How could I start out any commentary on the end of 2020 without at least pausing to acknowledge the unique, intense and eventful year we’ve all had…? Whoa.
The world of Real Estate has rolled with the punches along with everyone else, and Humboldt County has fared well so far. For a solid recap of how things have been going, check out the 2020 Spring , Summer and Fall Market reports. Right now, Our biggest struggle is that we do not have enough inventory. There are more buyers than sellers by a good margin and that is driving prices up.
Rising sale prices is good news for sellers. The sale-to-list price ratio has risen significantly in the last year, from 94% to 97% . This means that more sellers are getting the price they ask, and I can assure you, it’s not because people are pricing their properties any less aggressively.
Proof that sellers are getting the prices they want comes in the form of the median list price, which has risen incredibly quick from $310k in December of last year to $370k at the end of last month. This is a tremendous increase.
It’s no secret that real estate in Humboldt continues getting more expensive. Some financial predictors seem to think that our market will finally catch up to the rest of the state and could grow 5-15% in the next five years.
That might happen, but it also might not- or at least not as fast as that. It seems like most prices have reached a point where using residential homes as an investment might not pan out considering our current rents. The Covid situation and recent rent increase laws are slowing down the rate at which sales prices and rents match up to make a good investment. This is probably good news for local folks who want to invest in themselves and buy a home, because it should mean there is less competition for the residential ideal of a 3bed 2bath family house in reasonable condition.
Also, it seems that some investors are taking notice and are choosing to sell off one or all of their investments – either because they’re done doing the work of renting out properties and want to maximize their investment, or because it makes sense to sell smaller properties and reinvest in bigger ones right now. It also appears that large, dividable lots are coming up more often, with developers looking to increase our housing capacity.
Another interesting statistic points to how little inventory we have available, and is that the absorption rate, which has halved in the last year. This number indicates that the same properties were taking twice as long to sell last year. The current rate is 2 months – much which is pretty quick to be the norm.
On the horizon, there is lots of chatter about California’s recent population statistics. This year, more people left than arrived. There are several reasons for this trend. First, is California’s taxes and general cost of living. 5 out of 10 of the US’s most expensive places to live are in California. It’s just plain expensive to live in California. Other reasons point to political restrictions on business, and possibly the beginning of a corporate exit from the sunshine state. With Tesla announcing that they’ll be relocating out of California, it’s possible we’ll see other companies follow suit, recognizing that the telecommute is the shortest commute.
Covid has definitely impacted businesses in this dramatic way, and that is trickling into Humboldt county. With our rural beauty and small town feel, we are the perfect, not-too-far, not-too-close area of California for the “urban flight” to take advantage of. Other people are looking to extreme rural areas of Humboldt as investments for the eventual growth of the area or for a good off-grid place to bug out.
All of this contributes to our rising market, and when that is combined with the low inventory, it makes it hard to be a buyer. Multiple competitive offers are still the norm for well-priced properties in good condition. As a buyer, this can make things seem very daunting and disheartening. Certainly, the rising prices have outpaced some buyers, and there are some people who could have afforded to buy a year or two ago, who now can’t really get into anything. But mortgage rates continue to be very low, and since property here is forecast to continue increasing in value rather quickly, it still makes sense to buy a home here if you can afford it.
I for one, am hoping that our market stabilizes where it is for now, and doesn’t continue to rise too quickly. That kind of change is unsustainable in the long-term. There will eventually be a peak, and inevitably, someone will suffer the consequences of the peak – because it’s almost impossible to predict.
I’ll come full circle and wrap up right where I started – if we had more people putting properties on the market, that would help a lot. All of California’s real estate virtually ground to a total halt in March with the initial shelter in place orders. However, most parts of California saw a complete rebound this summer. Here on the North Coast however, we just never had the number of listings return to where it once was.
So, while I may feel like a broken record, I’ll say it again for those in the back – give us a call if you’re even contemplating selling property right now. You might be surprised by what it’s worth.
Brian and I are wishing you and yours Winter blessings and looking forward to a bright, less troublesome year in 2021!