Even though we only have one full month of sales in the books, I wanted to look at the stats and check in with some of our local experts to see if the housing market had indeed kept up with those rosy predictions we were seeing at the end of last year.
I also wanted to get a sense of what the upcoming months might look like and any possible headwinds that might cool down this sizzling market.
My December column noted the California Association of Realtors was projecting a 3.3% increase in the housing market statewide. While I realize the local market performs much differently, it was nonetheless an important data point.
I recently asked Dave Campagna of Premier Lending to share some of his findings for the greater San Jose area for January. According to his data, there was a 38% increase in closed sales for January as compared to that same time last year.
The 562 sales that closed went for 103% of the asking price, indicating we are still in a seller’s market. Furthermore, the average days on market dropped by nearly half from 39 to 20. This, of course, was a direct result of pent-up demand and a less-than-adequate amount of inventory being available.
A traditional assumption during the last decade was that sellers would not put their house on the market or even consider moving during the holidays. In fact, we really used to have a “Super Bowl Bump,” meaning it wasn’t until after the Super Bowl that homes would begin to be listed on the market.
That is clearly not the case anymore. The January housing market is riding the momentum from the record-setting fourth quarter last year and is even exceeding expectations and the early indicator is that February will be a very strong month as well.
So what’s next?
Doug Goss, broker and 2021 president of the Santa Clara County Association of Realtors, says starting in April we should see an increase in the number of homes available for sale.[optin-monster slug=”yxup4h1fcich5uxtdvtn”]
“I anticipate demand will still be very strong and multiple offers will continue on most properties,” Goss said. “I also think we will continue to see prices rise as the homes that are selling now, with their multiple offers and overbids at the close of escrow, are setting the price point for the new listings coming onto the market.”
While at times it may seem like there is just no stopping this housing rally, there are several notable headwinds that could really put on the brakes. The largest of such headwinds is COVID-19 and our ability to quickly roll out the vaccines.
The economy will continue to be constrained until we can move on from this pandemic. Job losses and long-term economic uncertainty could be devastating. Fortunately, we are seeing significant progress in Santa Clara County to ramp up additional vaccination sites and to speed up this process.
Evictions and foreclosures, if left to go unchecked, would also wreak havoc on the market. Local, state and federal governments are coordinating efforts to offer relief to tenants and property owners, as well as mortgage forbearance to ensure that this does not happen. It’s important that we can keep people housed and at the same time protect the investments of our small “mom-and-pop” housing providers.
Additionally, the historically low interest rates have increased the buying power for many but skyrocketing house prices could soon outpace this increased buying power. While inflation has largely been kept in check, the continuous stimulus dollars from the federal government could cause an inflationary situation that over time would cause interest rates to creep up.
Other than the pandemic, no other single factor is more important to the housing market than increasing the housing supply. We are at all-time lows in available inventory. This is the single largest factor for driving up existing housing sale prices and decreasing affordability.
We need to be mindful of not only preserving existing home-buying opportunities but also expanding them through thoughtful infill projects. The most effective way to tackle the equity imbalances that we face today is through the expansion of homeownership.
San José Spotlight columnist Neil Collins is CEO of the Santa Clara County Association of Realtors, a trade association representing more than 6,000 real estate professionals in Santa Clara County and surrounding areas. Contact Neil at [email protected] or follow @neilvcollins on Twitter.