Hans Struzyna

Hi, we’re Hans and Kristin Struzyna, a powerhouse husband and wife team, offering a real estate experience with your success as the core driver of everything we do. We believe in building authentic relationships, exceptional advice, effective communication, and constantly striving to be the best so we can deliver the best. 

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Bay Area Housing Market Update Q2 2021 – Bubble Trouble??

Inman, a real estate news publication that reports on real estate industry-related news, recently put out a series called “Bubble Trouble.” This series shared four stats that will give us hope and four stats that won’t. In this market update, I’m really excited to share with you some of those stats that I found really interesting, as well as some anecdotes about what I see on the ground in this local market so let’s get into this!

Bubble Trouble: The Troubling Numbers

1. Increasing Number of Licensed Realtors

Bubble Trouble - Number of Realtors
Image Credit: Jim Dalrymple II via NAR data

As I’ve said, the Inman article had eight different stats– four that were positive and four that are negative. Let’s start with the sort of negative ones.


One thing that I thought was interesting is they started the article with the number of licensed realtors. According to the article, there were 1.48 million licensed realtors in the United States right now, which has been the highest in recorded history since 1910. That’s only significant right now because the last time we saw numbers and a trend line in the uptick direction like this is in 2005 and 2006, and which really peeked out in 2008, when we all already know what happened.


Obviously, the number of licensed realtors has absolutely nothing to do with the market itself going up, down, or sideways. However, it is sort of an indication of the general public and something to pay attention to. In general, what it means is there’s a lot of competition at a time when there is not a lot of listings. Historically, there’s not a lot of inventory happening right now. 

Keep in mind that just because there are so many licensees does not necessarily mean anything relative to the health of the market or lack thereof. Nonetheless, it’s something to be aware of when you’re going out and shopping.

2. Rising Material Costs - Lumber Prices

Bubble Trouble - Lumber Prices
Credit: NAHB

The cost of lumber and other building materials are very important statistics to look into. We’ve seen many videos out here about the price of lumber, the tariffs, and why all of the import taxes and everything else affecting it. Moreover, the supply was taken down just when it actually needed to go up, so that’s really causing a huge shortage, causing the price to go up significantly.


Just a quick story, I talked to Joe, an architect here in East Bay whom I work with and refer to a lot. Joe told me the other day that he’s working on eight different projects right now, specifically in Alameda, where he focuses. Joe described the cost structure of getting a project started from just a simple couple of hundreds square foot addition, to building something brand new at the back of somebody’s house, or a second level, or whatever.


According to Joe, the cost of engineering drawings has almost doubled. He used to get those for somewhere in the $5,000 range. However, now he’s paying as much as $9,000 to $10,000 for the same set of drawings. Also, according to him, the permit costs here in Alameda have doubled. In addition to that, since there’s still COVID, the amount of time it’s taking also doubled. As a consequence, his fees have gone up to something in the world of 20%.


According to Joe, the cost of a lot of things needed for construction went up.


Joe then talked specifically about lumber. He mentioned how the cost of lumber and the cost of shipping it to the United States have both gone up. As some of you may not know, a huge amount of lumber, the big beams and stuff, come from the Pacific Northwest or Canada. Therefore, the cost to build an ADU or building anything from the ground up has also gone up significantly.


For example, according to Joe, just for paper alone, meaning permits, engineering, architectural drawings, and all of that stuff needed before you even dig a hole or pound a nail into something, someone is already going to spend somewhere in the ballpark of $20,000 to $25,000.


Then, when you look at someone who’s got a 2-BD/1-BA or a 2-BD/2-BA house and wants to have a bigger yard or expand it, it would cost them about $500 to $600 per square foot to build something nice. Maybe it could get them to as low as $400 to $450 per square foot if they don’t go with high-end finishes or if they do some of the work themselves. But overall, that cost has gone up significantly because the cost of building materials and the cost of permits needed for the construction have both gone up substantially.


What I think is happening is people are doing a cost-benefit analysis.


They’re probably computing all these costs and deciding, “Hey, for the amount of money I need to add an office, a third bedroom, or whatever it is in a couple hundreds of square feet, I could just take that money and put a down payment on another house. I’ll get something bigger that’s already there, and it’s done. No need to waste another six to 12 months to live in a construction zone, nor experience headache, and all that crazy stuff.” 

I think that has added to the value to the premium of something that fits your needs today, right now, as opposed to something you can build and that can affect your life for up to 6 to 12 months. That is definitely super important and worth considering.

3. Labor Shortage

Labor shortage
Credit: U.S. Bureau of Labor Statistics

The third component is the labor shortage. The U.S. Census Bureau reports  the number of skilled laborers for construction to have gone down significantly during COVID and has only recently started to trend back up.

However, because there’s such a lack of labor and such a premium on materials and contracting, building new houses has definitely slowed down and has gotten more expensive. That’s the reason why I believe there’s a premium for something that’s already built today as well.

Now, let’s go to a couple of other things that I think are maybe more on the positive side.

The Hopeful Numbers

1. Number of fully-vaccinated Americans

As of my recording date of this video in May 2021, over a third of Americans have been fully vaccinated. Moreover, I think around half of the population has also had their first dose of the COVID vaccine.

This news is obviously bringing a lot of positivity into the marketplace. People are starting to get out and about. They are starting to come out of their COVID little holes and trying to figure out their next steps in life. I think you’re also going to see some general enthusiasm into the economy as open houses come back, as opportunities to travel come back, and all that kind of stuff. This is what I keep reading and keep hearing a lot of people talk about. I think that this is going to continue to lift the economy and push it towards the right direction. 

2. Spending by builders that are creating residential spaces is going up

Construction Spending
Credit: Jim Dalrymple II via U.S. Commerce Department data

On a national basis, one interesting thing is that the spending by builders creating residential spaces has actually gone up pretty significantly. Part of that, I think, is probably due to some of the inflated prices we talked about earlier for labor and materials. But, also, based on what I’ve read, the U.S. Commerce Department is pushing the new construction back into a really good place.


Again, I think some of that might be a little artificial, given how expensive materials and labor are. However, people are still responding to the demand. Even if it takes time and is not something that can happen overnight, they are still building and constructing. Therefore, at least in the short term, this is why we see such a premium on the existing houses, as opposed to adding rooms or building new ones which could take several years to complete.

3. Projected existing homes sales in 2021

The last stat brought up in the Inman Article that I think is really interesting is that the National Association of Realtors is projecting that by the end of 2021, we should see a total of 6.22 million units sold. That’s significant because it’s 10.3% higher than what we saw in 2020!

However, there’s a lot of conversation going on about how there’s no inventory or there’s very light inventory so here’s what I think is happening. Yes, at any one time, there are not as many units on the market at any given day or week as it used to be. I have a great example of this here in Alameda, specifically.

In Alameda, before COVID happened, if you’d go out on a broker’s tour, you would see anywhere around 50-55 units available.

Sometimes, there could even be as many as 60-65 units. Then, if we’re on the low end, there would still be around 40 units at any given week. However, when COVID started, the number of units available for any given week shrunk to under 10 units, in many cases.

Since this is not very big geography, what’s happening in Oakland is similar to Alameda. The inventory was cut in half, and there were less than 200 units on the market at any one time in Oakland. It is ridiculous if you think about it!

Another thing that I see happening is the time it usually takes to complete a sale has shrunk significantly.

The two-week sales cycle, where you’d come out, for example, on a Wednesday, do an open house, a broker’s tour, and take offers the following weekend like we’re used to, has shrunk pretty significantly. Now, when you see something come out on a Wednesday, they’ll most likely already post an offer date for Thursday the following week. So it’s on for only eight days! Maybe you could even get it to be under seven days, or maybe four, if you get a pre-emptive, right?

So, where am I going with this? What I think is happening is that the turnover is happening faster. The days that these units are on the market have gone below the average. So, therefore, what you’re seeing is not necessarily less inventory, but just less available inventory sitting on the market for a given time. That is why the perception is there is less inventory.

In reality, things are just being turned over faster.

If you look at a snapshot of any one week, you’ll see that fewer units are available. It’s because inventory is being turned over quickly and not languishing on the market. Also, if you look at the macro level, you will see a pretty high volume of transactions as well. That is what I think this estimate is suggesting.

Personally, I’m also looking at investing in a couple of cities. Specifically, Cleveland and Pittsburgh are two that I’m focusing on. In these two cities, I am also hearing the same story that stuff is just being turned over in a matter of three, or four days, or even one day in some cases! Sometimes, the longest time a house would take to sell is just only a week! It’s surprising because this hasn’t been the case before. 

Before COVID, depending on the price point, it used to take 14-21 days or more to sell in these markets. Thus, I think this is really just about having this turnover effect. As a result, there is a perception that there’s not a lot of inventory. But if you look closely at the numbers, you’ll see that there’s just a good amount of turnover. To further support this,  the National Association of Realtors suggests that you’re actually going to see 10% more transactions this year compared to last year. So, yes, it is fair that last year was half out the window because of COVID, but still, you see where we’re going with these statistics.

I hope my blog on "Bubble trouble: 4 stats that'll give you hope (and 4 that won't)" has helped you.

If I can give you more context on the process of buying or selling your home, please do not hesitate to reach out. My information is below. 

Here’s to all your success!


Hans Struzyna

Bubble trouble: 4 stats that’ll give you hope (and 4 that won’t)

The market has shifted and you need to be aware of where we are going. I have created a free resource packed with all the information I tell all my clients when they start shopping.

Download my COVID Era Buyers Guide:

Bubble trouble: 4 stats that’ll give you hope (and 4 that won’t)

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