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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, 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 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

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. 

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

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 January Market Update. This month, we cover the state of employment in the United States and the likelihood of meaningful stimulus. We also dive into how the Democratic Party’s majority control over both chambers of Congress and the White House could affect asset prices and interest rates.


Most of California (around 98% by population) is under a stay-at-home order due to COVID-19, and the United States as a whole is seeing new peaks every day. With the approval of several vaccines, we finally have a glimmer of hope to move out of the pandemic. However, we know that transmission mitigation measures will still be necessary through 2021 at least. The pandemic has substantially raised demand for housing, and we suspect that demand will continue through this year. Mortgage rates remain at all-time lows, and buyers are devoting more of their total spending to housing costs. 

As we enter the new year, we continue to provide you with the most up-to-date market information so that you feel supported and informed in your buying and selling decisions. 

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

Key Topics and Trends in January

According to the ADP private payrolls, the U.S. lost 123,000 jobs in December 2020, marking the first contraction since April. Economists predicted an increase of around 60,000 jobs in December. However, they did not anticipate larger companies, especially in leisure and hospitality, laying off employees due to reimplementation of stricter COVID-19 restrictions.

ADP Nonfarm Employment East Bay January 2021 Market Update

US Employment Recovery Path

Data from the Bureau of Labor Statistics differs in the exact numbers but shows the obvious deceleration in employment growth. As time passes, more and more jobs will be permanently lost, likely with real long-term economic impact: fewer people interacting in the economy usually indicates less buying, which trickles into less production, which trickles into fewer workers needed, leading to more unemployed workers. 

US Employment Recovery Path East Bay January 2021 Market Update

Job growth is one of the clearest indicators of economic health, so the December jobs contraction underscores a slowing of the recovery and the need for government stimulus. Under the incoming presidential administration, government stimulus is far more likely but will take some time to implement. With aid, businesses will be able to continue operating and will likely be able to hire significant numbers of employees back, setting the recovery back on course.

To help struggling businesses and people, the government will have to spend significant amounts of money. Heavy fiscal spending is often associated with higher inflation. Currently, inflation is around 1.2% (the Federal Reserve targets 2%), and with the expected increase in government spending, the expected inflation will rise as well. Ultimately, money today is worth more than money in the future. Not only can you buy more today, but real interest rates (inflation-adjusted interest rates) will be lower as well, making a home bought today cost less than its future price. 

Mortgage Rate

For example, the average 30-year mortgage rate is 2.67%, and if the inflation rate were 2%, the real interest rate on the mortgage would be 0.67%.

Average 30-Year Fixed Mortgage Rate East Bay January 2021 Market Update

The financial circumstances on the individual level are highly variable, now more than ever. Those who have been unaffected (or even positively affected) financially are likely saving more money than ever. Strict COVID-19 restrictions have largely cut travel, dining, and entertainment expenses, allowing potential home owners to devote more of their income toward buying a home that they love. With historically low mortgage rates and an expected increase in inflation, it’s never been cheaper to finance a home.

Demand shows no sign of decline in the near term. Today, housing is one of the best investments one can make, as it has been historically.

January Housing Market Updates for the East Bay

The median single-family home rose to an all-time high in Contra Costa. Alameda was flat month-over-month but still near peak median price. Year-over-year, single-family home prices increased considerably, up 15% in Alameda and a massive 27% in Contra Costa. Inventory has continued to decline, as fewer homes have come to market and sales have remained high, contributing to the price increases.

East Bay Median Home Prices

East Bay Median Home Prices January 2021 Market Update

East Bay Median Price Changes

East Bay Median Price Changes January 2021 Market Update

Condo Prices by County

As you can see in the graph below, median condo prices were up across counties. Contra Costa had an exceptionally large year-over-year median price increase. 

Condo Prices by County East Bay January 2021 Market Update

Single-Family Homes Inventory

Single-family home inventory was lower through 2020 relative to 2019. Home sales climbed after the initial months of the pandemic (March through May). Generally, buyers and sellers left the market in April and May, causing pent-up demand. Since June, sales have increased and showed unseasonably high levels in November 2020 for both single-family homes and condos. Usually, we expect sales to decline in the autumn and winter months, but homes were selling at extremely high rates. We can attribute this to fewer holiday obligations in 2020, allowing more focus on homebuying. Single-family home inventory dropped in November due to unusually high sales numbers, and it is likely to decline further as we make our way through the winter months. 

East Bay Inventory - Single-Family Homes January 2021 Market Update

Condos Inventory

The number of condos on the market declined significantly in November. New condos coming to market outpaced sales every month in 2020 except for November, when sales inched higher than new supply. 

East Bay Inventory - Condos January 2021 Market Update

Days on Market

Days on Market (DOM) declined further for single-family homes over the last 12 months, but both single-family homes and condos spent far less time on the market in November 2020 than November 2019. As we will see, the pace of sales affects Months of Supply Inventory (MSI) and has contributed to the low MSI over the past several months.

East Bay Days on Market January 2021 Market Update
East Bay Days on Market by County January 2021 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 dropped below one for single-family homes, which firmly favors sellers. The MSI for condos fell 0.2 months to 1.6 months of supply, indicating a sellers’ market as well.

East Bay Months of Supply Inventory January 2021 Market Update
East Bay Months of Supply Inventory by County January 2021 Market Update

Summary

In summary, the high demand in the East Bay has sustained home prices. Inventory for single-family homes and condos will likely decline further into the new year, and fewer sellers will likely come to market, potentially lifting prices higher. Overall, the housing market has shown its resilience through the pandemic and remains one of the safest asset classes. The data show that housing has remained consistently strong through this period. 

We anticipate new listings to slow through the holiday months. The autumn/winter season tends to see a slowdown in activity, although we did see a new trend toward the end of 2020 with higher-than-normal sales.

As always, we remain committed to helping our clients achieve their current and future real estate goals. Our team of experienced professionals 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.

Looking for a realtor in the Bay Area? Call us today at 925-415-0835!

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