Chasing the 2021-2022 Housing Market

Over the last 30 years our office has seen multiple cycles in Real Estate and in the Stock Market.  These cycles consisted of Growth (where the US Equity Markets (Dow and Nasdaq) and housing prices soared), Over-Supply (where the curve flattened due to a lack of economic growth and housing inventory started increasing), Recession (where the US Equity Markets dropped and housing prices followed) and then Recovery (where consumer confidence increased and the US Equity Markets and housing prices slowly started to go back up).  Each cycle would last a max of 24 to 36 months.  

In my time of providing home financing to thousands of customers, I have personally witnessed these cycles and like clockwork we saw one in the 80’s, in the 90’s and in 2000’s.  Then in 2009, the books were rewritten and we found history changed.  Basically in 36 months following the 2009 housing and US Equity crash, we went into a recession, skipping “over-supply” all together and found us in a recession (the worst we had seen in 70 years since the great depression) with housing and the US Equity Markets free falling.  Then in 2012, the storm leveled and over the next 8 years we saw the Dow average rocket to 29,500 and housing prices hit all-time highs or so we thought.  Then on or around Q1 – 2020 (March 9th to be exact), the COVID pandemic scared investors but had little impact on Real Estate.  Yes, the Dow dropped down to 17,000 in change but US residential real estate stayed strong only pausing for a short period of time and then once the market could survive COVID, the US Equity Markets and US Residential Property Prices continued their way up with the Dow Average now at 35,526 (dtd 8/13/2021 at 10:22am PST) up 6026 since March 9, 2020 and US Real Estate Prices went even higher than 1.5 years ago.

Now let’s go back 12 -18 months (8/2020) where the US Equity Markets started showing signs of growth and there were signs (a vaccine for Covid) that things were improving not just locally but on national level and international level.  So many buyers and trade up sellers (selling first and then buying up) convinced themselves, that if they didn’t act quickly, they were going to miss a once in a lifetime opportunity and get priced out of the housing market also called FOMO (Fear of Missing Out)

Here’s where things got really bad for buyers… 

Residential Home, Townhouse and Condo Inventory drops below 1000 in several Bay Area counties as the economy bounces back.  Sellers backed by the advice of their Realtors, list properties 20% or lower causing a frenzy of buyers to over bid, making some offers with no contingencies for Financing or Inspections and some even decide to pay cash improving their position to “win” the offer.

Then this Happens…

That Overbid becomes the new comp for the area.  Why is that a problem?  See below…

Let’s say you were looking at $1M dollar home in the Bay Area and had to compete with someone that already sold their home and has a lot of cash for the down payment or has enough cash to pay for it out right.  The house is listed for $1M but it’s really worth $1.2m and you decide to come in at $1.2M but someone else comes in at $1.4M that pays $200K more than the fair market value.  The home closes escrow and now that home and other properties like it within a 1-to-2-mile distance are now worth $1.4M.  You the buyer, start looking at making another offer, but now what was $1.2M is now worth 1.4M.  What if you don’t make an aggressive offer on the next property?  You might get outbid again and the prices of homes in that area are now even higher.  

Let’s say you take some time out of the buying frenzy, thinking it can’t stay this way and you start looking again only to find homes in the neighborhood you want, are now worth $1.6M or higher.  In just a short period of time you saw homes in one neighborhood go from $1.2M to $1.6M and then find out this phenomenon is happening in other desirable areas not just locally but nationally.

What do You Do?

Do you ride this one out or do you take the plunge, go super aggressive and pay $1.7m or higher for the next property in your desired neighborhood.  This dilemma is something every buyer has had to consider in the last 8 to 12 months.  If you want a “leg up on your next offer” 101 Loan LLC and a few Realtors we work with have the answer(s) to help win on your next offer.

In today’s market, you want to work with pro-active Real Estate Professionals and Time-Trusted Lenders but here’s the key…We can help you not become one of those frustrated buyers that are waiting for the housing bubble to burst.  Those buyers may be waiting for a long time, especially as many Bay Area HQ Companies are now forcing employees back to their Bay Area offices with many of them looking to buy locally again.  The employees that left the area for other less expensive areas, may soon become your competition in buying as large companies like IBM, Apple, Google and Facebook force employees to come back to the office in the very near future or risk economic consequences.

If you want to make a competitive offer and your next offer, we can help.  Contact Rob at your earliest convenience.