HAPPY NEW YEAR FOR REAL ESTATE?

Time will tell, as it always does, no one’s crystal ball works perfectly every year. But analysis of current conditions and data would lend one to conclude…more of the same? The answer is sort of, but not really. Yes, inventory will remain tight. This country and California specifically, has a tremendous housing shortage. A recent Wall Street Journal article criticizing the “old, vintage, good bones” theory, surmised that 700,000 new homes would need to be built for at least the next 3 years, to truly take the pressure off the resale market. That being said, inflation is at its highest in years, which has already begun to increase interest rates, and more increases are almost certain. The actual numbers, highlighted in the next section, do indeed reflect a slight cooling in volume, but not in price. That’s the conundrum that buyers and sellers will face, finding the right price. Nothing will slow a market faster than greed and unemployment. We have a bit of both. The Great American walk off may be voluntary, but it’s still unemployment. As far as greed, buyers will say enough, at some point. The pandemic will likely become endemic, but herd immunity is far from certain, with the many variants. So this will continue to be a real time disrupter. Real estate always-continues on because of necessity of housing, making it different from other areas of investment. The adage of doing your homework and seeking competent counsel remains in play for 2022.

WHAT ARE THE ACTUAL NUMBERS?

The latest complete month available is November 2021. All numbers are year over year comparisons to November 2020. The total number of sales was 3,181, a slight decline of 3.5%, however the median price for all sales was $919,000, a 14.9% increase from the previous year. The resale market rose 17.3% to $1,032,000, but sales dipped 3.2% to 1,977. Condos had the greatest appreciation coming in with a median price of $650,000, a 19.5% rise. Sales were also off with a total of 893, a 4.3% drop. New homes were fairly static, the median price $941,000, up 0.2%, and sales off 3.1% with 311. The average monthly payment rose significantly to $3,939 from $3,464, a reflection of both higher rates and prices.

WHERE WILL TECH SHAKE UP THE MARKET?

1) Mortgage approvals will speed up. 2) As a result of #1, appraisals are agonizingly slow as there are not enough appraisers, however technology will continue to streamline virtual or “desktop” appraisals. Fannie Mae and Freddie Mac have already signed on. 3) Cash is king and “rich uncle” companies are stepping in to speed up acceptance times. (Home Ribbon, Unlock, and Better.com to name a few.) Remember nothing is for free, so check their fees and repayment times to obtain your own financing after close of escrow. 4) NO BLOCKCHAIN type products for now—bitcoin and other crypto currencies currently not in use. Digital assets are very different from brick and mortar. Housing continues to be quite unique in that respect. 

HOUSING APPEARS POISED FOR STRONG 2021, REST OF REAL ESTATE A MIXED BAG

 Wow, what amazing finish to one of our most difficult years ever, in terms of worry and hardship; but those who had the nerves to pursue housing were rewarded on both the seller and buyer side. The result were some staggering rebound sales numbers, the second half of 2020, (to be given in the next section), that have set the stage for an equally strong 2021. According to DataQuick/CoreLogic, the first half of 2020 plunged on average 24% in 6 So Cal counties and climbed 51%, the second half which is the greatest turnaround in 33 years. Historically, second half rebounds are a precursor for a strong year following— so far that appears to be the case. According to Jonathan Lasner’s Bubble watch algorithm, a scale of 1-5, 5 being huge bubble, we are currently at a 1. Good news for sellers, but better for buyers afraid of buying at the top of an over inflated market. These types of rebounds generally have a beneficial advantage for purchasing power, the beginning of 2021 giving buyers 2% greater buying power. 

(This according to projections by UCLA’s Allen Matkins/Anderson economists.). On the commercial side, office space is holding even, retail has slipped significantly, and the true bright spots are multiple family units and industrial. Particularly warehouse and manufacturing or assembly and distribution as Californian’s change how they pandemic shop, reflecting a massive shift to online. 

WHAT WERE THE ACTUAL NUMBERS?

Unbelievable numbers! Total number of sales for December, the last complete month numbers available, was 3,611, which is an increase of 17.7% over December 2019. (All numbers reflect year over year for the same month.). Single-family resale reported 2,254, up just over 30 %. Condos came in at 1,021, a very big number for condos, up 26%. New homes, always lagging had 336 sales, the only figure in negative territory, it represented a 36% drop. Resale median price rose 12.5% to $890,000; Condos also increased 3.7% to $544,000; New homes barely noticeable at 1.4% rise to $882,000; Finally the overall median price for all homes was $795,000 up 8.2%. Average monthly payment was virtually unchanged, but it did go down slightly from $3,485 to $3,445.

DON’T EXPECT BIG FORECLOSURE MARKET ANY TIME SOON

The top five cities in OC for notices of default, hardly constitute a worrisome scenario. Number one had an NOD ratio of 1 in 1,261 homes; number 5 was 1 in 5,273. With forbearances still active and COVID relief packages still being actively sought by Congress, most lenders may be reticent to file NOD’s unless a last resort. Realtors are here to help you navigate during this extraordinary time. 

STATE’S OWNERSHIP RATE HITS AN 8-YEAR HIGH...OR...SOUTHERN CALIFORNIA SALES PLUMMET TO 11-YEAR LOW

Are you an optimist or pessimist or realist? How you view things may decide which headline you believe is the most telling of things to come for the SoCal real estate marketplace. CoreLogic released final figures for January and that figure was 12,665 homes and condos changed hands in January 2019 — a 17.1% decline from January a year ago. These figures for Southern California from Ventura down to San Diego. However, 2018 ended with more SoCal citizens owning and living in their own homes than in the past 8 years. Low interest rates compensated for rising prices in the very best of ways, before last year saw rates rise rapidly and often, ending the year with rate hikes left buyers cold. However, if you only read the papers, you are under the impression, no doubt, that rates haven’t budged, because local columnist have been remiss to report that rates have dropped over a point. YES!! INTEREST RATES ARE BACK IN THE 4’S!! (Remember, this column never reports active rates because they can change without notice. This meant to be informational only.) In fact, 56% are owning their abodes here in the sunshine state. Yes, we are still behind many other states in that statistic. However, if you take similar metropolis areas and compare population dense areas, it will be about the same. Shame on newspapers not letting the public know that a little affordability came back with rates dropping. Many economists predict that rates will move little this first six months of2019.