THIS WEEK IN REAL ESTATE - May 2021
OPEN HOUSES:
The California Department of Health just updated its guidelines around open houses. There are still some restrictions in place, for example only a certain number of people can be inside the home at one time and everyone must be masked, but this is quite an improvement from the previous zero-tolerance policy. We also have gotten word that they are working on modifying the rules around PEAD forms (those annoying COVID forms everyone has to sign before entering a listed home). Realtors, home buyers and sellers rejoice!
EVICTION MORITORIUM:
To California landlords' delight, the current eviction moratorium was just struck down by a Federal judge this week. If this goes through, it would mean that landlords would once again be able to evict tenants for non-payment of rent, something they have been unable to do during the pandemic. The DOJ will appeal the decision so the results are still in progress. If you are a landlord and this affects you, reach to your real estate attorney for guidance.
LUMBER: (see graph above)
The price of lumber has QUADRUPLED in the last 12 months and its causing huge problems in the construction industry. 30% of America’s lumber comes from Canada where the mountain pine beetle has destroyed a 15 year supply of lumber. Things adding to the shortage - unprecedented demand brought on by board homeowners during the pandemic, trucking shortages for delivery, and a harsh winter in Canada.
HOUSING BUBBLE?
In 2008, when the market crashed, construction came to a halt. It didn't return to normal levels until after 2014, 6+ years later. This has resulted in a severe shortage of homes in the US that continues to play out today.
The current demand is further being fueled by a mixture of historically low interest rates and lifestyle changes brought on by the pandemic. A third factor, is the number of millennials coming into their home buying years. As you might know, millennials are the largest generation ever to reach adulthood, even outpacing the Baby Boomers. This combination has created the most intense seller's market we have ever seen. The demand, coupled with record low inventory, due partially to home owners not wanting strangers in their home during a pandemic, is causing the rise in home prices this time around.
“The combined numbers of millennials turning 34 over the next decade — the median age of first-time home buyers in 2019 — is roughly 46 million, the largest such number expected to reach that age in a single decade...And as millennials age, there are millions more of their younger peers in Gen Z behind them waiting in the wings.”
Last time around, the crash was caused by millions of Americans buying homes they were not qualified to afford. This was due to extremely poor and predatory lending practices that led to a surge in demand, driving up prices, and then leading to the market's demise.
Fortunately, his time around we have the Dodd Frank Act of 2010. This law created minimum ability to repay standards (documentation and cash down to qualify) for all residential mortgage loans. This time around is MUCH different, and most experts do not predict price decreases or even a slow down anytime soon.