Market Resilience: Understanding 2021's Return to "Normal"
This is going to be a little weird. I am going to try to explain what we are seeing this year so far, and put it into perspective, and to give you some comfort that the world of Real Estate is returning to "normal", seasonal pattern after the shockwaves of 2020. So follow along and hopefully, I can make some sense of this for you.
Okay, let's all agree that 2020 was bizarre, weird, unprecedented, nothing I ever want to see again; whatever. I do not disagree with any of those terms. But 2020 was unusual and unpredictable.
Understanding 2020's Impact
- For whatever reason, 2020 saw a significant below normal inventory coming to market in January and February.
- As a result, we saw very little appreciation in the early days of 2020.
- Typically we see a fair amount of inventory coming to market in the second week of January through the first week of February.
- The inventory explodes from the second week of February (end of the Super Bowl) through the end of April.
- Most of our inventory began coming to market in March and then... well you know... Shelter in Place caused our industry to unravel for a while.
- Most pundits predicted a 30-40% drop in the market.
- I believed that our market was not destroyed but only delayed.
- We ended the year down only 4% in unit volume sales and up 5% in Dollar Volume.
- Clearly we recovered in spite of the systemic shocks COVID gave us.
- In addition, we saw a yearly increase in the Median Price of about 10.5%.
- Beware of statistics and statistical error when the number of data points are small.
- Remember that we are comparing only January 2021 versus January 2020.
- With small numbers of data points, there can seem to be wild swings, particularly with Median Price.
- The most reliable statistical information will be in the combined area graphs rather than individual cities or Zip Codes.
Remember that if Kensington had only one house on the market in 2020 but now has 12 houses on the market; that is an eye-popping 1100% increase! While it may make sensational headlines, in absolute terms it does not mean that everyone is fleeing Kensington.
The Market Snapshot
Unit Volume and Dollar Volume January 2020 versus 2021
- 2020 began with little to no inventory. 2021 has begun with a very healthy 45% increase in Active Inventory that came to market in January.
- This has translated into a surge of buying that has far outpaced January of 2020 where we have seen a Unit Volume increase of 73% and a precipitous rise in Dollar Volume of 79% over January last year.
The Median Price is UP and Home Equity on the rise
- Our entire market is up 24% in Average Price and 18% in Median Price over January of last year.
Market Analysis: From Red Hot to Nuclear?
I warned you that the graphs would seem a little crazy. At first glance, it appears that the East Bay Real Estate market has gone from red hot to nuclear! What we are really seeing is a return to a "normal" market for us in 2021 as opposed to the shock and uncertainty of last year. To be clear, I am not suggesting that we are returning to a balanced market. A "normal" market for us is still inventory constrained, a strong Seller's market with multiple offers and sales, on average, 10-11% over the asking price.
Most Agents will comment that this is a crazy market, and that is true. With low inventory, we have too many Buyers chasing too few opportunities. But that is nothing new. What is new and Crazy is the amount of time, energy and resources spent by every Agent to schedule showing, return all of the COVID related paperwork required before anyone enters a home and the constant cleaning of properties after in-person showings. In my career, I have never seen a time that requires more time, effort, and courage on the part of individual Real Estate Agents than now.
So to my mind, the word that best describes our Market is RESILIENCE. Resilience is what has allowed the vast majority of Real Estate Agents and the Public to realize that life is different but it can continue productively with a few major adjustments.
Until next month, stay safe and healthy.
