2021 C.A.R. president looks forward to strong Q4 housing market

2021 California Association Realtors President Dave Walsh shared his analysis of the housing market with members of the Silicon Valley Association of Realtors at last week’s Los Gatos-saratoga Realtor district virtual meeting. Walsh also shared news he has received at the federal and state level regarding housing-related legislation.

Walsh began with sobering news that consumer confidence is down largely due a surging Covid Delta variant

in parts of the country. The rent relief program is not getting to households who need help fast enough. Over $3.5 billion in back rent is owed to California housing providers. The wildfires may lead to premiums increasing five-fold and to insurers no longer covering fire prone areas.

Also, California’s median home price, now at a record $827,940, keeps increasing beyond reach of homebuyers, and sales slowed in August. At the federal level, to pay for the $3.5 trillion infrastructure plan, there is concern a budget reconciliation package may place 1031 exchanges on the chopping block.

Walsh then presented a brighter picture, noting the GDP has returned to pre-pandemic levels. California’s labor market continues to recover, creating over

100,000 new jobs. Hotel occupancy has rebounded. California home sales are up 21.3 percent year-over-year and up 33.6 percent in the first half of the year, on track for the most closed sales in the state in over a decade. Days on market are at eight in Santa Clara County and sellers are receiving an average of 108 percent of their asking price.

More good news is San Jose has the highest share of “ultra-high-networth” residents and the city was declared the most “equity rich” city in the country, with 69.4 percent of its residents owing less than 50 percent of the estimated market value of their home. San Mateo County ranked first and Santa Clara County second in the nation at 70.2 percent in that measure, according to the 2021 U.S. Home Equity and Underwater Report.

Walsh shared housing market stats he tracked over the last two weeks and compared them to last month and last year. He acknowledged sales in the last few weeks had fallen from 406 a month ago, but noted sales jumped to 430 the week before.

Active listings of single-family homes which were at 840 in August, are climbing back and were at 795 that week. Santa Clara, Los Gatos, Saratoga and Palo Alto are doing particularly well. A C.A.R. study also indicates Mountain View, Saratoga, Menlo Park and Sunnyvale were among 30 cities that have already surpassed their 2020 sales growth this year.

Walsh attributed the lull in listings and sales to people going on vacation in the month of August. He told members, “I don’t think there is buyer pushback because we’re right back to 430 sales. I think you’re in for a very strong fourth quarter.”

Despite the wildfires, politics, mass out-migration, a recent study by the University of California confirms there is no abnormal exodus out of the state particularly among high wealthy individuals. In fact, Federal Research Economic Data (FRED) found between 2015 and 2019, the state lost 465,500 people who had less than a college degree, but the state gained 74,500 individuals with a bachelor’s degree and more. This information indicates California is losing its service workers, which deeply underlines the lack of affordable homes, but also shows Silicon Valley continues to attract highly educated individuals.

“Our support system is broken, there are no affordable homes… Highly educated people with high-wage opportunities are keeping our housing market strong,” said Walsh.

As for discussions about cutting 1031 exchanges, increasing the capital gains tax to 39 percent, and repealing the SALT Act, Walsh likened them to a game of poker. “All sorts of things are being negotiated,” he

stated.