Record-low mortgage rates, record-high stocks power double-digit gains for owners
Big prices are leading to the biggest gains in more than a decade, the latest argument for buying and building wealth through homeownership.
Record-low mortgage rates coupled with a record-high stock market helped generate head-turning profits, from Sacramento to San Diego.
The Central Valley, easily the most affordable market in the state, boasted the biggest percentage gains in 2020 compared to 2019, while the Bay Area enjoyed the largest money-in-pocket for owners that sold in 2020, according to ATTOM Data Solutions.
Bakersfield rules, really
Home-sellers in Bakersfield — yes, Bakersfield — made $83,000 on their property, a 27.7% return on investment compared to 2019, the largest percentage profit among the major metro regions in the state. Bakersfield homeowners-turned-sellers have enjoyed gains for eight consecutive years, following five years of losses from 2008 to 2012. But the current gain is far from the record of $133,000 in 2006.
The average home-seller in Fresno, the largest city in the Central Valley, had an 18.1% gain last year with a $94,500 payday. Fresno-area home-sellers had their best profit since the $137,000 in 2005. Like Bakersfield, Fresno also endured eight consecutive money-losing years between 2008 to 2012.
The percentage gains in Bakersfield and Fresno are nice, but far from the money made in San Jose and San Francisco at $550,000 and $375,000, respectively.
Home sales ‘aided by super-low mortgage rates and a strong stock market’
San Francisco had the smallest return on investment at 2.7% among the major metros in the state compared to 2019, largely because many buyers have been looking at inland markets rather than paying a $1 million-plus price during the pandemic that has allowed more folks to work from home.
However, San Jose-area home-sellers had the nation’s largest return on investment at 87%, based on their buying and selling price, regardless of when they sold. San Francisco sellers had the fifth-largest percentage increase at 68%.
“A once-in-a-century health crisis tore through much of the nation’s economy but seemed to have the opposite effect on the housing market,” says Todd Teta, chief product officer for ATTOM Data. “Demand remained strong as people who could afford the space and relative safety of single-family homes did just that, aided by super-low mortgage rates and a strong stock market. But they went after a narrowing supply of housing stock, so prices soared and so did seller profits. While it’s unclear how long that will last … there will be few years recorded as better for sellers and more challenging for buyers.”
Nationwide, the average home-seller had a net gain of $68,843, a 35% return on investment, the best since the housing boom in 2006. It was the largest return on investment since 2017.
Now, something to remember, the returns on investment are based on the purchase compared to the selling price, and does not include brokerage commissions and income tax on the transaction, if any. As always, speak to your accountant to determine the net payout.
Source: ATTOM Data Solutions
Report: Most Californians moving don’t leave the state
When the world’s richest man moves out of California and some other billionaires follow, it grabs headlines and makes newscasts.
But Tesla Inc. founder Elon Musk, Oracle Corp. founder and chairman Larry Ellison, Dropbox CEO Drew Houston and several other high-profile business leaders leaving the state are more the exceptions than the rule.
Concern about a mass exodus from California is merely Bay Area residents relocating to other parts of the state — and not a stream of moving vans headed elsewhere. Instead, those abandoning the state are not being replaced by those moving in, according to a new report by the California Policy Lab.
‘Mass exodus … clearly didn’t happen’
California’s high taxes, left-leaning politics and record-high home prices are certainly causing some residents to leave for Arizona, Texas, Idaho and Utah, but only slightly more than in the past.
“While mass exodus from California clearly didn’t happen in 2020, the pandemic did change some historical patterns,” says Natalie Holmes, a research fellow at the California Policy Lab and a graduate student at the Goldman School of Public Policy at University of California, Berkeley. “For example, fewer people moved to the state to replace those who left. At the county level, however, San Francisco is experiencing a unique and dramatic exodus, which is causing 50% to 100% increases in Bay Area in-migration for some counties in the Sierras.”
Almost 39,000 San Francisco residents left the city in 2020, compared to 5,200 in 2019 — a more than 600% increase. But even San Franciscans leaving their heart behind (and the sky-high housing costs) are staying close by, with two-thirds remaining in the 11-county Bay Area and 80% staying in California.
Last year, about 18% of Californians that moved left the state, compared to 16% in 2015, according to the report. The biggest difference is historically the number of people leaving the state has been matched by those moving in, but that changed in 2020. About 267,000 Californians waved goodbye in 2020, but only 128,000 entered the state.
And those abandoning California are not the high-income earners as many worry, despite the Musks and others relocating, says Evan White, executive director of the California Policy Lab at UC Berkeley.
“We don’t see any dramatic evidence that rich households are fleeing California en masse,” he says. “Unfortunately, because the state relies heavily on income taxes on the uber-wealthy, the departure of even small numbers of wealthy people could negatively impact revenues if they aren’t replaced with new entrants.”
Single-women buyers increase in some California cities, slide in others
Despite the Covid pandemic, a still-struggling economy and some ongoing uncertainty, single women are buying more homes nationwide — just not as much in California.
Single women were 15.7% of buyers during fourth-quarter 2020, an 8.7% increase compared to the same three-month period in 2019 — and almost twice as much as the growth percentage of single men homebuyers nationwide, according to Redfin.
The single-women buyer gain is a bit of a surprise since the Covid-driven recession has disproportionately affected women more than men in 2020. And women, who earn just 82 cents for every dollar earned by men, are often in hard-hit industries such as health care, restaurants and retail, and many women have left paying jobs to take care of their children or other family members during the pandemic.
Sacramento and Riverside are top markets for single-women buyers
California, where affordability is often an issue for buyers, had fewer single-women buyers compared to the average nationwide. But there were some cities in the state that fared much better than others.
Sacramento, one of the hottest housing markets in the nation, had the largest percentage of single-women buyers in California at 14.9% during the fourth quarter, a 2.1% increase compared to a year earlier.
Riverside had the second-highest percentage of single-women buyers in the state at 13%, down 2% from a year earlier. Los Angeles County came in third-place with single women making up 12.5% of buyers, flat compared to fourth-quarter 2019, according to Redfin.
‘Another illustration of America’s uneven financial recovery’
San Diego and San Jose — some of the least affordable cities in the state — had the largest percentage gains of single-women buyers at 3.5% and 2.8%, respectively. Single women were 11.2% of buyers in San Diego, where the average single-woman buyer paid $520,000 for her home. While single women were only 6.3% of buyers in San Jose, that was a 2.8% increase compared to the final three months of 2019. The average single-woman buyer paid $819,500 for her home in San Jose.
Oakland, Anaheim and San Francisco went in the wrong direction with the percentage of single-women buyers dropping.
Single-women buyers plummeted 9% in San Francisco, plunging to 8% of overall sales — easily the largest decline in the state. However, the San Francisco market has been struggling for several months, as more residents move outside the city (see previous blog item). Even with fewer buyers and more residents moving out, the average single-woman buyer paid $1.07 million in San Francisco — or about $370,000 more than the median home price in the state, according to the California Association of Realtors.
“This is another illustration of America’s uneven financial recovery,” says Redfin chief economist Daryl Fairweather. “While millions of women have lost their jobs during this recession, the impact has largely been on lower-income women. Meanwhile, most women who were able to afford homes before the pandemic are likely still able to afford homes, and low mortgage rates, especially at the end of 2020, have been incentivizing them to buy.”
One of every four home buyers is a single woman in Boston
Boston was the best market for single-women buyers in the U.S., with single women accounting for one of four homes sold during the fourth quarter, even better than the 23% for single men.
Providence, R.I., and Detroit came in at second and third place with single-women buyers making up 20% of total home sales. But here is the head-scratcher: the percentage of single-women buyers in Detroit was down 30% during fourth-quarter 2020 compared to a year earlier.
Virginia Beach, Va., had the largest percentage increase of single-women buyers nationwide at 15.7%. Single women were 17.6% of buyers in Virginia Beach, about 200 miles southeast of Washington, D.C.
6 California cities among Realtor.com’s hottest housing list
Everyone enjoys a turnaround story, and Stockton-Lodi is a hard-to-imagine tale.
Stockton and Lodi — about 90 miles east of San Francisco, and 45 miles south of Sacramento — is the nation’s hottest housing market, according to Realtor.com. It’s a dramatic turnaround from a decade ago, when Stockton was one of the hardest-hit housing markets nationwide, dominating the list of foreclosed properties during the Great Recession.
The community’s median home price of $480,000 is almost $1 million less than the nearby Bay Area and helps lure buyers.
The average home is sold in 37 days in Stockton and Lodi, one of the fastest-selling markets in the U.S.
Five other cities in California also landed on the so-called hot list, with Vallejo-Fairfield at No. 4 and Sacramento-Roseville at No. 10, according to Realtor.com.
Again, both communities — and home-sellers — are benefiting from Bay Area residents looking for lower-priced homes to purchase. Vallejo-Fairfield homes are selling in 27 days, while Sacramento-area homes are about 36 days.
Yuba City, about 30 miles north of Sacramento, finished at No. 13, followed by Modesto at No. 14. Fresno cracked the top-20 list at No. 17.
Longtime business journalist-turned-communications executive who enjoys reporting on residential real estate in his spare time.