Like almost everything else in 2020, the housing market has provided some surprises. One would think that during a pandemic, people would hunker down, delay any plans to relocate, and wait out the storm. Instead, the housing market is red hot.
Record-low interest rates combined with COVID-related changes have spurred people to buy and sell property just as fast as they can. Apparently, people don’t want to hunker down in cities full of protests, traffic, and COVID. And now that many companies have announced a shift to allow permanent telecommuting, their employees are seeking rural communities like ours, with plenty of open space and the only protests being a few sign-waving die-hards at the County courthouse on random Fridays.
The other group spurring this residential real estate boom is millennials. As a rule, they’ve waited longer to marry and have kids, but many of them finally appear to be ready to take the plunge into home ownership. I’m thinking the pandemic may have nudged them into action, since for some, living with their parents through a shutdown helped them fully appreciate the benefits of having their own space.
Really, though, the biggest driver of the hot real estate market is historically low interest rates. It has people jumping into the housing market at record rates. Throughout the state, residential real estate prices are up and so are the number of home sales. In September 2019, the median single-family-home price in California was $605,680. The median price in September 2020 was $712,430. In Mendocino County, prices went from $407,500 to $500,250. In the state, sales volume was up 21.2 percent in September year over year; but in Mendocino County, it was only up 3.3 percent. I attribute this to the fact that we simply have no more inventory.
We have had a housing shortage for more than a decade, and the wildfires in recent years have only made it worse. Some people displaced by the fires have rebuilt, but the majority either bought a preexisting home here in the valley or they moved out of the area. This housing shortage causes a lot of problems, and one of them is that we lose the opportunity to bring much-needed doctors and other professionals to our communities, as we did after the fire in Paradise, California.
So, what can we do? We can support reasonable regulations that encourage healthy growth. Right now, government regulations discourage housing developers from investing in our communities. It’s been more than ten years since we had a market-rate housing development of any size go in. People sometimes forget that more housing at the median price point will create more housing at higher and lower price points as people move out of old homes and into new ones. Some households are growing and need more space; others are downsizing.
The Bella Vista development across from the Ukiah Valley Athletic Club will ease the pressure on Ukiah’s housing supply and therefore ease the pressure on local housing prices. It’s simple economics: more supply with similar demand translates into lower prices.
Statewide, houses are selling at 100 percent of list price on average. In Mendocino County, houses are selling at about 98.5 percent of list price. And prices continue to rise. If we want enough housing for everyone at all price points, we need to allow housing developers to make a profit. Otherwise, they’ll keep choosing other communities over ours and we’ll get no new houses. This is how we lose our children to other communities.
If you have questions about property management or real estate, please contact me at email@example.com or call (707) 462-4000. If you have an idea for a future column, share it with me and if I use it, I’ll send you a $25 gift certificate to Schat’s Bakery.
Dick Selzer is a real estate broker who has been in the business for more than 45 years.