Expectations for Local and National Markets in 2021?

[Cameron Harrison]

Hey everyone, 

As we approach the end of 2020 (finally) in a hot seller's market, I want to see what everyone thinks is in store for 2021? I work as an agent/investor in San Diego and we are projecting interest rates to remain low, home prices to stay high, and inventory to jump up. What do you guys think? Open to any and all opinions, ideas, and projections! Love to hear what other people are thinking.

[Dan H.]

I think the risk of a depreciation cycle is higher than any time in the last 8 years.  Here is some of the rationale:

• Supply has been reduced since the start of COVID.  This would indicate a likely backlog of supply.  
  This low supply combined with the low interest rates has resulted in appreciation that exceeds what would have been achieved with a normal supply.  This is a way to say the prices are artificially high.  
  LTR tenants have had rent forbearance.   I think most of that forbearance will not be recovered by LLs.   This will result in realized losses.  Especially LLs that rely on cash flow are going to have issues.  
  Our 2 San Diego STRs are down over $75k in lost rent. The state restricting STR rentals for >3 months and reduced occupancy the remaining COVID period has significantly impacted the STR rents collected. Especially recent STR purchases are to be impacted by this lost rent.
  San Diego recently had its highest unemployment ever.  
  Many businesses have closed, Some will never reopen. 
  Retail space has been decimated.  Vacancies everywhere.  
  college/university housing has issues due to online learning.   Hard to know if this will recover now that online learning has been established. 
  covid has resulted in a depletion of savings.  Savings are required to purchase homes.  
• Rent has been flat.  Many LLs in San Diego purchased expecting rent increases to provide their cash flow.  No rent increase results in lower return than projected.  

There are some who have had a great year financially, but most people have struggled financially.  Home prices are already out of reach of many San Diegans.