Stimulating Forecast
I’ve been receiving a steady stream of calls and emails from people asking about the latest stimulus bills for California and the nation, and what it means for people and businesses in need, because of the Covid-19 pandemic, business shutdowns, and unemployment. Another steady stream of calls and emails come from people asking about the forecast for our Real Estate market. We have been in a long drought of available homes for sale, Buyer competition is a routine frenzy, and prices have been pushed higher. How long can this go on? My source for getting the latest and most reliable information on the details of pandemic relief and the forecast for the housing market comes from the California Association of Realtors. Here’s some news on pandemic relief: Governor Newsom signed off on a new $7.6 billion stimulus bill for COVID-19 recovery in California. The economic package will deliver $600 checks to around 5.7 million Californians earning under $30,000 per year. It also sets aside $2 billion for small business fee waivers and the California Small Business Relief Grant Program, which provides grants of up to $25,000 for businesses with annual revenues of between $1,000 and $2.5 million. Priority will be given to women- and minority-owned businesses, as well as businesses in the areas with the highest unemployment rates. The legislature had planned to also vote on a bill that would have provided $2 billion in tax benefits for small businesses, but they decided to amend the bill to let businesses deduct more than $150,000 from their taxes. That bill should be voted on soon.
The Biden administration set aside a two-week window beginning today, February 24, during which only businesses with fewer than 20 employees (including sole proprietors and independent contractors) can apply for forgivable loans through the Paycheck Protection Program (PPP). The administration is also dedicating $1 billion in PPP funding for sole proprietorships. As a bonus, the PPP loan calculation formula for sole proprietors, independent contractors, and self-employed individuals will be revised to potentially offer more relief for these borrowers. The number of Americans applying for unemployment aid rose last week, evidence that layoffs remain high nationwide. In California, unemployment is at its highest level in more than a month, and California continues to account for a greater share of the nation’s jobless claims than it does of the nation’s workers.
Here’s the California Association of Realtors (C.A.R.) market forecast for 2021:
C.A.R. recently revised the 2021 forecast to increase more than previously estimated. The California housing market started the year even stronger than expected. The statewide median price hit $699,890 in January 2021, which is 21.7 percent higher than January 2020. Home sales this January were up 22.5 percent from 2020, driven by strong growth in California’s core housing markets, in particular the San Francisco Bay Area. The North Valley follows the same trend.
Based upon strong January closed sales, more of the same for February, low interest rates, and ongoing growth in buyer demand, C.A.R. revised its forecast for prices in 2021 to be higher than previously estimated. Existing single-family home sales are expected to rise by more than 11 percent this year, and home prices are expected to increase by 8 percent. Lumber prices are up 170 percent over the past 10 months, causing a rise in new-home prices, too. Newhome building softened in January, likely because of the increase in costs, with overall housing starts down 6 percent nationwide. But California-wide, new home permits are up, so the forecast is for a strong new-home construction market this year.
When will our Real Estate market begin the inevitable slow-down? Or can a rising market just keep rising? Look into your crystal ball and please let me know.