Nine months ago when our world was turned upside down with a countywide stay-at-home order, none of us could have predicted the robust housing market we have been experiencing.
Many of us were assuming similar outcomes as we experienced during the last great recession, but plummeting prices and mass foreclosures never materialized. In fact, sale prices for homes increased and so did sales. So what do the experts think the 2021 housing market will look like?
Jordan Levine, the deputy chief economist for the California Association of Realtors (C.A.R.), gave his 2021 forecast earlier this month and expects the housing market to grow at 3.3% for next year with prices increasing by 4.4%.
Most expect interest rates to remain virtually unchanged next year and that the 30-year fixed mortgage rate will hover around 3%. Levine based his forecast on several assumptions including a successful vaccine distribution, improved GDP and foreclosure rates being single digits.
Locally, despite unprecedented pressure on the economy, housing is still likely to be one of the bright spots of the recovery. Realtor.com’s housing forecast predicts the San Jose metro market will grow by 10.8% in both sales and price year over year. Lack of inventory continues to be the main factor driving up housing prices.
Dave Walsh, 2021 C.A.R. president and San Jose Compass manager, is predicting a banner year for housing in Santa Clara County, which could see sales rising at 5.4% or more if the inventory is there to support it.
However, Walsh continues to see weakness in the condo market with the latest inventory numbers showing a 50%+ increase over last year.
If the vaccine renews optimism that we are getting closer to moving beyond COVID-19, the increased supply of condos and low interest rates could offer a unique opportunity for first-time buyers in Santa Clara County.
According to Levine’s market forecast, “the share of first-time buyers reached the highest level in 10 years this past summer, with nearly two of five homes being sold to buyers who purchased for the first time.”
Despite the rosy outlook to the housing market there are still major headwinds. This pandemic has contributed greatly to the ongoing wealth gap in our community. The “K” shape nature of the economic recovery that we are experiencing is likely to continue into 2021.
The top wage earners in our community have been relatively unaffected as compared to the lower third of wage earners, many of whom have been devastated by reduced work hours and layoffs.
It is those top wage earners who are continuing to drive the housing market while the rest of the community falls further behind. And for that reason, we need to continue looking for equitable solutions that lift up our entire community.
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.