As we get closer to the end of a rollercoaster of a year and one of the more unique holiday seasons we’ve experienced in our lifetime, home continues to be a central focus of our everyday lives. Where maybe we have taken our homes for granted, I think it’s safe to say we all have found more reasons to appreciate the walls that surround us, the yards our kids play in, and the rooms we share moments in. We continue to see this focus play out in the local real estate market as well as the national market. The S&P Case-Shiller Index reported a 7% gain across the country in their most recent press release (through September 2020), and across the wider South Bay we have seen prices increase 9.2% year-over-year through November (MLS reported sales). This is illustrated in the chart below. As we close out the year, there’s little sign of things slowing down.
What is driving the market?
It’s all about low interest rates. The average 30 year fixed mortgage rate just hit an all-time low for the 15th time this year. According to Mark Fleming, Chief Economist at First American Financial, “how much home one can afford to buy given their income and the prevailing mortgage rate is a primary driver of home-buying demand.” “Fannie Mae predicts average rates for the 30-year fixed loan will remain at 2.8% through 2021 and only rise to 2.9% for 2022.” The Mortgage Bankers Association is less optimistic, predicting rates will increase to 3.3% by the end of 2021. Regardless, the low mortgage rate driver, coupled with strong buyer demand, especially with Millennial buyers entering the market, will likely mean another strong market in 2021.
Thanks for reading, and if you have any questions, I’m here to help.
