Real Deal

need to commute. Levine said there also has been a structural change, as homes are becoming more important to people than ever before.

Economic indicators point to a K-shaped recovery. “The economy is doing well, but there’s a lot of healing to do in the bottom-end of the market,” said Levine.

The C.A.R. chief economist indicated California’s

housing market ended 2020 on a high note. Sales made up for lost ground in the second half of the year. In 2020, sales of existing homes were 3.5 percent ahead of 2019. The statewide median days on market was 11 days.

Interest rates are fluctuating from 2.65 to 2.7 percent, but this is still an incredible time from the perspective of where rates have been historically. Sales of homes on the high end are strong. Investor share of rentals has tapered. It is the share of first-time homebuyers that has driven the market, with many buyers putting more money down than in the past.

“There was this perfect storm that triggered this sense of urgency from more affluent renters to finally say, ‘It’s time to buy,’” said Levine.

Levine indicated many homeowners “have skin in the game.” Homes are in the 8-10 percent range of appreciation, so the fundamentals are strong because homeowners have plenty of equity in their homes. Many homeowners are on a fixed-rate mortgage, so they know what their payments are from month to month. Unlike in 2008, there are few cash-outs. Those no longer in forbearance are able to sell their home, which fends off foreclosures.

“Inventory is the biggest risk; not because people don’t want to buy homes, but because there are no houses for them to live in,” said Levine.

The lack of housing, low affordability, and increased economic pressure have resulted in more and more people leaving California. Last year, 260,000 people moved out of state.

Levine said this is the flip side of affordability. Since more employees can now work from anywhere, they are looking at cheaper places to live in other states.

“We’re just not building enough homes,” said Levine. “We were on track to build less than 100,000 homes and it didn’t happen. California needs 2.5 to 3.5 million homes. With a 40 million population, we have yet to build a third as much as what was built in 1985 when the state had a population of 27 million.”

Information provided in this column is presented by the Realtor members of the Silicon Valley Association of Realtors at www.silvar.org. Send questions on any topic to rmeily@silvar.org.