March 2021 – US Housing & Economic Markets, Mortgage, CRE Market Updates

Thank you for reading the March U.S. Housing Market Update! We will bring to you the latest stats for US Housing & Economic Markets, Mortgage and Residential Loans, and Commercial Real Estate Market Updates. See the video recording on our YouTube Channel! If you want to learn more about the Bay Area Housing Market, check out this blog.

Let’s look at the big picture in terms of the whole market in the United States. We’ve been providing these home price forecasts for 2021 from different organizations. Mortgage Bankers Association, they were on our webinar last month, and they had a very aggressive projection, which is 10.3% appreciation for 2021, while CoreLogic is only 3.3%. But if you average out all these different places, the projections are about 5.9% on average for all these forecasts. 

It’s interesting if you compare pre-2008, the mortgage recession because a lot of people are saying – oh my gosh, you know, our market has been really blowing up, it’s been appreciating way too fast. But if you look at from 2002 to 2005, the average annual appreciation is about 10.3%, while between 2017 and 2020, the average annual appreciation is about 6.3%. So if you look at it that way, it doesn’t feel like it has gone up as much as the pre-mortgage mortgage crisis. 

Here, again, are some of the numbers from other organizations. This is the actual final appreciation numbers for 2020. If you look at the Federal Housing Finance Agency, we recorded a 10.8% increase or appreciation, and CoreLogic recorded 9.2%, and S&P Case-Shiller recorded a 10.4% appreciation for 2020. For those people who have bought homes at the beginning of 2020, you’re probably very happy right now, because, in just one year, you had gained quite a bit of equity. 

If you’re looking into different regions, now, you can look at the whole United States from the pacific to the central and all the way to the east, You see that mostly all have double digits besides the West Central area, where they are single-digit numbers – 9.7% and 8.6%, but the Mountain Area is doing really well. Also, I’m actually really surprised over here that the New England Area has recorded a pretty high percentage change in price as well.

I put together this list today (Mar. 10). It’s a really long list including over 400 American cities, but I picked out just the California cities to see how we’re ranking and the appreciation since 1991Q1. As you see, Stockton actually made the top list at 155.83. If you keep going down this ordered list, we have Modesto, Fresno, Sacramento, Riverside, Madera, Vallejo, Yuba City, San Luis Obispo, Chico, Los Angeles, Anaheim – Irvine area, and then Santa Cruz, San Diego, of course, San Francisco, and San Jose. The Silicon Valley area actually has the most appreciation compared to all the other cities in California since 1991. I thought that was interesting. I’m sure those people who have bought in the 90s in the San Jose area, or anywhere here, you’ll see a huge appreciation of your property – I’m talking about this as almost three times more. 

Now, another question is the foreclosures. We have clients asking us how to find foreclosures, so let me show you the foreclosure filings in California. We have pre-foreclosures dropped 4.9% last month, and compared to the prior year, it dropped 78.8%. Then we look at auction, it actually dropped 73.1%, and actual bank-owned has dropped quite a bit. But obviously, we have this moratorium where they’re not really foreclosing anyone right now, but I think the number for pre-foreclosures is a really good indication to show that there isn’t really a lot of foreclosures, especially here in our market right now. That’s why I want to show this chart to prove to you that the foreclosure filings are really not high, so we’re not really foreseeing that we’re going to have a lot of foreclosure activity. 

Now, I don’t know if you guys have noticed the mortgage rates have gone up. They said that “the 30-year fixed-rate experienced its largest single-week increase in almost a year, reaching the highest level since July 2020”. We’ve been talking about this all year in my monthly housing market updates, and we did talk about starting 2Q of 2021, we should start seeing some increase in the mortgage rate, and sure enough, it did increase. 

The rate had been going down, but starting January, it has gone up slightly and in March. Actually, we just hit 3.02% for Freddie Mac 30-year fixed. 

This is mortgage rate projections, as this month you see some adjustment from Fannie Mae, they have adjusted their projections, basically adding another 10 basis point on all their projections, which makes the average of four projections go up slightly as well. Instead of 3.17%, it became 3.22% for 2022 1Q. They are expecting 2.95% for 2021 2Q on average of these four projections. 

We have received the latest stimulus package, and this is good news as the 1.9 trillion dollar relief package is actually “projected to help propel the U.S. economy to its fastest annual growth in nearly four decades, reduce poverty, and revive inflation”. I am quite excited about this stimulus package that’s gonna help a lot of people, but I think we still have to take precaution on how this relief package is being used and being distributed, so I think this is another topic that we can talk about for a long time – how this is going to affect our economy, but let’s leave it for another webinar so that we can dive deeper into this topic. 

Real quickly here’s a commercial real estate market update. I just want to let you know that San Jose, especially downtown San Jose, hasn’t slowed down. These are all the developments, especially office buildings, in the downtown San Jose area. If you go over there right now, I mean, the Google Village is still going on, and then there are a lot of Class A office buildings being developed in the downtown San Jose area. We did share the news that they believe San Jose is going to be the one leading our post-COVID recovery. If you look at the commercial real estate market, I mean, don’t get me wrong, office building is still really slow, you can tell that a lot of people are still leasing smaller spaces, they don’t need as much of office space right now. However, these developments are not going to be completed within this year, but they are still moving forward into building, because they have such strong confidence in the recovery of downtown San Jose, especially because the Google Village is continuing its development. Also, the Diridon Station has phase two of the Bart Station, which will come to the Diridon CalTrain Station, and extend all the way to downtown San Jose and Santa Clara University. So this is the next 10 years of developments that are going to happen, and a lot of things are going to change in downtown San Jose.

Lastly is our multi-family update. As of March 1st to March 6th, they collected 80.4% of rent payment. February in the full month, they did collect 93.5%. If you compare it with last year, it is slightly lower, but not too much. So the outlook is better than we thought. If you were here last month listening to Jeff Burns, who talked about multi-family financing, he did say that initially a lot of us were expecting to see a lot of pre-foreclosures or forbearance on multi-family mortgages, but we really haven’t seen a huge number, a huge rise on that. We continued to make offers for our investors on the multi-family side, and the prices from the sellers are very aggressive, they are not really coming down too much. So buyers are realizing that they can’t wait any longer because they really want to take advantage of the low-interest rate. So we do have a lot of investors who are still very aggressive and making offers on multifamily properties. Hopefully, this has given you a good sense of what the market is doing right now. 

We hope you enjoyed reading this blog, don’t forget to share this with friends, family, or clients who may find the information useful. In this month’s Bay Area Housing Market Townhall Webinar, we also invited back Tim Tikalsky as the tax season coming up, he shared with us his tips on how to handle California’s Prop 19, as well as his insights on potential Biden tax plans. Watch the video recording of the webinar here.

If you have any questions or other topics that you would like to discuss, feel free to get in touch with us, we’d love to chat with you!