Those brief months of withdrawal from the Bay Area – sluggish home sales and falling rents in the first few months of the Covid-19 pandemic – are long gone and are not expected to return anytime soon.
Economists expect another strong real estate market in 2022, although they say it will struggle to match this year’s record pace.
Bay Area prices climbed 18% in November from a year earlier in a busy market, according to the California Association of Realtors. The median price of a single-family home has reached $ 1.3 million, well above the state median of $ 782,000.
Jordan Levine, the association’s chief economist, said the real estate market “has just been characterized by incredible demand from buyers.”
And the Bay Area looks set to head into 2022 with few homes to sell, prices rising and more families looking to return to the suburbs with an easy commute to work. âA lot of people want to go back to the office,â Levine said.
Rising home prices have been a jackpot for longtime homeowners, who rack up double-digit equity gains just by paying off their mortgage. Tenants and potential buyers struggled to save over $ 200,000 for a healthy down payment, leaving many workers on hire or moving out of the area for cheaper locations.
Bay Area Homes Still Among the Least Affordable in the US Ten years ago, more than 4 in 10 Bay Area families could fit a home purchase into their budget. Today, only about 2 in 10 families can.
The region’s strong market reflected this year’s national trends. Zillow called 2021 the hottest year on record for home values. Prices in the United States climbed 19.5% from a year earlier, with the median home price hitting $ 316,000.
âThe big picture of the pandemic so far – it seems to have supercharged the housing market,â Zillow economist Jeff Tucker said. Relatively few homes for sale, demand for remote workspaces and low interest rates have combined to push prices to record highs. Zillow economists are forecasting an 11% increase in home values âânext year.
The most searched destination for the online broker this year was South Lake Tahoe. The typical Tahoe roster attracted 5,500 viewers, an indication of the intense interest or dream surfing of a new life in a resort town.
But Tucker is seeing demand return in big cities like San Jose, Oakland, and San Francisco, as people rediscover the social and cultural benefits of city life. âWe are seeing signs of a big recovery in rentals in the big cities,â Tucker said.
Zillow also expects real estate booms in smaller, more affordable cities. It also predicts that Millennials and Gen Z workers in expensive areas like the Bay Area will buy vacation or investment properties before a primary residence near their workplace, which could go over budget. .
Several factors could disrupt the overheated real estate market next year. The Federal Reserve has signaled that an interest rate hike is imminent, after years spent at record highs. The interest rate on a standard 30-year fixed mortgage is now 3.12%, down from 2.67% a year ago, according to Freddie Mac.
Levine sees the market slowing, but still favorable to sellers. As the state creates more jobs and moves closer to pre-pandemic work levels, demand for housing is expected to increase. Statewide, CAR expects prices to rise 5% in the new year.
âCovid remains a wild card,â he said. So far, the increase in health threats since mid-2020 has translated into a more urgent buying rush, especially in outlying suburbs and rural communities.
Another impending factor: How many new homes will be built with a labor shortage and the cost of materials and land rising?
âThe change has to come on the supply side,â Levine said. Some new state laws, including SB 9, which makes it easier for homeowners to develop large single-family lots, are expected to add new units. But an analysis by researchers at UC Berkeley estimated that the new law, which goes into effect Jan. 1, would only create about 700,000 new homes and apartments over several years.
âI hope we will continue to make progress,â Levine said.