Business & Real Estate

On the Market: Pressing real estate questions for 2021

There is much chatter in the press of late about all of the people leaving California. We hear about rents declining and newly minted work-from-homers heading to the suburbs. But what is the reality? What does the data show?

Q: I hear that people are moving out of California to less expensive areas. Does that mean prices will go down?
A: I hear the same thing, and the data suggests that statewide, more people are leaving than ever before. However, the line of people waiting to move to California is longer than ever.
One of the data points I watch is Months Supply of Inventory (MSI), which quantifies the question: “If no new houses were brought onto the market, how long would it take to sell off the existing inventory of houses?” At the end of December two years ago, the MSI was at one of its lowest levels in many years. Last year, it was even lower. Last December, it was even lower, at below a one-month supply. This suggests that demand is outstripping supply and the likelihood of home prices going up in 2021 is high.

Q: Where will interest rates be?
A: All indications are that interest rates will remain very low through 2021 to stimulate the economy.

Q: What about commercial versus residential real estate?
A: There is an interesting social movement occurring now where the money is flowing to the businesses that support the more residential side of life – Peloton, Home Depot, Sonos, Restoration Hardware. But the commercial side is seeing declines – Cushman Wakefield, Marriott, Planet Fitness, Simon (malls).

Q: What about condos versus single-family homes? Are they being valued differently?
A: Yes. I have seen a softening of the condo/townhome market in some areas. However, inventories are so low that the pent-up demand is not really allowing prices to fall very much. Prices are just not going up as much as those of single-family homes.

Q: What about rental properties? Are prices going down?
A: Yes. As many workers realize they don’t need to be physically close to their offices, the demand for housing near business centers is declining. Many large rental complexes are offering incentives such as a free month’s rent.

Q: How long will these conditions last?
A: My crystal ball is a bit hazy right now, but things will cool off at some point. The stimulus monies will need to be paid back at some point, and we will work through the labor and wage reductions and see where interest rates go. My prediction is that the market will remain strong well into 2022.

Q: What should I do if I am considering selling my house?
A: I always advise my clients to sell when they are ready to sell. Don’t try to “time the market.” Factors working in your favor right now: Low inventory means less competition; low interest rates means buyers can afford more; and Proposition 19 allows you to transfer your property-tax basis to your new property.
Capital gains are always a consideration, but current tax laws are still
favorable, offering a $500,000 capital gains exemption for couples. The fact that you have to pay capital gains
means you have already made quite a lot of money.

Owen Halliday is a longtime Los Altos resident and realtor who manages the Sereno Group office in downtown Los Altos. Email comments, questions and potential column topics to This email address is being protected from spambots. You need JavaScript enabled to view it.. For more information, call 492-0062.

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