Overall, 2021 was one of the hottest years for the housing market in a decade. Low-interest rates were the key driver of the market and consumers redefined what “home” meant to them.
The pandemic continues to have a lasting impact on the real estate market. We see consumers’ desire for more space and larger homes. Home features in high demand as a result of the pandemic are extra rooms for home offices and workout spaces. Remote and hybrid working schedules have opened up new markets for many consumers that are no longer required to be in the office five days per week.
Despite these tailwinds, we started to see a slowing of the market this past December when compared to year-over-year data. According to the California Associations of REALTORS®, home sales dropped nearly 17% in Santa Clara County. So is this just a momentary blip as a super hot market begins to normalize or is something else at play here?
“My intuition is telling me that the real estate market is going to ramp up again later in the first quarter,” says Lisa Faria, 2022 president of the Santa Clara County Association of REALTORS® (SCCAOR). “By spring, I am hoping this COVID surge will be behind us and we will be getting to some sort of normalcy. I believe the real estate market will be very active and hopefully offer a bit more opportunity for buyers.”
Lack of inventory was a huge issue earlier this year, making it very difficult for buyers. Dave Walsh, vice president and manager of Compass San Jose says, “Inventory has definitely risen over the past two weeks — it needed to. We started the year with the second-lowest amount of available inventory that we have ever had to start the year.” For comparison, we started the year with less than 500 unsold (active) Class 1 and Class 2 properties combined. This extremely low inventory continues to drive up the price of housing, pushing some out of Santa Clara County altogether.
“January has been very interesting in terms of my business,” said William Chea, 2022 SCCAOR president-elect. “I have received several calls from longtime clients that are moving out of the Bay Area. They are moving to Tennessee, Texas and Florida. The common theme — affordability.” Even as affordability declines, our region is still in high demand with sellers often receiving multiple offers.
Despite what is predicted to be a very healthy local housing market moving forward, it is clear that we need more housing of all types to increase affordability. We cannot continue to lose our best and brightest minds, our youth and our future, to other states. We need to rethink what housing development looks like in this modern era. Are there better ways to repurpose underutilized land or buildings? Can we create incentives, instead of more barriers, to encourage smart growth? It will take multiple layers of creative solutions to counteract years of underbuilding housing in the region.
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. His column appears every fourth Thursday of the month. Contact Neil at [email protected] or follow @neilvcollins on Twitter.