Overall, the housing market has shown significant price growth over the second quarter, showcasing the strength and stability of residential real estate. Year-over-year sales have also increased considerably through the summer months. As we enter fall, we believe the housing market is positioned for continued growth in both sales and price appreciation. Let’s take a look at how the local economy and real estate market are trending.
Economic Trends in October
Despite high rates of unemployment and an economic downturn, housing has held onto its value, particularly in the San Francisco Bay Area. Pandemic-induced economic impacts disproportionately affect workers without college degrees—individuals who were likely not in the housing market in the first place. And, as the Bay Area employs a high number of skilled workers with college degrees, its unemployment rate is lower than other areas of the United States, and its housing market is holding strong. Now, more than ever, the more highly skilled and educated a person is, the more likely they will be able to afford a home.
As we enter fall, we are uncertain whether or not federal stimulus aid for individuals and businesses affected by COVID will come before or after the election. The immediate risks to the housing market, however, are fairly low. The Mortgage Bankers Association’s (MBA) Research Institute for Housing America (RIHA) reports that, for the most part, homeowners were able to continue their mortgage payments; however, renters struggled to pay rent. This should come as no surprise; only 6% of homeowners reported collecting unemployment by the end of June, while the percentage of renters collecting unemployment was more than double that.
Despite our struggling economy, the housing market has maintained its value, and homeowners have navigated this uncertain time well.
October Housing Market
Single-family homes had the largest year-over-year gain of 2020 with a median home price of $1.03 million in Alameda and $805,000 in Contra Costa. Year-over-year, median single-family home prices were up 14% in Alameda and 20% in Contra Costa. Total inventory decreased in August, as the number of homes under contract rose for both single-family homes while there were more than 1000 fewer homes for sale than this time last year.
The Days on Market (DOM) trended down as buying activity increased. Single-family homes under contract were up 22% showing the high demand in the area. The pace of sales contributed to the reduction of Months of Supply Inventory.
We can look to Months of Supply Inventory (MSI)—the measure of how many months it would take for all current homes for sale on the market to sell at the current rate of sales—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 are dominating the market and there are relatively few sellers (a sellers’ market), while a higher MSI means there are more sellers than buyers (a buyers’ market). The MSI for single-family homes is typically below three, but an MSI of 0.8 is quite low, heavily favoring sellers.
In summary, we can see that MSI still favors sellers. The single-family home market is heavily undersupplied, a byproduct of the desirability of the East Bay. Overall, the housing market has shown its resilience through the pandemic and remains one of the safest asset classes. As we digest seemingly endless stories on negative economic data, we are pleased to report that home ownership has offered a sense of stability.
Moving forward, we anticipate home prices will likely remain stable. The fall/winter season tends to see a slowdown in activity, as well, although this year we may see a new trend.
As the market changes, we will continue to provide the most up-to-date housing information to support your buying and selling decisions. At Arrive Real Estate Group, we remain committed to helping our clients achieve their current and future real estate goals. Please contact us with any questions about the current market or to request an evaluation of your home.