With the election over and Pfizer announcing their new vaccine is proving over 90% effective against COVID-19, many are wondering about the forecast for the economy and housing market moving forward into 2021.
It now looks likely Biden/Harris will take over in January but the House of Representatives moved closer to neutral and the U.S. Senate is favored to have a Republican majority. The consensus is thus DC gridlock will occur for at least two more years. While we all like to see progress through positive change in DC, gridlock will generally keep the status quo in place for a while longer. It is one reason the stock markets soared this week. Additionally, Biden states he will be a centrist, with no big changes. This week's announcement that the vaccines are working extremely well should add huge consumer confidence moving into the new year. The virus era appears to be soon coming to an end. Next year would thus be on track to be an excellent economy and that would further boost the housing market.
Low inventory and historically low interest rates are driving California's red-hot housing market from Eureka to Chula Vista. California home sales volume just hit their highest record in more than a decade and the median home price reached another all-time high for the fourth month in a row. With the lockdown, and people spending much more time at home, renters are suddenly thinking that it might be a good time to buy a property. Anything reasonably priced, in a decent area and with a yard is selling very quickly. There is huge demand and limited supply right now. It is not unusual for a $600,000 property to get 15 or 20 offers by the second day. I put a nice 4-bedroom home on the market last week, in need of some updating, and was immediately flooded with offers. If land were plentiful, San Diego could build 100,000 homes and sell them all within a year or two, I believe. Obviously, San Diego does not have the space for that expansion.
This county is landlocked by Camp Pendleton, the Pacific Ocean, Mexico and the mountains. Further supply is permanently limited, but demand for real estate in America's (and the world's) finest city continues to be strong! I just received data from the California Association of Realtors that shows a surge in out-of-town buyers moving into San Diego. People from Seattle, San Francisco and L.A. as well as people from the East Coast are moving into San Diego in large numbers. Also, international buyers continue to move here.
If you still do not own property in San Diego, call me to discuss your options. I can offer a brief zoom session to discuss the tax benefits and wealth building aspects of owning real estate. With San Diego real estate, you just can't go wrong purchasing a nice property. Furthermore, I am an excellent buyer's agent and have a proven strategy for getting my buyer's offers accepted by the seller. I just got three buyers in escrow over the last couple of weeks.
I wanted to address a couple of the ballot propositions briefly. Prop 15 lost. That would have increased property taxes on commercial properties. What you might not have realized is that most tenant commercial space leases are written for the tenants to pay property taxes on the building. That is generally how it works (called a triple-net lease). So, although it seemed like a $12 billion tax per year on landlords, that tax would have immediately been passed on to restaurants, nail salons, gyms, etc. If you know any small business owners, they will probably tell you that it is already extremely expensive to operate in California. Well, Prop 15 lost. At least that will help businesses up and down the state.
Prop 19 passed. There are two sides of this coin. First, it allows anyone over 55, severely disabled homeowners, and wildfire victims to keep their residential property basis when moving to a new home. There are a ton of homes out there where the owners paid between $25,000 and $150,000 in the 1960s, 1970s, and 1980s. Their property taxes (based on the original cost and a 2% inflation) are very low. The problem is that these people then do not want to move from many times a larger home to a smaller home because their taxes would skyrocket. Well, now these people can sell their typically larger 3-, 4-, or 5-bedroom homes and move into something smaller and easier to care for and retain their lower tax basis. This will put a ton of homes on the market just when we need it most.
The other side of the coin is that this eliminates a loophole, where inherited property is reassessed to market value. Children, usually from out of town, or out of state would inherit their parent's property and would retain a sometimes extremely low tax basis. The children would then rent out that property and pay very low property taxes. That opportunity is now gone. Inherited property with some exceptions is now reassessed to market value, increasing property taxes.
Finally, Prop 21 was defeated. That was another attempt at rent control. While I am sympathetic to ever increasing rents to local renters, I have been to quite a few talks and workshops on the damage rent control does. Simply put, repairs on rental properties decrease and landlords sell their rental properties in droves to homeowners, greatly decreasing the supply of rentals.
Call me for any real estate advice or buying or selling real estate. I continue to read extensively on real estate issues, I teach real estate workshops, and I am happy to answer most or all of your real estate related questions.
—Sarah Ward is a realtor with Fine & Coastal Real Estate. Reach her at firstname.lastname@example.org, or at 858-431-6043.