When researching the home buying process in California, you've probably heard about the "standard" 20%…
Are you planning to buy your first home in the Bay Area during 2021? Wondering what to expect next year, in terms of real estate and mortgage trends?
You’ve come to the right place. Below, we will analyze some of the key trends that could affect Bay Area first-time home buyers in 2021. We’ll look at everything from inventory to prices. There’s a lot to cover, so let’s jump right in.
Buying Your First Home in the Bay Area: 2021 Outlook
Bay Area home sales are expected to remain steady over the coming months, and they might even climb in 2021 (compared to 2020). You can expect house prices to continue climbing in most parts of the region, with the possible exception of San Francisco itself.
On the inventory front, Bay Area first-time buyers will continue to face big challenges next year. Supply levels remain low, from a historical standpoint. All in all, 2021 will likely be a competitive year for the real estate market.
Let’s tackle these trends one at a time, from a first-time buyer’s perspective.
1. First-time buyers will encounter rising home prices in 2021.
In most parts of the San Francisco Bay Area, home buyers will likely encounter rising home prices in 2021. In fact, it might be more accurate to say that prices will continue climbing as we move into next year.
Home values in most cities across the region rose steadily in 2020, despite the COVID situation. And that trend will probably continue into 2021, with one glaring exception — San Francisco.
The city of San Francisco could actually see a dip in prices during 2021, according to some forecasters. An outflow of residents has caused housing inventory to “pile up” in the city. These trends have altered the supply-and-demand picture in San Francisco, which could soften the market over the coming months.
But in most of the other cities across the Bay Area, first-time home buyers will feel a sense of urgency due to rising home prices.
On December 2nd, Realtor.com published a housing market forecast for the nation as a whole along with the 100 largest metro areas. By their estimation, home prices in the San Francisco-Oakland-Berkeley metropolitan area (a large swath of the broader Bay Area) will rise by around 8.4% during 2021.
The South Bay could see even bigger gains next year, in terms of home values. The Realtor.com forecast mentioned above predicted a year-over-year gain of 10.8% for the San Jose-Sunnyvale-Santa Clara metropolitan area.
2. Buyers will have to compete in a fast-moving housing market.
In mid-November 2020, the California Association of REALTORS® reported that homes in the Bay Area were selling faster than in the past. To quote that report:
“The median number of days it took to sell a California single-family home was 10 days in October, down from 24 in October 2019. The October 2020 figure was the lowest ever recorded.”
Some Bay Area counties — including Contra Costa and Santa Clara — had an even lower median number of “days on market” during that same month. In most cities across the region, the typical time it takes to sell a house is well below the national average.
Translation: It’s a fast-moving real estate market with strong demand.
These trends will affect many Bay Area first-time home buyers in 2021, especially those who plan to make a purchase in the East or South Bay. Those markets are particularly competitive right now. Local real estate agents have even reported bidding wars on homes in some desirable areas.
In a September news release from the national real estate brokerage Redfin, local agent Suzanne Masella noted that a lot of folks are leaving San Francisco for surrounding towns and suburbs that offer more space. This is largely due to the increase in remote working, brought on by the coronavirus pandemic.
A lot of tech workers who are permanently working from home are selling their San Francisco condos and relocating to Alameda, Contra Costa and Marin counties, where they can buy a house for the same price. There’s such huge demand for homes with yards, a separate office and a quiet space for the kids to do schoolwork that a well-priced single-family home … could end up with 15 to 20 offers.”
These trends are regional in nature, so they could affect many Bay Area first-time home buyers in 2021. The bottom line is that if you plan to buy in an area where there is high demand, you’ll want be prepared for stiff competition.
3. South Bay and San Jose expected to be red-hot in 2021.
First-time home buyers in the Silicon Valley area — in particular — could also see stiff competition next year, due to a severe shortage of homes for sale.
To be clear, inventory remains low across most of the Bay Area, heading into 2021. But some local housing markets are really short on supply. Most of the South Bay / Silicon Valley area falls into that category.
In fact, a recent forecast from Realtor.com predicted that San Jose, California would be one of the top-ten housing markets in 2021.
The research team at Realtor.com noted that San Jose’s strong economy, tech presence, and top-notch school system lure talent from all over the country. They added that “without a ton of room for new construction, inventory in the area is tight, so serious buyers should expect to pay above asking price.”
So there you have them, three of the biggest trends affecting Bay Area first-time home buyers in 2021.