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2021 Economists View

I spent Tuesday morning listening to the chief economist for the National Association of Realtors give his take on where we are now, how we got here, and what we might expect in the next couple of years. 

Our local market is white hot as I’m guessing many of you may have heard. It’s not the same market we had back in the early years of the century (2005-2009.) Easy loans are not the norm, the inventory of new homes is quite low (~1/3 what it was in 2009ish,) and inventory of existing homes is low. He did not see this situation as a bubble – nope – no bubble. 

The job market was on a steady climb for 10 years from 2010 – 2020. Then April of 2020 hit (or actually the world wide pandemic hit) and we lost all those jobs! One year later we are half-way back to where we were in March 2020. After the pandemic, the job market is expected to surpass where it was before April 2020. 

The “work-from-home” phenomenon is here to stay. Not like it has been through the pandemic, but some lighter version of that. Many people have shucked the close-to-work criteria in favor of a larger home with room for an office (or two) and areas away from town, away from work, away from the city. Long commute – who cares? You may never have to do that commute again – or if you do – perhaps only a couple times a week and suddenly - it’s manageable. 

Office space is cheap and vacant, the condo market is flat and the single-family home market is up, up! Mortgage rates dipped below 3% in January 2021, less than 3%! There may be a move up on that front come late Spring or Summer – but nothing drastic is expected. The concern for inflation is making some rumblings, but this economist didn’t expect more than about a 2% rise in inflation over the next year or so and probably not more than 4% within 5 years. And your best hedge against inflation? Real Estate. The prediction was even thrown out that Santa Cruz real estate, which is expected to continue, may surpass the prices of it’s big sisters; San Jose and San Francisco. That will be something to see!

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