Snapshot of the State of Housing

Pandemic Edition

by Khang Tran

March 2022

Slow down a bit…

Ever wondered how the housing market shifted during COVID? Real estate firms such as Zillow and CoreLogic had both predicted that home prices would fall. Nope, quite the opposite.

Two things are for certain. To homeowners, the housing market was like the California gold rush for them. To people who were looking to buy homes, they got their hopes up often to be let down, being outbid or priced out. And yet that is the for-sale housing market only. COVID’s effects on rents are a completely different story.

Join as we take a look at the California housing market over the past two years and get a snapshot of where we are in March 2022.


March 2022 Snapshot

In the months following the pandemic, millions of people were and still are left unemployed, hungry, and worried. Now a little over two years into living through lockdowns, COVID variants and surges, the feared California Exodus, and the Great Resignation, we can get a clearer sense of the state of housing today. 

At the start of the pandemic, there was a migration out of San Francisco and Los Angeles, but not a migration out of California as some had predicted. In a March 2021 article, the LA Times quotes the Executive Director of the California Policy Lab at UC Berkeley as saying, “With people leaving, we’ve seen rents going down pretty dramatically.” They continue saying, “Most who left San Francisco stayed in the Bay Area economic region… and some 80% remained in the state — a trend consistent with pre-pandemic patterns.” A November 2021 NY Times story shows this trend continuing into the end of the year. They quote a senior fellow at the Public Policy Institute of California as saying that moving “tends to be within a certain metropolitan area, and a lot of that is people moving to suburbs and exurbs. Californians are likely to move from Los Angeles to the Inland Empire or from San Francisco to the fringes of the Bay Area or the Sacramento region. That’s because they want cheaper housing but don’t want to end up so far away that they need to change jobs.”

(source:  NY Times from CA Association of Realtors)

(source: Fortune from Corelogic Data)

With housing prices and rents already skyhigh in these major metro areas, the relocation of so many households to other areas of California has had great repercussions across the state. Despite the surging financial worries of many, the housing market drastically exploded across California. Since 2020, home prices across the state have increased by an average price of 28% and home equity has risen by $118k with huges increases in outlying suburbs and small metro areas

In 2022, California homes are predicted to increase by 5.2% with housing affordability dropping by another 3%. As long as the pandemic continues, and it will, CaRLA believes that housing inflation will do the same.

The For-Sale Market

Home Buying and COVID

When the pandemic’s first early hooks settled into the US, many people believed housing prices would decrease. Even large home buying sites like Zillow and data analysis sites like CoreLogic predicted a decline in home prices. They could not have been more wrong. 

Many believed that a large number of people would leave cities as COVID-19 created the possibility of working from home, essentially allowing people to live anywhere. They and many others predicted an exodus from cities and historical central business districts. It makes sense. Now stuck at home many had a new appreciation of their physical space and some wanted new environments and others wanted more space and home offices. Why would you not want to get away from populated cities when amenities were closed off due to COVID-19? Many would want to move back to their home cities or rather be closer with family. Added to the lower expenses on things such as dining out and travel, which led to more money saving, this combination led to a bigger demand for housing ownership. These reasons play a huge part in why housing prices actually increased. 

Additionally, many homes simply were not listed for sale. The financial concerns following the pandemic made many not list their homes for the year or take it off the market. Due to COVID-19, many were anxious to show their homes to strangers in person with the threat of COVID in the air. Even with technology, such as virtual tours, the supply of homes for sale was down to 2.5 months of inventory in comparison to other years. According to a realtor in another hot market, Missoula, Montana, “A healthy market is six months of inventory, and right now we’re under a month of inventory based on demand.” 

Along with the financial instability, new homebuilding slowed during the pandemic, further restricting supply. Homebuilding slowed because of safety concerns, a disruption to global markets, and the rise in the cost of construction materials. In addition, local zoning regulations, discretionary approval processes, and high fees restricted new developments as is normal in places like California. Many continued to block new buildings out of fear that low-income housing will degrade neighborhoods, lower property values, or violate environmental policies. Yeah…unbelievable.

The mortgage rate back in 2020 when the pandemic first arrived was at a record low rate of 2.67%. The low interest rates available allowed home buyers to buy higher priced homes and pay less over the life of their mortgage as compared to buying  a lower priced home with higher interest rates. This allowed first-time home buyers to save more if they bought a house during COVID-19. Unfortunately, a lot of people realized this, surging the demand for houses resulting in higher prices for homes across the country. 

The Result

2020 was the year where many millennials were predicted to reach the point where they could buy homes. For nearly two million millennials who were renters unable to purchase homes in urban/metro areas – a new possibility opened. They could now purchase houses farther out, particularly in places as far out as the Midwest where homes have historically been cheaper. Wrong again. Those areas have seen price increases of 13%, the highest growth ever. More western states outside the Midwest saw drastic price increases as well. Montana with 57%, followed by Idaho with 46%, Utah with 37%, Nevada with 37%, and finally Maine with 36%.

Homebuyers have many factors to consider such as job location, family size, or kids going off to college, but now another factor is at play. Many people enjoyed the idea of working from home. As a matter of fact, 75% wanted to continue doing so. Working from home gave people the chance to live where they pleased, be close to extended family, and spend more time raising kids.

The Rental Market

Renting and COVID

Oh boy, as if the situation was not bad enough…here comes RENTS.

Believe or not, rents actually went down at the onset of the Pandemic and continued to fall in the early days. In 2020, those in low-income households would “double up” or move back in with their families as unemployment engulfed the country and more were unable to afford rent, resulting in higher vacancies and lower rental demand. Many moved away from large cities to more rural areas. However in 2021, things started to somewhat look like they may return to “normal”. With the release of vaccines and more data being released, talks of schools and businesses reopening started being louder. They were right. Work places opened back up, schools, communities, restaurants, etc. People were tired of being cooped up in their homes and were anxious to get back out there.

The Result

Now in 2022, as we learn to live with the virus and things open back up, rental demand has once again increased to levels comparable to when the virus first hit. Students are returning to school, workplaces opening back up, and people wanting to regain a sense of normalcy constituted increased rental demand. As of Feb 2022, prices in the Bay Area have increased…again. Many cities such as San Mateo, San Francisco, and Berkeley jumped up 17%, 16%, and 13% respectively. Notable places outside of the Bay Area include Miami with a 25% price increase in the past two years. Another place being Asheville, North Carolina jumping 33% in smaller towns.

The ridiculous rising rent prices can be attributed to many things, including a lack of laws limiting rent increases in many jurisdictions across California. Other reasons entail concerns about global economic financial issues and our favorite word…inflation. Another issue is the expiring pandemic eviction protections. Many places are raising their prices again due to the Pandemic starting to “settle down”. Landlords have been known to use the excuse of renovating to evict tenants, allowing them to charge a higher price to new occupants. In April 2021, it was reported that 18.7% of renters were behind on payments in contrast to only 10.3% for homeowners. Fundamentally, the recent increases are just a continuation of a long-term trend that was in place prior to the pandemic: new home building has not been able to keep up with the demand for housing. After a short dip due to a global catastrophe, the rental market is bouncing back to its prior, unsustainable path.

What about Rent and Mortgage Relief

Prior to the pandemic, millions of Californians were already late on their housing payments; now it’s worse. During the pandemic, it was reported that 1 in 10 owner-occupied homes had fallen behind in their mortgage payments. Even worse, 1 in 6 renters had fallen behind in their rent payments. Many of those fallen under this category were people of color or those considered low-income. African Americans and Hispanic or Latinx led that category. Those behind on their payments by over 90 days were dubbed “Seriously Delinquent”. From 2019 to 2020, the “Seriously Delinquent” rate has skyrocketed. Those with less formal education and  African American or Hispanic/Latinx people were the most likely to fall behind in payments for rent or mortgage payments. Although the pandemic initially put many people in financial distress, causing them to fall behind on housing payments, generous federal aid and rising incomes have brought us to the point now where delinquency rates are historically low. California can and should do far more to protect and give aid to the thousands of struggling renters still out there facing potential eviction.

Aside from renters and homeowners, landlords are also deeply affected by the pandemic. When renters cannot pay, it puts a strain on landlords. Many landlords even considered selling their properties as a result. Approximately 51% of landlords who earned less than $50,000 a year with mortgage payments remaining felt more pressure to sell compared to those who are more well off. Sadly, the trend regarding race continues in this aspect too. African American and Hispanic landlords were also at increased financial risk. Roughly 5% of mortgages were in forbearance in early February of 2020. Loans were taken out in order to help pay for the late mortgage payments. While forbearance helped out many people, of course it did not erase or reduce the payment. It simply gives people a bigger lifeline. Regardless, many people did not understand the terms of forbearance and many more face difficulty receiving the aid. National forbearance reached a peak of 9% around late May of 2020, with 4.7 million landlords and homeowners. This amount culminated in around $1 trillion of unpaid mortgage payments.

With both tenant and landlord suffering as a result, many have come to the $5.2 billion state-wide rent relief program. What is the issue? Well thousands of renters have never heard back. Months and months but complete radio silence. As many of the eviction bans ended, many people were still unable to pay what they owed. Many renters have tried city relief programs due to the state program being so poorly run. The outcries of many pissed off tenants and landlords fell on deaf ears as politicians and state officials left no response. The California Department of Housing and Community Development reports that $2.2 billion have been sent out to around 40% of the 470,000 households that applied. But in reality, the National Equity Atlas reported that only 16% has ever received the promised funds. As a result, millions of renters and landlords are scrambling to make due. Many in the future will undoubtedly look more closely at a tenant’s ability to pay in order before renting out to them, making housing overall harder to access. 

What’s to Come

If that felt like a lot to take in, that’s because it was. We are living through a once-in-a-lifetime Pandemic in unprecedented times for our economy and housing market. One thing that we should have learned by now regarding the Housing market is how unpredictable and volatile it is in nature. With so many factors in play (the biggest being Covid), it is impossible to predict the beast. To play devil’s advocate, let us say we can predict it. How can we prepare or even counter it?

The one thing we can do is to continue the effort to create more homes being built. This helps to counter the rising prices of homes and puts us closer to a better California. It is our jobs to continue enforcing cities to do right by the people – housing is a right, not a privledge.

Time and time again, we cannot always rely on the cities or government. There is simply not enough enforcement or resources to go around. It is our job.