, we remain committed to providing you with the most current market information so you feel supported and informed in your buying and selling decisions. In this month’s newsletter, we cover the following:

Be the first to receive our newsletter. Sign up here.


Key Topics and Trends in June

The past year saw the highest sales volume and fastest price increases on record, nationally. We want to take a closer look at this massive buyer demand, and the ways in which it’s affecting the housing market. 

At the start of the pandemic, the housing market looked incredibly unstable: buyers and sellers were pulling out of deals, sales volume and inventory dropped, and unemployment skyrocketed. The uncertainty around the housing market was short-lived, however, and it became clear that homes were going to have a remarkable year.

The sheer number of highly qualified buyers who were entering the market seemed to come out of nowhere, and we were left wondering where all this money had been hiding before the pandemic. As we dug into the data, we saw that the money was out there, but people were simply not spending it. 

The graph below shows the money supply (M2) in the United States and the velocity of money, which measures how much consumers and businesses are spending (higher velocity equates to more spending, and vice versa). When the money supply and velocity increase, we tend to see inflationary periods. As you can see from the chart, however, the money supply increased dramatically (3x) over the last 20 years, while velocity decreased. In other words, more money has not driven the equivalent production of more goods and services, implying that consumers are saving and/or investing. Over the last year, the money supply has increased even more because of COVID-19 relief and the Federal Reserve’s monetary policies, putting even more money in consumers’ pockets. 

Greater Bay Area Market Update June 2021 Money Supply and Velocity

Using the S&P 500 and the housing market as examples, we can see the effect that the money supply has had, especially over the last year. The S&P 500 increased around 54% from March 2020 to March 2021, and the Case-Shiller 20-City Home Price Index, which measures the aggregate home prices in the 20 largest metro areas, rose 14%. Stock prices benefit considerably from increased money supply due to their liquidity and fungibility. Home prices rose substantially, especially considering their illiquid nature. Notably, we aren’t seeing a transfer of money out of stocks and into housing; rather, we’re seeing cash going into both asset classes, which means that there is a large amount of money in circulation.

Greater Bay Area Market Update June 2021 Home and Stock Prices in the United States

An increase in money supply also tends to lower interest rates. As shown in the chart below, mortgage rates have definitely declined over the last 20 years, and we’re currently hovering at historically low rates, which increases housing affordability despite the rising prices.

Greater Bay Area Market Update June 2021 30-Year Fixed Interest Rate

We don’t expect the same level of buying in 2021 that we saw in 2020, mostly because of the home undersupply issue. The environment, therefore, is right for demand to outpace supply in 2021. We’ve reached near-perfect conditions for buyers—high credit scores, large down payments, and low-rate financing—so we anticipate a competitive landscape for buyers throughout the year. 

While the market remains competitive for buyers, conditions are making it an exceptional time for homeowners to sell. Low inventory means sellers will receive multiple offers with fewer concessions. Because sellers are often selling one home and buying another, it’s essential that sellers work with the right agent to ensure the transition goes smoothly.


June Housing Market Updates
for the Greater Bay Area

During April 2021 in the Greater Bay Area, the median single-family home price rose to another all-time high. Year-over-year, Greater Bay Area prices increased considerably, up 36%.

Greater Bay Area Median Home Price Market Update June 2021
Greater Bay Area Median Home Price Changes Market Update June 2021

The median price in all four regions of the Greater Bay Area rose to all-time highs in April. The sustained price appreciation emphasizes the demand in the area.

Greater Bay Region Median Prices - Singe Family Homes Market Update June 2021
Greater Bay Area Single Family Home Prices by County Market Update June 2021

As you can see in the graphs below, median condo prices were mixed across regions and counties. San Francisco condo prices declined month-over-month, while the rest of the Bay regions rose slightly.

Greater Bay Region Median Prices of Condos Market Update June 2021
Greater Bay Area Condo Prices by County Market Update June 2021

Single-family home inventory began to climb over the last three months, which is expected in the spring/summer season when more sellers typically come to market. In 2020, fewer people wanted to leave the Greater Bay Area, and more people wanted to move to the area. This trend drove inventory down to record low levels. New listings, therefore, improve the current market conditions. In April 2021, the total inventory in the Greater Bay Area had slightly more homes for sale than it did in April 2020, which is a positive development for the housing market. The sustained low inventory will likely cause prices to appreciate throughout 2021.

North Bay Inventory Single Family Homes Market Update June 2021
East Bay Inventory of Single Family Homes Market Update June 2021
Silicon Valley Inventory of Single Family Homes Market Update June 2021
San Francisco Inventory of Single Family Homes Market Update June 2021

Both single-family homes and condos are selling quickly. As we will see, the pace of sales has contributed to the low Months of Supply Inventory (MSI) over the past several months.

Great Bay Area Days on Market June 2021
Days on Market by County June 2021

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), which indicates a balanced market. An MSI lower than three means that there are more buyers than sellers on the market (meaning it’s a sellers’ market), while a higher MSI means there are more sellers than buyers (meaning it’s a buyers’ market). In April 2021, the MSI remained below two months of supply for single-family homes, indicating that the market strongly favors sellers.

Greater Bay Area Months of Supply Inventory June 2021
Months of Supply Inventory by County in Greater Bay Area June 2021

Summary

In summary, the high demand and low supply present in the Greater Bay Area have driven home prices up. Inventory will likely remain low this year with the sustained high demand in the area, potentially lifting prices higher. Overall, the housing market has shown its value through the pandemic and remains one of the most valuable asset classes. The data show that housing has remained consistently strong throughout this period. 

We expect that the number of new listings will increase in the summer months.The current market conditions can withstand a high number of new listings coming to market, and more sellers may enter the market to capitalize on the high buyer demand. As we navigate the spring season, we expect the high demand to continue, and new houses on the market to be sold quickly.

As always, we remain 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 in this newsletter. We welcome you to contact us with any questions about the current market or to request an evaluation of your home or condo.

Our team is committed to continuing to serve all your real estate needs while incorporating safety protocol to protect all of our loved ones.

In addition, as your local real estate experts, we feel it’s our duty to give you, our valued client, all the information you need to better understand our local real estate market. Whether you’re buying or selling, we want to make sure you have the best, most pertinent information, so we’ve put together this monthly analysis breaking down specifics about the market.

As we all navigate this together, please don’t hesitate to reach out to us with any questions or concerns. We’re here to support you.

Rama Mehra, DRE #01463395

Welcome to our May newsletter, where we dive into national and local residential real estate trends. This month, we examine how the housing undersupply is increasing home prices and paving the way toward a more balanced market. We also discuss the sharp decrease in mortgage rates and the state of employment, which is historically one of the leading indicators of home valuations.

Currently, the housing supply is so low that demand far outpaces the number of homes on the market. Freddie Mac estimates that the United States is about 4 million homes short of meeting buyer demand. The housing shortage compounds when potential home sellers decide to stay out of the market because they feel they won’t be able to find a home to buy after they sell. Home builders, who have been slow to ramp up production after the 2008 crash, are drastically increasing new construction because they want to capitalize on the sustained demand for housing.

We expect relative housing demand to remain high over the next 12 months at the very least. New homes take time to build and will not come to market at the rate necessary to balance it. In March 2021, U.S. home builders started constructing homes at a seasonally adjusted annual rate of 1.74 million, up 37% compared to March 2020. New construction will eventually alleviate some of the shortage, but housing will remain undersupplied for months, if not years, to come. 

As we navigate this period of high buyer demand and low supply, we remain committed to providing you with the most current market information so you feel supported and informed in your buying and selling decisions. 

In this month’s newsletter, we cover the following:

Be the first to receive our newsletter. Sign up here.


Key Topics and Trends in May

Last year, many individuals and families experienced feast or famine. Those lucky enough to stay financially unaffected by the pandemic were likely saving or investing more than expected, accruing more and more capital. At the same time, interest rates plummeted to hyperlow levels as millennials, the largest living adult generation, grew to prime homeownership age. With these factors combined, we saw the demand for homes skyrocket in 2020. The near-universal ability to work remotely changed motivations for moving. Relocating for a job or to be closer to the office was no longer necessary. However, due to the unique requirements of working from home, people began wanting more space. As a result, single-family home demand rose steeply, while condo demand lagged. As sellers listed condos, they bought single-family homes, driving single-family home inventory down. As the supply of homes declined, fewer new listings came to market—in part, because of the difficulty of finding a new home after selling.

One reason for the housing shortage has been the understandable hesitancy of builders to construct new properties since the 2006–2008 housing crash; however, this lack of new construction means that there aren’t enough homes on the market to meet the unexpectedly high demand. Over the last six months, new construction has ramped up considerably to an annualized 1.74 million new homes. The largest gains in new-home construction occurred in the Midwest, where housing starts more than doubled on a monthly basis. The Northeast and the South also saw faster rates of new-home construction, while home-building activity slowed in the West. Additionally, established metro areas lack land upon which to build, so adding meaningfully to supply through new construction can be challenging or fully unattainable.  

As you can see from the chart below, new construction is now in the pre-housing bubble levels as home builders react to the surge in home prices and demand.

New Housing Construction Q1 2000 to Q1 2021

Mortgage rates rose significantly, slightly over 50 basis points, from January 2021 to mid-April 2021, but dropped sharply back below 3% in the second half of April. Although interest rates are still expected to rise to 3.7% over the course of the year, according to the Mortgage Bankers Association, the mortgage rate drop shows the non-linear path that rates will likely take. Because the mortgage rate affects affordability, the current low rate will only increase demand in the short term.

30 Year Fixed Interest Rate Greater Bay Area Market Update May 2021

High unemployment is one of the strongest predictors of falling home prices over a two-year period. The chart below illustrates the employment cost of a recession. Total employment tends to grow at a fairly consistent rate during economic expansions. The green line illustrates the expected level of employment had the pandemic never happened. As that green line shows, we are nearly 11 million jobs below where employment was expected to be after the first quarter of 2021. Twice as many workers are currently unemployed than in February 2020. The initial pain of unemployment has been dampened by government relief. Mortgages in forbearance and foreclosures are low, as are delinquencies in credit card debt. However, we will continue to monitor unemployment in order to gauge future market conditions. 

Employment Level in the United States March 2011 to March 2021

Although we don’t expect the same level of buying in 2021 that we saw in 2020, the environment is right for demand to outpace supply in 2021. In the short term, we may even see a demand spike as potential buyers try to purchase before rates rise higher. As a result, we anticipate a competitive landscape for buyers over the course of this year. 

While the market remains competitive for buyers, conditions are making it an exceptional time for homeowners to sell. Low inventory means multiple offers and fewer concessions. Because sellers are often selling one home and buying another, it is essential that sellers work with the right agent to ensure the transition goes smoothly.

May Housing Market Updates for the Greater Bay Area

During March 2021 in the Greater Bay Area, the median single-family home price rose to another all-time high. Year-over-year, Greater Bay Area prices increased considerably, up 21%.

Greater Bay Area Median Home Price May 2021

Prices in every region and county were up in March. The North Bay, East Bay, and Silicon Valley reached all-time highs in March. San Francisco is still slightly off peak prices for single-family homes. The sustained price appreciation emphasizes the demand in the area.

Greater Bay Area Median Prices Single Family Homes May 2021

As you can see in the graphs below, median condo prices were mixed across regions and counties. North Bay condo prices declined month-over-month, while the rest of the Bay regions rose slightly.

Greater Bay Area Median Prices Condos May 2021
Greater Bay Area Condo Prices by County May 2021

Single-family home inventory began to climb over the last two months in anticipation of the spring season, when more sellers typically come to market. In 2020, fewer people wanted to leave the Bay Area and more people wanted to move there, which drove inventory down to record low levels. New listings, therefore, improve the current market conditions. Since the start of 2021, more homes than usual have come to market, causing inventory to rise. However, inventory is still low, especially in relation to demand, and the sustained low inventory will likely cause prices to appreciate throughout 2021.

East Bay Inventory Single Family Homes May 2021
Days on the Market by County May 2021

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), which indicates a balanced market. An MSI lower than three means that there are more buyers than sellers on the market (that is, it is a sellers’ market), while a higher MSI means there are more sellers than buyers (that is, it is a buyers’ market). In March 2021, the MSI fell below two months of supply for single-family homes, indicating that the market strongly favors sellers.

Greater Bay Area Months of Supply Inventory May 2021
Months of Supply Inventory by County March 2021

Summary

In summary, the high demand and low supply present in the Greater Bay Area have driven home price appreciation. Inventory will likely remain low this year 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 most valuable asset classes. The data show that housing has remained consistently strong throughout this period. 

We anticipate new listings to accelerate into the summer months. The current market conditions could withstand a high number of new listings coming to market, and more sellers could enter the market to capitalize on the high buyer demand. As we enter the spring season, we expect the high demand to continue, and new houses on the market to be sold quickly.

As always, we remain 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’ve shared in this newsletter. We welcome you to contact us with any questions about the current market or to request an evaluation of your home or condo.

Click here for the January market update.

Welcome to our November market update for East Bay. This month, we take a look at the ways in which current U.S. economic conditions are affecting local, state, and national real estate markets. In particular, we examine some crucial economic indicators, such as third-quarter Real Gross Domestic Product (GDP)1 and new housing permits. Although California’s COVID-19 cases remain fewer per capita than those of most other states, cases are rising in California, 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 make our way through the autumn months, we continue to provide you with the most up-to-date market information so that you feel supported and informed in your buying and selling decisions. 

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In this month’s newsletter, we cover the following:

1Real GDP is inflation-adjusted GDP. All references to GDP use Real GDP figures.

Key Topics and Trends in November

In this issue, we dive into some key economic indicators that tend to affect long-term home prices. GDP and employment together explain much of the economic climate and typically trend with housing prices, but they do not explain the current rise in home prices. We will still go over the ins and outs of these indicators, however, because they have received so much press and may affect home prices in the future.

The U.S. Bureau of Economic Analysis reported a 7.4% third-quarter gain to GDP, which is the broadest measure of goods and services produced. During the second quarter of 2020, GDP dropped 9.5% quarter-over-quarter. The second-quarter drop was so sharp that the third-quarter bounce was expected. The long-term effects of the initial drop, however, have yet to be seen. Economists expect lower fourth-quarter GDP growth, which will not make up all the ground lost in the second quarter. Ultimately, the loss in GDP will likely be permanent. 

GDP and Output Loss


The chart below illustrates the cost of a recession. While it depicts U.S. GDP from 2005 to present, it illustrates economic patterns that occur in all recessions. GDP tends to grow at a fairly consistent rate during economic expansions. The dotted line in the chart represents the predicted GDP had the 2008 financial crisis never happened, and the green line illustrates the expected third-quarter 2020 GDP had the pandemic never happened. As that green line shows, we are 40% below where GDP was expected to be this fourth quarter. In other words, we are still underwater despite the impressive third-quarter 2020 increase in GDP.

GDP and Output Loss East Bay November 2020 Market Update

As of October, the Bureau of Labor Statistics reported that 11.1 million workers remained unemployed, which is an unemployment rate of 6.9%. However, the number of out-of-work individuals collecting unemployment insurance has dropped to 7.3 million. In September, the number of unemployed workers and the number of those collecting unemployment insurance were roughly the same. The large number of unemployed workers without government assistance will affect the rental market first, because those working in the hospitality and leisure industries have been most affected by unemployment, and those individuals tend to be renters rather than homeowners.  

Employment Rate

The employment level does matter in the long term, particularly for the housing market. Disposable personal income and savings, which both dropped in the third quarter, are two of the most important factors when considering whether or not to buy a home. As a result, we will continue to monitor these numbers.

Total Nonfarm Private Payroll Employment in East Bay November 2020 Market Update

Existing and New Homes Trend

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. Months of Supply Inventory is an important marker of real estate market health because it measures how many months it would take for all current homes for sale on the market to sell at the current rate of sales. Low Months of Supply Inventory means that there is a high demand for homes that will push prices higher more rapidly. 

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 2006. 

New Housing Building Permits East Bay November 2020 Market Update

Rise of Housing Demand and House Prices

The rise in housing demand and price under the current economic scenario speaks to three factors: (1) the asymmetric effect of the pandemic on personal income; (2) monetary policy (low interest rates); and (3) buyer preference. 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.

November Housing Market Updates for the East Bay

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.

East Bay Median Home Prices November 2020 Market Update

Year-over-year, median single-family home and condo prices were substantially up in both countries.

East Bay Median Price Changes November 2020 Market Update
Condo Prices by County East Bay November 2020 Market Update

Single-Family Homes and Condos Inventory

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. 

The number of condos on the market has increased fairly consistently since May. The demand for condos and new condos coming to market have stayed about the same each month since May with slightly more condos coming to market than bought, which has caused inventory to rise. Condo inventory is 14% higher than last year. However, demand for condos is still high.

East Bay Inventory

East Bay Inventory November 2020 Market Update

Single-family homes 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.

East Bay Home Sales November 2020 Market Update

East Bay Days of Market

The Days on Market (DOM) is lower year-over-year. Months of supply inventory has continued to stay low because of the inventory decline and faster pace of sales.

East Bay Inventory Days on Market November 2020 Market Update
Days on Market by County East Bay November 2020 Market Update

East Bay Months of Supply Inventory

We can use Months of Supply Inventory (MSI) as a metric to judge whether the market favors buyers or sellers. The average MSI is three months in California, which indicates a balanced market. An MSI lower than three means that buyers dominate the market and there are relatively few sellers (i.e., it’s a sellers’ market), while a higher MSI means there are more sellers than buyers (i.e., it’s a buyers’ market). The MSI remained at 0.8 for single-family homes and 1.9 for condos, both favoring sellers.

East Bay Months of Supply Inventory November 2020 Market Update
Months of Supply Inventory by County East Bay November 2020 Market Update

East Bay Market Update Summary

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. 

We anticipate new listings to slow through the holiday months. Condo prices will likely remain stable with no outsized gains or losses through the winter months. The autumn/winter season tends to see a slowdown in activity, although we may see a new trend this year 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 are happy to discuss the information we have shared in this newsletter. We welcome you to contact us with any questions about the current market or to request an evaluation of your home or condo.

Read about the December market update here.

Call us today at 925-415-0835 so we can start planning for your home goals!

Welcome to our December market update. This month, we take a look at the ways in which the U.S. housing market has behaved during the pandemic. We do so by examining the Case-Shiller 20-City Composite Index, which tracks property values across 20 different cities and indicates the health of the overall economy.

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As of December 7, many counties in California have 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 make our way through the holiday months, we continue to provide you with the most up-to-date market information so that you feel supported and informed in your buying and selling decisions. 

In this month’s newsletter, we cover the following:

Key Topics and Trends in December

As we enter the final month of 2020, 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 below, home prices have moved significantly higher over a short period of time, reaching record highs. 

Case-Shiller 20-City Home Price Index

Case-Shiller 20-City Home Price Index East Bay December 2020 Market Update

We can couple the price information with the Months of Supply Inventory (MSI), which quantifies the relationship between supply and demand. More specifically, MSI refers to the number of months it would take for the current inventory of homes on the market to sell given the current sales pace. Historically, six months of supply is associated with moderate price appreciation, and a lower MSI tends to push prices up more rapidly, according to the National Association of Realtors. 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 three to four 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. 

Months of Supply Inventory

Months of Supply Inventory East Bay December 2020 Market Update

President-elect Joe Biden released a $640 billion housing plan, part of which aims to make homeownership more accessible to mid- and low-income Americans. Some ideas in the plan include giving a tax credit up to $15,000 at the time of purchase and offering down payment assistance to teachers, first responders, and other essential service workers. Although this will certainly help some people, the most desirable properties will likely remain within reach only for upper-income earners. Additionally, if new affordable housing is not built, prices could rise for the currently more affordable homes. We will keep an eye on the implementation of these policies to gauge their efficacy. 

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.

December Housing Market Updates for the East Bay

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.

East Bay Median Home Prices

East Bay Median Home Prices East Bay December 2020 Market Update

Year-over-year, median single-family home and condo prices were up substantially in both counties.

East Bay Median Price Changes

East Bay Median Price Changes East Bay December 2020 Market Update

As you can see in the graph below, median condo prices were substantially higher in both counties. 

Condo Prices by County

Condo Prices by County East Bay December 2020 Market Update

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. 

Single-Family Homes Inventory

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, causing pent-up demand. Since May, sales have increased and are still near their highest levels 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 well into autumn. Single-family home inventory is noticeably lower, and is likely to decline as we make our way into the winter months. 

Single-Family Homes Inventory  East Bay December 2020 Market Update

Condos Inventory

The number of condos on the market has climbed at a steady pace since May. New condos coming to market have outpaced sales in every month this year, causing inventory to increase. Sales have remained high and steady but have not fully offset new condos coming to market. In October, condo inventory was 16% higher than it was last year.

Condos Inventory East Bay December 2020 Market Update

Days on Market

As mentioned earlier, we continue to see the Days on Market (DOM) fall due to rising demand and speedier processing through technological advances. The pace of sales affects MSI and has contributed to the low MSI over the past several months.

East Bay Days on Market December 2020 Market Update
Days on Market by County East Bay December 2020 Market Update

Months of Supply Inventory

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 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 remains below two for both single-family homes and condos, which means that both markets favor sellers.

East Bay Months of Supply Inventory December 2020 Market Update
Months of Supply Inventory by County

Summary

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, and fewer sellers will likely come to market, potentially lifting prices higher. 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. The data show that housing has remained consistently strong through this period. 

We anticipate new listings to slow through the holiday months. Condo prices will likely remain stable with no outsized gains or losses through the winter months. The autumn/winter season tends to see a slowdown in activity, although we may see a new trend this year 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 are happy to discuss the information we have shared in this newsletter. We welcome you to contact us with any questions about the current market or to request an evaluation of your home or condo.

Read the January 2021 market update here.

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