Newsletter January 24, 2021

 In my last edition, Zillow estimated a 10% increase in home values for 2021. These will come from inflation. Near the end of 2020, lumber prices increased due to the lack of production thanks to the Coronavirus.  Several large lumber mills in the U.S. came to a halt.  Home builders suffered the consequences.  Pressure treated wood prices increased 79%, dimensional lumber 73%, plywood 59%, decking 60%.  Along with these specific items all associated building products increased.  It was not usual for new home prices in the U.S. to increase $90,000 as a result of rising lumber costs.

 

The other issue for rising lumber prices was the tariffs with Canada.  Our domestic market cannot supply all our needs so our partner in Canada is relied upon to pick up the difference.

 

Next, we had wildfires on the west coast.  Our proud Redwoods stood the challenge, but the pines and other trees relied upon for construction became smoke and ash.

 

The small home builders and contractors have had a harder time.  The large builders, owing to their planned inventory, are feeling less of an impact.  Even so, by the end of the year, the inventories began to diminish and prices for the larger firms began to rise.

 

To understand the impact, the average sales price of a new single family home sold in September 2020 was $403,900 up from $384,000 in January 2020. Homeowners who planned to sell and buy new homes went back to remodeling, thereby putting pressure on the already tight inventory of resale homes. To those who were priced out, the only alternative was to fight for a resale home in the tight inventory market. 

 

There appears to be a light at the end of the tunnel as Chief Economist for the National Association of Realtors says that prices in lumber should moderate to decline sometime in 2021 as a result of more harvesting and lower tariffs.

 

Low corn production has affected meat prices.  Ranchers, to offset the high cost of grain needed to fatten beef for slaughter have gone back to the old days of the "wild west" and once again range feed cattle.  Probably better for us as this means less fat than the feed lots fattening process of corn. This means we will see inflationary prices coming to us in higher beef, lumber and, of course, gasoline prices, as corn is used as an additive.

 

The 10% increase in Zillow from the last newsletter may really be more of an inflationary impact.

 

“For those who have moved to the suburbs and beyond, moving back to the city full time is unlikely while the work from home trend remains. Many of these affluent homeowners are now making their secondary properties their primary residences for the foreseeable future. Although it is important to understand, for cities that are not densely built up or offer communities that have larger properties with yards and green space, it is predicted that these will remain or become popular again with the affluent who are not willing or wanting to leave their metropolitan lifestyle.” *Luxury Home Market Report January 2021

 

I couldn't let this missive end without a mention of a certain New York Times article entitled, "You start to feel stupid”: Tech workers can't leave SF fast enough.

The article does not bring up anything new from my past posts.  Maybe, with the exception of Estonia having a new residency program for digital nomads...ESTONIA!!!?  The next revelation is Savannah, Georgia and their reimbursement program for remote works.  But the mosquitoes may eat you alive!

Larry Ellison has put up for sale 301 and 401 Parkway and the 501 Island Parkway parking structure.  The office buildings are located within the Belmont City Limits and the parking garage is in Redwood City.  Goode Bye Tax Base.  Hello Redwood Shores property listings.  Get your cowboy boots and hats ready Partner!