Just as the continuing drought means warm days ahead, an ongoing drought in Pleasanton real estate means more hot market conditions.
The heat comes from another year of limited choices for homebuyers throughout the East Bay and particularly in Pleasanton.
During 2021, the average number of homes listed for sale each month in the East Bay and in Pleasanton was at a five-year low. The lack of inventory was a result of few existing homes being placed on the market and limited new residential construction. Other factors, some global and some local, also contributed to the scarcity of homes for sale.
The ongoing COVID-19 pandemic meant many Pleasanton residents were working from home. For current Pleasanton homeowners, not having to endure a long commute to offices in the South Bay or Peninsula made living in Pleasanton even more attractive and made them less inclined to consider a move.
Simultaneously, Pleasanton homeowners wanting to move during 2021 also realized they would be competing with many other buyers in a limited-inventory market.
Both factors resulted in current homeowners staying home, literally, during 2021, which meant few homes for sale in Pleasanton.
The handful of new residential projects underway or completed in Pleasanton during 2021 were unable to bust the drought and the demand for homeownership simply outpaced supply. Sales prices during these drought conditions set new records. The median sales price for a single-family detached home in Pleasanton during 2021 was more than $1.6 million: a 31% increase compared with 2020.
Buyers had a surprising response to limited choices and high prices: they bought homes and bought them quickly.
Two factors contributed to strong home sales activity and short days-on-market: low mortgage interest rates and high bank balances. While some economists predicted interest rates will rise in response to inflation, throughout 2021, rates were still relatively low. Monthly payments for million-dollar homes in Pleasanton were reasonable enough for buyers to go shopping.
They also had their own resources. One side effect from COVID-19 was many potential buyers did not take vacations or dine out during 2020 and 2021. This allowed them to save money for down payments.
Homebuyers were prepared when they entered the competitive Pleasanton real estate market during 2021. Their enthusiasm drove sales activity to a five-year high. There were 861 single-family detached homes sold in Pleasanton during 2021 compared with 686 during 2020.
Another factor that led to more homes being sold during 2021 is that buyers and sellers did not need to take a COVID-19 "time out." During the early spring of 2020, homebuyers and sellers had to wait for real estate activities to be deemed "essential," which wiped out several weeks of potential home sales just as the real estate season should have been accelerating. Buyers and sellers didn't have a similar pause during 2021 which helps explain the increase in home sales.
Buyers entered the market early during 2021 to quickly scoop up the few homes on the market. A home was listed for sale in Pleasanton last year for only 14 days during 2021 compared with 26 days during 2020. This fast pace indicates home buyers were not scared of high prices.
Real estate economists predict more drought conditions and a resulting hot market during 2022. Rising inflation and potentially higher mortgage interest rates may take some buyers out of the market but demand will remain strong.
Current Pleasanton residents have enjoyed the benefits of working from home in a community that makes "stay-cations" feasible and enjoyable. Those conditions will continue during 2022, which may mean another year of limited choices for home buyers and high sales prices.
Editor's note: David Stark is chief public affairs officer for the Bay East Association of Realtors, based in Pleasanton.