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.

[Dustin Allen]

@Cameron Harrison

I’m in South Lake Tahoe, CA and expecting mostly the same. Interest rates will stay low, home prices will stay high and inventory will increase somewhat.  

We have very low inventory right now so I do expect an increase. The question is whether or not inventory will rise to meet the level of demand we’ve been seeing since July. Up until now, demand has far outstripped supply and helped maintain a strong sellers’ market here.

[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.  

[Dustin Allen]

@Dan H.

I think you are right with regard to San Diego and other Major Metropolitan Areas.  That is a huge contrast with secondary/tertiary markets like mine where both Short Term and Long Term rents have exploded with the massive growth in demand both on the rental and the buy side.

I think it’s been pretty clear that more people want to leave big cities and live in smaller communities with better access to outdoor activities.  Remote work and school has completely changed the game for now.  It will be very interesting to see if and when that may change again and if people will ever be drawn back to big city life in large numbers.

[Julie DeWolfe Arroyo]

@Cameron Harrison I cant see how we can avoid some tough times, especially in urban areas that people are fleeing. Smallish landlords might be in a world of hurt after a year long moratorium on rent. I suspect many homeowners will not be able to repay their mortgages, business closures and job loss sure wont help. Nevertheless, many states are experiencing unprecedented growth which has caused real estate markets to out price local wages. I am deeply concerned that more areas will see sudden explosions of homelessness. City officials dont see adept at balancing tax demand growth with grandma's ability to pay taxes.

[Mark Frattini]

Q1 status quo.