2020 Review – A Crazy, Covid Year

If this year threw you for a loop, you’re not the only one. It was a crazy, Covid year that we’d all like to forget, but the residential real estate market was charging all but a couple months.  Here’s the stats from the 4th quarter of 2020 and the yearly review for San Diego real estate, along with predictions for 2021.   Always hand-written with stats direct from our local MLS.  

2020 Q4 Year End Summary

Sales Volume Down: 2020 saw ~ 8% less closed sales than 2019 in total
Inventory Record Low!:
Down ~45% from end of 2019. Down 41% from Q3 2020
Loan Rates Record Low!: Started 2020 at 3.73%. Started Q4 at 3.04%, ended 2020 at 2.77%
Home Values Up: Median sales price Up 15% this year.
Govt./Policy/Life Changes: Covid-19 Shift, Stimulus Money & Fed Fund Rate


The Above image is a visual summary of my statistics reference from our local San Diego Association of Realtors.

Click here to View Full Stats from San Diego Association of Realtors

2020 Year Review – The Details

Sales Volume:
When you see that sales volume was down 8% this year over last, you might get the wrong idea if you weren’t immediately told that inventory was down by close to 50%.  Thus sheds much needed perspective on the slightly lower sales volume we experienced this year. We also had a month or two of very minimal activity during the early stages of the shutdown in late March & April. Thus, the only reason more homes didn’t sell is that there simply weren’t enough for people to choose from.  They had to scramble and pay more than the last person just to get something they (hopefully) like.

Record low inventory has been the predominant market factor this year. Inventory was already dropping when Covid happened. And then it ground to a halt.  New listings are down 15-20% this year and anything that does go on market at a decent price gets purchased within a week, often times over asking price. As such, active inventory has been hovering around 50% less than last year at the same time.

Loan Rates:
Rates had a short bumpy period in March, but otherwise, followed a rather consistent path down this year. We started the year averaging 3.73% for a 30-year fixed mortgage and ended up almost a point lower at 2.77%!  Rates are so low that people are able to save money buying instead of renting with minimal down payments.

There have been weird anomalies and different loan products performing much differently. For example, purchase loans have been the lowest/best. They have been about .5-.75 percentage points lower than refinance loans this year. Cash out refinance loans have been much higher this year due to liquidity issues and some banks stopped doing them altogether.

In short, I’m seeing more variance in the market this year, but the overall trend is that loan rates for all products are lower than they were a year ago, if not notably so, with a few minor exceptions.

Home loan rate charts:

Long Term Rate Chart: 1971 – 2021                               Short Term Rate Chart: 2020




Govt / Policy / Life Changes:

The Federal Funds Rate was dropped pretty quickly at the beginning of the year from 1.5% to 0% and has been hovering at 0 since the first lockdown in March. This has allowed banks to borrow money for virtually nothing and pass on those savings to consumers, spurring economic growth. The result in real estate has been lower home loan rates. With super low rates, it becomes more affordable to purchase a home, thus putting upward pressure on home values.

There was also stimulus money given out in the form of personal checks, PPP loans, EIDL grants, PUA and unemployment benefits. For the people that kept their jobs and felt secure, it’s been a great time to buy things at a discount, or to borrow for less. I believe that this influx of stimulus money has helped inflate prices.

But the new and potentially bigger market change is what I will call The Covid Shift. For example, the commercial office space market has taken a big hit. Where did those people go?  They work from home.  3/4 buyers in the last 6 months is expressing the need or desire to have a work from home space. Everyone wants 1 extra room now.  I have also noted a slowly growing discrepancy between demand for condos and detached homes with yards / land. People want and need outdoor living spaces – my new place to entertain a guest is my front patio with benches and a fire pit. The downtown condo market is weak in comparison to the Clairemont detached home market.  But although condos are not as hot as homes, they are still going up in value, just not as much.  Whereas office space inventory is up, vacancies are up and values took a solid 20% drop on average, if not more. And many expect the office market to keep dropping for a few years, as do I. There are some commercial markets that are doing quite well, like life sciences & medical devices and industrial space. This further illustrates that a shift in market needs/desires is re-shaping our real estate landscape. The loss in office space is being picked up by the residential market as homeowners buy bigger homes with an extra office space or larger yard to build an ADU/Office Shed. The loss in retail is being picked up by industrial space as retailers move online to sell their goods and into warehouses with their products. I believe we are creating a new “norm” and it will be a couple years before it all shakes out and these various markets start moving more ‘together’ again.

Home Values:

If you hadn’t already guessed, home values went through the roof this year.  Extremely low inventory, extremely low rates, and a market shift towards more residential space per household all combined to give us an average 15% equity gain countywide. Some markets went up 20% and some went up 10% – detached homes with more land were favored over condos, but all residential markets went up this year.

What does the future hold? My theories & predictions are below…

Of course, these are just predictions….that said…the house across the street from me just sold for $67k more than it was listed for at $875k in just 3 days. Now I’m not saying people are lining up to live next to me and my family lol, but they are scratching and clawing to get whatever they can.  And they are willing to buy at a higher price because rates are making their out of pocket expense lower – housing affordability has remained virtually the same for 3 years with minor ups and downs.

I’m going to predict another round of stimulus money in the first quarter, which will further propel our market into/through the Spring. I predict we will have a very tight low inventory market in Q1 that will bedgrudgingly see prices rise another 2-3%.  I will hope that more listings will enter the market in Q2 and through the rest of the year to keep home values from going up too much more, but I do suspect we will see a 4-6% increase in home values by the time we hit the summer. I tend to think another round of stimulus will happen in Q2-Q4 that will keep feeding the market of buyers with confidence.

For the handful of you that actually read my articles this far, you have likely heard me talk about the sell-off recently that is supposed to occur at the peak of each market. Historically, when a market starts to peak, listing inventory rises and so does sales volume as buyers start to have more choices for less.  If local and federal lawmakers continue to put a moratorium on evictions and foreclosures that will put off more inventory until the future. While those in need need help, there are also struggling independent rental home owners that are struggling and want to sell, but can’t. Once the moratoriums lift, we should see a small increase in inventory, but I’m just not convinced that a sell-off is in the books yet.  There are still a lot of people that are hunkered down due to Covid and don’t want to make any move until things are “safer again”, which has depressed inventory. There are too many things toying with our economy and lives for me to feel comfortable predicting much further, but currently, I’m thinking a smaller than expected “sell-off” and market peak will actually happen in 2022. However, I also don’t think the peak of the market in 2021 will be that much lower than the peak of 2022.  At some point, we will have to deal with the negative effects of Covid and take the band-aid off. If I were looking to sell a property in the next couple years, I would target the peak of this year, rather than wait with uncertainty to see if 2022 is notably better. But that’s just my generalized guess.

Want a free lunch?
If you got this far and read my entire article, please let me know what you think with an email/text/call. You’ve got a free lunch coming to you!  Or, we can share a glass of wine over my front yard fire pit at a safe distance 🙂

And thank you for your referrals – they are the foundation of my business at over 90% the last 5 years.

Adam Pascu
Broker / Owner
73 Degrees Realty

ps. feel free to check out my San Diego Green Homes site if you have a passion for living green/sustainably and contact me (cell: 858-761-1707) for a free consult regarding how to green your home.