The 2019 Economy and Housing Market in Review
In 2019, the national economy grew at a steady, healthy pace. Employment remained near all-time lows, and gross domestic product (GDP), a measure of all goods and services produced during the year, grew by more than 2%. In spite of some potentially negative economic events, such as the trade war with China, the U.S. economy remained strong. The wage growth from October 2018 to October 2019 tied with the growth from April 2008 to April 2009 for the largest year-over-year increase in the past decade. The country also added 312,000 jobs in December, nearly doubling November’s job growth of 176,000.
After rising in 2018, last year’s mortgage rates returned to historic lows. The Federal Reserve surprised a lot of people by reducing the federal funds rate three times in 2019 in order to maintain a thriving economy. The federal funds rate, which indirectly impacts a variety of consumer interest rates including credit cards and car loans, significantly affected mortgage rates in 2019.
Monthly mortgages decreased by over 11% in the Greater Bay Area, benefiting both buyers and sellers in 2019.
Although real estate started slow in 2019, by June, home prices in the East Bay hit their yearly peak, accelerated by falling rates. In the latter half of the year, home prices pulled back from their spring highs while interest rates fell even lower, increasing affordability and allowing the number of overall sales to finish up by double digits compared to 2018.
A strong economy and greater affordability nudged year-over-year single-family home prices up in 2019, even though condo prices fell, indicating that buyers are paying a premium for detached residences.
An increase in sales impacted the months supply of inventory, a measure of how many months it would take to sell all the active listings on the market at the current rate of sales. In 2019, inventory in the East Bay plummeted to extremely low levels for both single-family homes and condos. In December, a month that usually has seasonally higher levels of supply due to slow holiday sales, supply tightened further.
Last but not least, in 2019 properties moved much slower at the beginning of the year due to an increase in rates but sold with increasing speed as the year progressed. Days on Market (DoM), the measure of how many days it takes for a seller to accept an offer from the first day of listing, started the year with homes taking twice as long to sell compared to the previous year. It took until the end of the year for the market to reverse course in Alameda, while in Contra Costa DoM remained unchanged from the prior year. This should be welcomed news for buyers especially in the fast-moving markets of Alameda and Contra Costa.
In summary, the 2019 housing market in the East Bay shifted further in favor of sellers. Higher median prices, less supply, and a faster-moving market encouraged sellers to ask higher prices and offer fewer concessions. The silver lining for buyers is that lower interest rates offset some affordability issues for higher-priced homes. The market also moved slower and gave buyers more time to make their purchasing decisions.