🏡 Insider Report - Wed, Jan 12

How did the housing market change in 2021?

Jan 12, 2022

Market Movement

Keeping in line with seasonal trends, only 12 homes were listed in the past day, a slight uptick from the 10 homes at the same time last week. Home prices for most counties on the rise, with the exception of Napa, San Francisco, and Sonoma counties. In fact, apart from Marin and San Mateo counties, most counties are trailing behind their 4-week price average.

MARKET UPDATES

Quick Clicks

Price drops (399 today in the Bay):

54 price drops in Contra Costa County, 112 in San Francisco, 74 in Alameda County, and others.

Last week in the Bay Area:

Most expensive home listed: 2815 Pacific Avenue, San Francisco for $10,500,000
Cheapest home listed: 2399 East 14th St #55, San Leandro for $65,000
Oldest home listed: 867 Wood St, Oakland built in 1889
Home with the most beds: 6170 Skyline Boulevard, Burlingame with 11 bedrooms
Home with the most baths: 27447 Edgerton Road, Los Altos Hills with 9 bathrooms

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Home Equity Conversion Mortgage (HECM)

A type of reverse mortgage that allows seniors over the age of 62 to convert the equity in their home into cash. This type of reverse mortgage is insured by the Federal Housing Administration (FHA) and allows seniors to get a loan using the equity in their home as collateral. A HECM can only be advanced to people who meet a number of requirements including working with a specialised counselor, owning their home outright or having very little mortgage remaining on it, and having the financial resources to make timely payment of ongoing property costs like taxes and HOA fees. Eligible properties also have their own requirements. HECM proceeds can be received in one lump sum, in regular monthly payments, or as a line of credit.

Before applying for a HECM loan, the borrower has to pay for the pre-HECM counseling fee which can go into $6,000. Borrowers have an option to make payments during the term of the loan, but are not obligated to do so. If no payment is made on the loan, the interest accrued is added to the loan, and is paid off when the home changes ownership. This means that the estate pays off the loan after the death of the borrower, or through the sale of the home.

HOME ADDICTION

How did the housing market change in 2021

The housing market was anything but normal in 2021. A rapid uptick in demand for homes took hold, and buying a home quickly became a competitive sport. The buyers who wanted to increase their chances of getting their offer accepted by sellers were forced to pull out all the stops—whether it was offering short closing periods, waiving inspections, or shelling out tens, or even hundreds of thousands, of dollars over asking price.

But how exactly did the housing market change over the last year? And how have these changes affected the millions of buyers, sellers, renters, and investors across the country?

Buying a starter home was cheaper than renting Throughout 2021, rent prices grew at breakneck speeds, increasing by an average of 20% from September 2020 to September 2021. This has been great for landlords, who are raking in huge profits from their rental units, but it has also caused rent prices to become more expensive than the monthly mortgage payments on starter homes in many cities across the nation.
Affordable homes became virtually nonexistent The median home price increased in 99% of all markets in the third quarter of 2021—and 78% of those markets saw double-digit increases in home prices. National home prices also increased by a whopping 19.8% from August 2020 to August 2021. These types of huge price gains made it tough for buyers without significant amounts of cash to purchase homes.
Housing inventory fell to record lows Housing inventory was extremely low throughout 2021 and things got even more competitive later in the year when housing inventory dropped to new lows. This record decline in inventory was quite unusual given that the late fall and early winter months are typically the slow season for real estate.
Mortgage requirements got looser As of August 2021, mortgage credit availability was up by 3.9% month over month, which indicated that lenders were loosening the reins of borrowing. With looser credit score requirements, down payments, and related criteria, a larger pool of borrowers could qualify for mortgage loans.
The rate of foreclosures increased significantly year-over-year Homeowners who were unable to make the payments on their mortgage loans were protected by federal measures throughout much of 2021. That said, when the foreclosure moratorium came to an end in July 2021, lenders wasted no time with the foreclosure filings. By the following August, there was a 27% increase in foreclosure filings compared to July—and a 60% increase compared to the year prior.
Investors flocked to the market Lured by the potential payoffs from rapidly increasing rents and home values, investors sunk a whopping $64 billion into approximately 90,0000 home purchases in the third quarter of 2021 alone. Those third-quarter sales amounted to an increase of 10% from the second quarter of 2021, and a jaw-dropping 80% increase compared to the year prior.
Residential construction projects were more costly—and faced significant delays In late 2021, the number of residential building projects that had been authorised for construction but had not yet been started had actually increased to a 15-year high. Sky-high cost of construction, which increased by a record-breaking 12.3% in October 2021 compared to the year prior, supply chain backups and rampant labor shortages, caused significant delays.
Mortgage rates dropped to new lows Mortgages kicked off the year with a bang in 2021 when rates dropped to record lows. As of early January 2021, the 30-year fixed-rate mortgage loan had hit a record low rate of 2.65%—the lowest in five decades. And the 15-year fixed-rate mortgage loan followed suit, dipping to just 2.16% during the same time frame.
Home prices in secondary markets outpaced urban markets By September 2021, the median price per square foot for homes in the suburbs was $212—about 18% higher than the price per square foot just one year prior.
Homes sold at the fastest rate in history—and for more than asking price On average, it only took about a week for homes to find a buyer in 2021—the fastest rate in recent history. And buyers weren’t lowballing offers, either. Data shows that most sellers accepted offers for at least the asking price on the property—and 35% of sellers received offers over the asking price for their homes.
Cash offers became more popular By April 2021, all-cash home sales made up about 25% of the buying market, up by a whopping 10% from the year prior. And the rate of all-cash offers in April 2021 was even higher among non-first-time buyers, with these buyers comprising about 33.5% of all-cash home purchases.

INSIDER INSIGHT

👀 Checking in on markets in Marin County

Let’s check in again with how a couple of markets in Marin County have been doing. Let’s start with San Rafael.

The median days on market (DOM) for homes in San Rafael, 66 days, is 50 fewer than that of Marin County as a whole (at 116 days). The median price per square foot fell by $87.81 while the median sale price rose by $525,073.08 last week. Overall inventory shrunk in December as the number of new listings dropped further while homes sold fell at a much slower rate, the second month in a row where more homes sold than were listed.

Mill Valley

meanwhile had a median DOM of 201 days. Inventory continued to shrink in December as the number of new listings fell for the third month in a row while sold homes also fell, albeit remaining above the number of new listings. Looking at the median price per square foot, that fell by $15.63 while the median sale price rose by $600,465.95 last week.

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