California’s Housing Market Forecast
July’s housing market sales in California is picking up nicely from Junes sales. The July report saw sales and prices rise across the state despite lingering effects of the pandemic.
Realtors are optimistic, the economy is picking up, but few resale homes are up for sale. 54% of consumers believe it’s a good time to sell their home.
The continuing lack of housing supply in the state is holding up the recovery and could create even higher price inflation. Will August’s prices surge as more buyers pour into the market to find fewer homes for sale? See all the July Stats below.
A number of factors including low mortgage rates, pent up demand from the shutdown period, and migration changes are pushing up sales and prices. The big story is a growing, severe lack of home listings which may raise home prices in August and September.
California’s median home price jumped 6.4% to $666,320 in July, over June’s $626,170. That was a 9.6% lift from July 2019. The story for last month is the growth of higher priced homes as those below $500,000 only comprised 40% of total sales.
However, a bigger trend to buying luxury homes with more space, away from dense urban areas is also taking hold across the country and in California. Low mortgage rates makes buying luxury homes a more viable possibility for buyers and investors.
For rental property managers and landlords, the employment and rent default numbers are scary. Please remember that a modern property management software is a great way to increase rent collection, improve tenant relations, and manage your property finances.
California Home Sales
California Home Prices
Throughout the state, single family home prices rose 6.4% to $666,320 from June’s $626,170 price. Sales of detached houses grew 28.8% or 6.4% over July 2019.
California condo prices rose to $500,000 even up from $486,250 in June. Condo sales were up an amazing 33.4% from last month. Condo Price price growth over June’s prices rose most strongly in San Bernardino (+15.6%), San J0aquin +(32.0%), Tehama (+63.5%), and Kern (+26.9%). Sales grew 21.9% in the Central Coast region.
Factors are businesses reopening, mortgage payments are falling, and some sellers are more ready and eager to sell.
Los Angeles, San Francisco, San Diego Home Prices
In Metro Los Angeles, home prices rose from $553,000 in June to 666,230 via a 28.8% jump in sales activity. In LA County,home prices rose $653,570 which is up 71.% from June.
Up in the Bay Area, home prices rose $50,000 or 5% from June while sales rose 26.1% vs June. Sales are now up 14.8% compared to 12 months ago.
In San Francisco, prices dropped 7.8% to $1,665,000, a loss of $1400,000 in one month. Sales still rose 28.85% and were up 1.4% from last year.
In San Diego, home prices rose 6% over June to a new median price of $179,000, while Orange County saw price growth of 1.1% ($10,000) over June’s to a new home price average of $880,000. San Bernardino is the recipient of worker migration out of LA. Prices in San Bernardino rose $25,000 to a new median of $350,000, a growth of 7.7%.
Santa Barbara saw home prices rise $80,000 to a new average of $985,000 which was a 34% month to month growth. San Benito also saw big price growth $88,600 to a new average of $675,000. There was big sales growth over 40% in Merced, San Benito, Mariposa, Mono, Plumas, Tuloumne, and Siskiyou.
Luxury Home Sales
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Pending Home Sales California
Pending home sales and list prices can help us forecast what August sales levels might be. Pending home sales at all price levels were up.
Listing Prices Are Rising
It might have been premature, but Realtors and homeowners are asking for much more than the going rate. This could be in anticipation of even fewer home listings than normal.
Unsold inventory has dropped as there are fewer active listings and sales are rising fast. This could lead to much higher price growth.
New Update for Corona Virus Period
Jordan Levine, Deputy Chief Economist with the California Association of Realtors® feels the housing market bottom is appearing. The resurgence of the Virus across the state is particularly troubling and could wound confidence in economic recovery.
There’s still optimism that a vaccine will arrive by 2021. In the Video report a couple of days ago, Levine says the next 5 to 8 weeks will be tough and the 2nd quarter could be down 30%.
Economic Data Depressing the Market
Consumer confidence has suffered a deep drop as this chart shows below. Levine says we haven’t seen how low this number could go. Consumers were carrying the economy, however the aid package from the Feds is several Trillion dollars with perhaps more coming. If the return to work goes well, we should enjoy a steady return of the California housing market in the remainder of the year.
GDP Forecasts are All over the Place
US real GDP growth was down -4.8% in the first quarter. Of course job losses have been significant, and there is doubt as to how quickly workers will be back on the job, and how many won’t be hired back. The good news is a big decline in new unemployment claims. Unemployment will be the heaviest weight, perhaps eliminating new young buyers from the market.
US major banks have reported wildly different views about GDP over the next 6 months and in 2021 (4.8% to 30% range for 5th quarter growth outlook).
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Sellers Withdrawing Homes and Buyers Backing out of Deals
As we entered May, CAR’s surveys showed homeowners were still withdrawing their homes from the market. And 85% of buyers were backing out of potential deals. With the Covid 19 resurgence, it appears uncertainty is finally weighing on home prices.
54% of CAR’s consumer buyers believe it is a good time to sell, up from 44% a month ago, and up 52% 12 months ago. Delays in closing are the big issue as buyer loan funding is seeing big friction. Median escrow time is now 33 days.
The most recent stats about loan applications shows California mortgage applications are coming back very strong the last week. Mortgage applications to purchase a home rose 6% last week from the previous week, according to the Mortgage Bankers Association.
CAR’s Jordan went on to draw comparisons to the 2008 recession, but the old data relates poorly since the economy, optimism, inflation, and interest rates were much different then.
The bottom line is that there has been a record level of optimism among consumers and it doesn’t look like Corona Virus can crush the spirit of Californians. They will be back buying homes across the cities and state.
California’s Rental Market
Zumper reported that all west coast rental markets were trending downward. Their survey found 67% of renter respondents were financially impacted from the pandemic. Of those impacted, 35% lost their job or received a pay cut.
See more about the rental markets.
Housing Market Forecast
Car predicts a J-shaped economic recovery extending over the next 12 months. Of course this trend will affect home prices in the coming 6 months.
Small Towns and Cities Seeing More Interest
With workers trying work at home arrangements,we may see more workers able to move away from high rent neighborhoods, perhaps even out of California. Employers are more accepting of the need to work at home, and one major real estate service CEO (Redfin) reported that demand in smaller cities is higher than in major cities.
Zillow Forecasts for Home Prices
Zillow reported in its latest release that home prices are expected to fall slightly for the rest of the year. They’re expecting sales to drop considerably. Their forecast of a 1.1% drop in price might be good news for Millennials in LA, San Diego, San Jose and San Francisco who are hoping to take advantage of historic low mortgage rates.
However, that’s not dampening the spirits of hopeful buyers in California. 48% of Zillow survey respondents said it’s a good time to buy.
This strong pickup in interest in homes for sale lately within San Diego, Oakland, San Francisco, and Los Angeles is a little shaky, however the trend is visible. Google Trends reports the search volume for homes for sale within California.
Booming Online Software Solutions
The new residential and commercial housing market in California has changed. Renters and business owners will seek layouts and buildings with room. The 6 foot social distancing mandate makes crowded spaces a big problem.
Realtors and property management pros are already testing out online maintenance scheduling and rent payment solutions. ManageCasa’s state of the art property management software integrates the global payment leader’s platform is the industry model. This might be the right time to make a platform switch. Check out online payments now.
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See Part 2 of the California housing market update, and the US housing market report.
This updated report covers important stats including home prices, sales, and recent home sales trends from CAR, NAR, DOT, St Louis Fed, NAHB, Statista, Zillow and more. For national home price tends see the US housing market.
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The key story with Los Angeles, San Francisco, San Jose, Santa Clara, San Diego, Orange County, Riverside, San Bernardino, etc. is the lack of listings. February’s numbers rose however. The number of active house listings inched up by 0.9 percent from January. California’s governor has allowed construction workers on new construction projects to keep working during the pandemic.
This updated report covers important stats including home prices, sales, and recent home sales trends from CAR, NAR, DOT, St Louis Fed, NAHB, Statista, Zillow and more. Please do share with friends on Facebook.
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The Real Story of California’s Real Estate Market
The real story of California’s housing market is a persistent lack of supply, something that may never be remedied. This means overall home prices and perhaps rent prices might flash up later in 2020. And this is despite recent high home construction numbers reported across the country.
Active listings fell again in February with huge drops in Southern California (26,779 listings last year compared to 17,868 listings this year. Unsold inventory ticked slightly to 3.7% in So Cal and 3.0% in the Bay Area.
NASDAQ has fared better than other stock markets of late which means the tech sector is more resilient to global goods trade and work shutdowns in California. Unemployment is likely much higher than the 4.1% previously.
Yet homelessness and extreme housing costs are making life tougher for most Californians, particularly rental tenants. Housing construction restrictions and other regulations are weighing very heavily on the quality of life in the Golden State and raising rent prices.
In what some expert economists forecast to be bearish times out west, it seems it’s going okay though. If some projections of a growing US economy from 2020 onward come true, home prices may roar higher in 2020. Zillow still believes prices will climb 4.9% over the next 12 months.
Jobs Report Improving
The California jobs forecast is a tough one with the pandemic surge. Hopefully, we’ll see more Californians behaving more cautiously to reduce the spread and help to open the workplace and schools safely. If this can’t be done, then work at home remains the most sensible and cost effective course. Unemployment is dropping slowly to a new 14.9% reate.
Continue to California Housing Market report Part 2
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