September 2021 Market Update

This market update covers the cities of Alameda, Albany, Emeryville, Hayward, Oakland, San Leandro, and San Lorenzo

Welcome to the first of my monthly market updates. In this blog, it is my goal to bring some clarity to the current state of real estate markets, and to try to discuss how I believe current events could cause increases in demand or supply of both homes and commercial properties. As such, I will be discussing the impact of interest rates and overall financial markets, the movement of people in and out of key East Bay real estate markets, the volatility of property prices, and the length of time properties are sitting on the market.

It is no surprise that the years 2020 and 2021 have been both extremely turbulent and active times in the real estate market. Under the influence of the pandemic and the many efforts of the US and California governments to advert a recession, markets in residential and commercial properties have been trending with higher prices as people relocate and move from urban centers to suburban centers. Federal Reserve Secretary Jerome Powell has been managing the economic recovery these last 17 months as best as possible, issuing several rounds of fiscal stimulus to regular American households as well as the purchase of corporate debt instruments to try to keep interest rates in the private market low. Another factor that is currently impacting the market is the moratorium on home evictions, which has primarily favored renters to the chagrin of landlords. A recent decision by the Supreme Court of the United States has invalidated the eviction moratorium implemented by the Center for Disease Control and may finally tip the favor to landlords this October. Finally, the Federal Reserve has also kept interest rates low and as such from a consumer perspective, interest rates in mortgages are the lowest they have been since the 2008 recession.

Home Interest Rates since April

Despite heavy maneuvering by the Federal Reserve in the money supply, the threat of short term inflation has impacted many economic sectors leading to an uneven recovery. Real Estate is one of the sectors which have felt much of that uneven recovery because home prices in the Bay Area have been increasing at rates previously unseen. Having monitored the average prices of Bay Area homes since 2004, I know the Bay is home to one of the expensive property markets in the United States. It is not uncommon to see single family home prices 3x and up when compared to other parts of the nation. Most of the clients that I have worked with recently have had to offer $65-100 thousand more over asking price to have their offers considered and often time the sellers will counter offer with higher prices. These factors are working together to continue to push prices higher. The average home price in the cities that I cover in this update is $916,132.00. This is despite the relocation of families and workers from urban centers to suburban cities within California.

Aside from the difference in pricing fluctuations, the end of the summer is marking a seasonal change in the market supply and demand of houses, shifting from primarily a demand driven cycle to a supply driven cycle. This shift is evident in the number of new homes that came into the market in August vs. the number of homes that were sold during that same period.

The Take Away

For buyers that want to enter the Bay Area market and need financing, now is the time to purchase. While the Federal Reserve has not indicated when it is going to begin raising interest rates, Jerome Powell did mention that the Fed will taper down the purchasing of corporate debt, thereby potentially pushing up interest rates in the short term. Additionally, the Fall is when school starts, people are less willing to relocate as buyers and that has the tendency to create a cyclical over supply of homes. While homes have been selling for over the asking price, the Fall cycle could mean that the amount above asking price that will motivate a seller to sell could be lower.

Those sellers who are flexible on timing should hold off on selling their homes at the moment and try to take advantage of the uptick in demand that the pre-winter and winter season brings. With school wrapping up and families being able to move and relocate, waiting until the winter break could see a small surge in demand thereby pushing up prices. That being said, if a seller needs to sell, now is still a good time as sellers can probably expect to receive multiple offers if the home is priced appropriately. Those sellers who have investment properties and have tenants that have been unable to pay rent may finally have the opportunity to work with their tenants and recover some (if any) unpaid rents. If rents are unable to be recovered, it could be predicted that with high housing prices landlords will evict tenants who are delinquent on rent unless they obtain federal assistance. Cities with high apartment building concentration, like Oakland, San Francisco, Emeryville and San Leandro, could see a larger than proportional evictions due to the demand for rental properties. In closing, the end of the moratorium may make investment properties much more attractive to other investors in case owners want to liquidate these investment properties.

Thank you for reading and as always if you want to work together please contact me at ernestina@vadillorealty.com!