How does one begin to wrap their head around 2020?
An even better question is, how do we all move forward in 2021? I have found that a laser focus on facts and statistics can help settle emotions and build the foundation for a plan to move forward. I hope to provide you, the reader, with a good overview of where we were in terms of real estate in Benicia, and more importantly, where we are going.
Understatement of the century: COVID-19 had a huge effect on all of us.
Over one year, we have fundamentally changed how we live and work. These changes are not all permanent, but like good Americans, we find our ingenuity sharpened by crisis. We all look forward to a new day when we have been inoculated to this horrible virus and can again resume interacting and connecting in-person.
I am going to share some very good news, right up front: real estate has done very well in 2020.
Here is another bit of encouragement: it is only going to be better in 2021. Here are 5 reasons why I know that this is true.
- Interest Rates Will Remain Low: Federal Reserve Chairman, Jerome Powell has said that no matter what happens politically, the Fed Rates will stay low through 2023. That is a huge forecast, and it is great news for those of you looking to buy or refinance your home in 2021. These low rates will eventually need to go up, and from a Macro Economic perspective that means eventual inflation. That being said, the best hedge against inflation is an asset at a fixed low rate (hint: YOUR HOME).
- Employment: While we have had some serious losses in 2020, and small businesses have been especially hurt during this time, the recovery has already begun. According to the Department of Labor’s latest report in December 2020, the Unemployment rate in the US was 6.7%. To put this into perspective, it is thought that anything less than 6% is considered full employment. While there will undoubtedly be fluctuations, look for this number to continue to improve in 2021.
- Demand Remains High: You have heard that economics can be summed up as Supply vs Demand? Well, the supply will remain very low through 2021. New construction is on the way, but due to COVID-19, costs of materials and other factors, it will not come fast enough. Meanwhile, Millennials are having children and needing larger homes due to work/school from home needs. Droves of folks are also leaving the high-density living environment of the big cities and moving to the suburbs (Benicia). This all creates high demand.
Here are some more fun statistics that will support my predictions for 2021.
I’ll compare 2019 numbers with 2020 numbers (remember, we lost almost an entire quarter of sales due to the initial lockdown in CA). In 2019, Benicia had 257 single family homes sold, versus 246 in 2020. In 2019, the Median Home Price was $660,000, versus $700,000 in 2020 (5.8% increase). In 2019, the Cumulative Days On Market was 46 days, versus 31 days in 2020. Finally, in 2019 the Median Price/Sqft. of a home in Benicia was $349/sqft., versus $364.56/sqft. in 2020. These are striking figures, especially during a global pandemic.
These facts, mixed with a general need to resume a normal life, whatever that is, point to a brighter tomorrow. We should see a 5% to 7% price increase in our market by year’s end, and while that is not why folks ultimately decide to buy or sell, it certainly lends to the urgency once the decision is made. Look for inventory to remain low. We will likely sell nearly the same numbers of homes as we did in 2019, if not a few more, but expect the market to be filled with step-up buyers, meaning buyers looking to buy a larger home than the one they are currently in. These step-up buyers will open the door to first time buyers and investors to snatch up the smaller homes. Look to make some new friends this year, as folks from surrounding cities will discover the beauty and charm of Benicia and make it their new home.
If you want to know the best time to get into the real estate market, it was yesterday. If you want to know the next best time to get in, it is right now. I see sunshine, even on cloudy days.
Eric P. Hoglund
Real Estate Broker Lic. # 01420325
Estey Real Estate & Property Management