After an insanely unpredictable real estate market in 2020, will our strong sellers’ market continue in North San Diego County’s Coastal region? Probably, but it should be more balanced.

Mortgage rates around 3% (and under) will continue through at least the first half of next year, but how about the low inventory?  The number of homes for sale today is 38% fewer than it was last year at this time, so it appears 2021 will start out with the lowest inventory ever for any new year.

But I don’t think it will last.

Do we have pent-up supply waiting to burst onto the market?  Here are my categories where I think we will shave additional homes come up for sale, roughly in the order of the most-likely contributors:

1. Move-Uppers – Covid-19 changed what we want from homes. Low rates/high equity make it possible!

2. Baby Boomers – A survey said that half of seniors delayed listing their home in 2020 due to Covid-19.

3. Politics/Taxes – Many Californians have had enough. The migration trend to other states should ramp up.

4. Work From Home – This trend frees up many to move…..up and out!

5. Forbearances – Lenders will be lenient, but some in default will tap their equity, rather than risk losing it.

6. Prop 19 – Enables 55+ homeowners to take their low property-tax basis with them. Though this won’t be the sole reason to move, it makes for a nice sweetener – and may be the last straw to make it worth it.

7. Divorce Rate is Up 34% – Technically, this could add more sellers AND buyers, but realistically those coming out of a divorce will be more likely to split their equity and take a break.

8. Unemployment – Older homeowners will grapple with taking a pay cut or quitting the job-search altogether – and retiring earlier than expected won’t seem so bad when their home’s equity has never been so high.  More boomer moves that would have happened in 2022-2025 will be pulled forward.

9. Eviction Ban – In the second and third quarter of 2020, there were 11% of renters who missed a payment. Mom and pop landlords will begrudgingly sell and pay the capital-gains tax, rather than risk another episode like this one.

10. Capital-gains tax. – From the WSJ: Biden will raise the tax on the capital gains of high earners to the same rate as wage income, increasing the rate to 43.4% (39.6% plus Medicare 3.8% investment tax) from 23.8%. Mr. Biden on Thursday estimated that these increases on high earners would raise $92 billion, but that’s before they put their tax lawyers to work. Biden has also said he will eliminate the 1031 exchanges, but all of the above will need Congressional approval. Just the thought could cause landlords to hurry up their plans of selling.

The potential home sellers that are in more than one category (and have more motivation) will be the first out – which means we should get off to a fast start in 2021. We probably won’t see a flood, but it will only take 10% to 20% more sellers to change the game dramatically.