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 Real Estate Market Update 2021 – Don’t Celebrate Just Yet!

As a follow up to last week’s market update, today, I want to show you some data from the California Association of Realtors (CAR) which I found absolutely fascinating. The general trend? Things are definitely getting better and there’s some really good data that indicates very positive things–but don’t celebrate just yet.

We’ve recovered back a number of jobs that were lost during COVID

market update - We’ve recovered back a number of jobs that were lost during COVID

The first thing I want to talk about in this market update is jobs. As you can see from the graph, in California, we have gained back roughly half of the jobs that we lost during the COVID era, a significant gain in a very short amount of time. As things continue to open up, hopefully, by June 15, when the ban on masks and indoor limitations on capacity and such things come back, we hope a lot of those jobs will continue to come back as well.

Job losses

One really important statistic for jobs lost is that many jobs with wages under $100,000 per year were the ones that were hit the hardest. As you can see from the chart below, almost 88% of the jobs we’ve lost were blue-collar jobs. These are people working in bars, restaurants, retail, etc. They were the ones who lost their jobs and who were hit hardest during the pandemic.


On the other hand, a lot of the jobs with a salary over $100,000 actually did a lot better. This indication is a big reason why the top end of our real estate market and the prices surged up at that top end even more than one might expect in a recession.

Interest Rates, Existing Home Sales, Unsold Inventory

market update - key interest rates

An additional factor that got us here is that rates, interest rates, and borrowing rates are so low. Historically speaking, we’re at a very low point, as you can see, based on this graph that I have going back to 1971.

existing home sales

What’s interesting is at the end of 2020, we have a lot of strong metrics. First, existing-home sales increased by 509,000 units (+28%) year-to-year and +3.5% year-to-date, which is fascinating when you think about it. Why? Because, frankly, 2019 was a pretty good year overall. But then, we had COVID which shut everything down for a good chunk of 2020, and yet, we still have an increase in existing-home sales over that.


Second, the unsold inventory index is down substantially by 48% and prices are also up by 16.8% (+$717, 930). These numbers tell us a lot about the numbers relative to 2019, the year prior, and the trend we’re on into 2021.

Home sales maintaining momentum in 2021

One thing that I find super fascinating, which I’ve touched on at the end of the other market update I did last time, is this metric—home sales are maintaining momentum in 2021. Things are actually continuing to increase.


The National Association of Realtors suggests that at the end of 2021, there will be around 6.22 million transactions in the country as a whole. That is 10% more than what we did in 2020, and so, things are trending upwards. Again, you can see from the graph below that there was a big giant dip in the heat of the COVID pandemic as far as homes trading is concerned, but now, we are again trending upwards, and things are continuing to turn over.

market update - february 2021 sales

However, as you can see from one of the previous graphs, the days-on-market has decreased. Locally, I see here that the sale cycles, which is the number of days something sits on the market, have gone down substantially.


We used to spend two weeks on the market—you come on a Wednesday, do open houses for a couple of weekends, get that exposure, and then you take offers. Whereas now, it only takes about a week.


There are no more open houses, and you might even take pre-emptive offers because people are just clamoring to fight over one another to get their bid in for that house. So you might even experience being on the market for only three, four days, or sometimes even less, which is consistent with other markets that I’m looking at from an investment perspective. This is true for cities such as Cleveland and Pittsburgh to name a couple. Across the country, I’m also seeing other cities experiencing the same thing that we are experiencing. It’s not just us here, locally.

Cold Foot Index

market update - cold foot index

The graph above is a graph I found really interesting. It is the Cold Foot Index. Periodically as a realtor, I and many of my colleagues got pulled throughout the last year and a half by the California Association of Realtors to determine if we have buyers who withdrew their offers or sellers who withdrew their listings.


As you can see, the data shows a pretty aggressively downward trend over the last year and continues to go in that direction. This downward trend of the Cold Foot Index indicates that people continue to participate in the real estate market. They continue to transact and gain confidence, which we’ll also get into more later in this market update.

First-time Homebuyers

market update - first time homebuyers

Another thing that I think is important to look at is who’s buying. Who’s entering this market? Who’s transacting?


I find it super fascinating that in 2020, the percentage of the market of first-time homebuyers actually eclipsed the long-run average (37.2%) of just over 38% of our market in that year.


When you look at the situation for a second, you’ve got people at the higher end of the wage gap who got to keep their jobs and ended up doing very well coupled with very low interest rates. Therefore, mortgages become more affordable and people can leverage the money they have.


In addition, prices and all of that are pushing up as well. So it’s telling a tale that the ones who are succeeding in the current state of the market are the people who had that high income and had those down payment funds ready to go.


To buy or continue renting?


In general, the high net worth renters are the ones deciding to enter the market. They are the ones deciding to put down their roots and get into a home for the first time. On top of that, they’re also doing so with substantial amounts of cash. These homebuyers are bringing a lot of money as a down payment. This is really fascinating because if you look at the trends on the numbers on the image below, it tells that people not only have put more than 0% down but as much if not more than 20% down than they have in years past.


Thus, when you think about it, it must mean that there are people who are hoarding money and then entering the market at a strategic moment, or in an interesting moment, at least.

market update - first time homebuyers skin in the game

Lastly, I saw a lot of millennials comprise the biggest buyer pools today.


In my experience, I’ve had a lot of people who would qualify as millennials, like myself, who bought a home in 2020. I was one of the people who bought my first primary residence as an owner occupant in 2020. A lot of other people in that group are also doing the same thing. It’s fascinating when you think about it.


In other words, we have a renter class that is starting to transition into an owning class. Additionally, they are the ones who have a good amount of money and higher incomes. So that’s telling a really interesting story of what’s happening.


Hopefully, with the economy opening back up, jobs coming back, and people making money again, things can continue to go in the right direction. However, before we go there, it’s worth mentioning that a lot of people are also worried about a bubble crashing or having a repeat of what happened from 2008 to 2010.

There are not as many fundamental problems

market update - fundamental problems

If you look at the graph above, you can see that the fundamentals in the mortgage market that killed us last time are just not there. If you look at the Adjustable Rate Mortgage (ARM) Lending of 2005, 33.5% of those applications made up 44.7% or almost half of the mortgage volume of people actually transacting. Then, if you look at 2010, obviously, the numbers are super low. This is the same as with years 2015, 2018, and 2019 where all has been really low relatively. This means that we’re not going to have this readjustment of income or of payments in a year or two in the same scale that we did last time.

Homeowners are keeping cash in their homes

market update - cash out refinancing

On top of that, many homeowners keep cash in their homes instead of pulling it out and spending it. You can see on the image above that we have not hit nearly the numbers of applications of cash outs in dollars and cash outs as we did before. However, we did see a huge spike in actual refinances. People are really taking advantage of those super-low rates. So that’s super fascinating as well.

Estimates on foreclosures

As I’ve talked about previously in other market updates, and as you’ve probably seen on the internet, a lot of folks were talking about a wave of foreclosures coming into the marketplace that at some point, it is just going to wreck the economy, drive down the value of homes, increase the supply, etc. and that it’s going to be a mess.

estimates on foreclosures

However, what we see today is that that’s probably not going to happen. At least, not even close to the magnitude that people were suggesting. It’s because, based on the image above, the total number of delinquencies was pretty low overall.


Moreover, only less than 15% of those delinquencies had no plan to get themselves caught back up. On the other hand, the huge chunk of the pie, which is 85% of the people in the delinquency status or forbearance status for one reason or another, have figured something out.


Some of these people paid off their loans. 25.5% of them added a balloon to the back end of their loan. Some amortized their loan. And others have worked something with their bank. As a whole, these people have a plan and an idea to move forward and get back up from foreclosure.

Delinquency is improving


Another thing, when you look at this graph, and you look at where we were in 2007, 2008, 2009, etc., and compare it to where we were and are trending currently, it’s not even close to the same magnitude. I mean, if you look at the height, and the width of that huge bump back in 2010 Q2, for example, versus where we were in, say, 2020 Q2. You can see a significant difference in the figures. Also, consider the trend and how quickly it went up in 2020 Q2, but then is immediately coming back down. So it’s just telling a completely different story.

Potential REO scenarios

REO scenarios

According to some predictions that the California Association of Realtors is making, the REO market, whenever it comes back into a thing in some of these foreclosures, they’ll start to run their way through foreclosure and actually hit the market as an REO or a short sale or whatever, is going to be minuscule. This is especially true when compared to last time, where 60% of homes available in the market at one point were foreclosures. Now, it’s looking like it could be somewhere between 3% and as high as 10% only. So that’ll be one to watch to make sure that these numbers continue. However, it looks like it’s trending in a really positive direction for the health of the overall market.

Consumers still lack confidence

Now, one thing to remember why we should not celebrate just yet, why we should not open that wine and have a celebratory toast just yet, is because we’ve still got some stuff to do.


We’ve still got a lot of jobs to take back. We’ve still got a lot of consumer confidence to get back to the pre-pandemic levels, where people will go out, buy, travel, transact, and continue making income, save, invest, etc. We’re going in a good direction, it seems, but there’s still work to be done.

still lack confidence

Number of Active Listings Dipped

active listings dipped

Also, as I have pointed out in this market update and in last week’s market update, active listings are down lower, which is really interesting. I have that theory from the last time, which I gave you my thought on exactly why, but the short version is that I see the days-on-market shrink, as we saw in some previous numbers. What this means is that houses are moving a lot faster.


In 2020, the average days-on-market in California, believe it or not, was 11, which is down by 10 or 11 days on average compared to pre-pandemic days-on-market . It is unbelievable that 2020 did that to us.


Nonetheless, the average active listings dipped down to the lowest level in over 15 years. So it’s part of the story here for sure.

Affordability is deteriorating


The next one we’re going to talk about is affordability. Currently, we are in a situation where we have such limited overall supply relative to the demand. As a result, household formation is not keeping up with the pace of people coming in or deciding to settle down.


Even though many high-income earners have their jobs and have the cash to transact and the willingness to transact as we’ve seen, coupled with the fact that rates are lower, affordability is still declining. Also, as mentioned earlier, the current price for the median home in California is well over $700,000. But because prices continue to rise, the ability for the average person to afford a $700,000-house is declining. So, as a consequence, affordability also declines.


One more reason to note, as mentioned before, is that a big chunk of the population that lost their jobs is those who have salaries below $100,000. So losing one income source out of a household or two, coupled with home prices keep going up, would make it harder for someone with such a salary to afford it. Thus, affordability is at a very, very low rate right now. Not as low as it was in 2006 and 2007 according to the graph. Nonetheless, it’s at a lower point than it’s been in a long time.

30% of sellers left California

sellers left california

Left unchecked, we hear that if affordability isn’t going to work, the population will eventually decrease as people would opt to go and stay in another state, especially if they can work remotely. People would relocate and start a life outside California.


According to the data reported to the California Association of Realtors (CAR), 30% of people who sold a home left the state. That number is at a very high level relative to the history of it all.

Negative Population Growth

negative population growth

The net domestic migration is an all-time high or low, depending on how you look at it. In addition, the population growth in California has declined for the first time since we’ve started tracking it in 1901. The overall population went down for the first time ever in 2020. So eventually, there is a straw that breaks the camel’s back here.

California new building permits

california new building permits

The last one we will look at is this graph about new building permits here in California. I’ve been tracking this. I am fascinated by it for some years now.


As you can see, there’s a huge gap between the level of new units that needed to be built at a year and how many were actually built. Take 2020 as an example. In 2020, we had an 80,000 unit shortfall to the 180,000 units needed as estimated by the Department of Housing and Community Development (HCD). So eventually, we’re going to lose a part of the population because they simply just can’t afford to live here.


That is an interesting challenge, especially with the high price of construction, labor, materials, cost of permits for a new building, let alone the cost of actually all the construction, all the financing, and all that kind of stuff combined. So affordable housing is a really serious question mark for the state of the real estate market going forward. I’m not here to try and hypothesize a solution here. Nevertheless, it’s something that needs to be paid attention to, clearly.

I hope my Bay Area Real Estate Market Update 2021 "Don't Celebrate Just Yet!" 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

Bay Area Real Estate Market Update 2021 

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.

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Bay Area Real Estate Market Update 2021a

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