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California Housing Market Report & Predictions 2020

November 19, 2020

California’s Housing Market Forecast

Home sales and price gains across California cooled off a little after September’s scorching run. House prices had hit an alt time median high.

In October, the market stayed warm despite an ever reducing supply of homes for sale. October’s sales dropped 1.0 percent from 489,590 units in September, yet are still 19.9% on sales of 12 months ago. There were 404,240 homes sold in October 2019.

2021 C.A.R. President Dave Walsh said “California’s housing market continues to exceed expectations as this year’s traditional homebuying season has shifted into late summer and fall instead of spring and early summer.

The median price for all homes sold in California fell only 0.2% to $711,300 down from September’s record high of $712,430.Maintaining record high prices during the late fall early winter seasons is very unusual, but 2020 has been nothing but unusual.

The mood for home buying and selling remains positive. C.A.R.’s monthly Consumer Housing Sentiment Index for November found that 59% of consumers believe it is a good time to sell their home, up 3% from last month and up a whopping 11% from last year.

Infographic courtesy of the California Association of Realtors™

Home sales rose in all regions, with the Central Coast seeing the highest rises (28%). The Far North region sales jumped 19.4% compared to last year and even the San Francisco Bay Area saw sales rise almost 19% YoY.

Sales in resort and rural areas continued to grow strongly, with some communities such as Mammoth Lakes, Lake Arrowhead, Big Bear and Lake Tahoe seeing strong sales gains.

Almost all regions set new record prices for the month of October. The San Francisco Bay Area had the second-largest price increase of 17%, followed by Southern California (15.4%), the Central Valley (14.7 %), and the Far North (12.8%). Santa Barbara saw the highest price growth (64% YoY). High end priced homes surged in sales.

Relocating to New Cities for Safety and Improved Lifestyle

CAR’s forecast report shows the reasons people are relocating and buying, See some of that info below.

Although apartment rent prices are heading downward in the Bay Area as vacancy rates climb, other housing markets in the state are thriving. The demand is for single-family houses.  It may be that when the pandemic is over, both the big cities and the rural regions will have evolved considerably.

 

For Landlords and Property Managers: Is this an ideal time to Demo a modern Property Management Software Platform?

 

 

Listings continue to plummet which means price pressures could be intense if a new stimulus deal is achieved by February.  New funds would help save the rental market, and support suburban housing markets around San Diego, Los Angeles, and San Francisco avoid overheating. See more on the Bay Area rental market.

As new listings begin to dry up, California’s Realtors are starting to become a little more pessimistic about the winter season.

Here’s a snapshot of California’s torrid sales performance in October:

California housing sales snapshot. Screenshot courtesy of CAR.org

As motivated buyers continue to take advantage of the lowest interest rates in history, home sales will be elevated in the next couple of months, and the housing market should remain a bright spot in a broader economy that continues to struggle,” said current C.A.R. President Jeanne Radsick.

Home Sales History Timeline California. Screenshot courtesy of CAR.org.

It’s been a difficult time for Realtors and landlords in California, and their resilience is evident.  However with vaccine distribution likely within the next 6 months, the mood, California economy, employment growth, increasing rent payment, and desire for homeownership will grow.  With Big tech and Silicon Valley’s fortunes improving, the big fires in the rearview mirror, and mortgage rates remaining low, the 2021 California housing market forecast is looking much brighter.

The good people at CAR.org have just released the October sales/price report for October.  Here’s the key details:

California housing market October 2020. Screenshot courtesy of CAR.

California Condo Stats

Perhaps surprisingly, given migration trends and the Covid 19 pandemic surges, the condo/townhouse market in California is still alive and well. YoY price increases are very strong. Only the Central Coast and Far North districts saw sales decreases. Prices are slightly down from last month’s records.

California Condo Sales/Prices October 2020. Screenshot courtesy of CAR.org

Will California’s Home Prices Keep Rising?

A lot of buyers are asking whether home prices will rise or fall?  High demand, low mortgage rates, and low inventory will likely skew homes and condo prices higher.  A number of factors are contributing to California’s positive sales stats:

  • lower unemployment claims
  • improving retail sales
  • growing consumer confidence
  • desire to live away from the city in suburbs and rural regions
  • delayed sales because of the pandemic
  • record-low mortgage rates
  • the upcoming election
  • moving to regions that offer more room perhaps with an office
  • wealthy buyers have the funds ready

Sales of more expensive homes continue to rise strongly, while sales of homes priced under again $400k dropped. See chart below.

Low rates and tight housing inventory are contributing factors to the statewide median price setting a new record high three months in a row from June to August. A change in the mix of sales is another variable that keeps pushing median prices higher, as sales growth of higher-priced properties continued to outpace their more affordable counterparts,“ said C.A.R. Senior Vice President and Chief Economist Leslie Appleton-Young.

Most Districts and Counties See Growth

85% of counties (43 of 51) tracked by C.A.R. saw a year-over-year gain in closed sales.  The county of Mariposa increased the most at 127% YoY.  Plumas increased +53%, followed by Amador (+53%) and Mono (+60%).  Sales fell in Sutter, Yuba, Butte and Tulare.

California house prices grew .8% month over month (+17.6%), while sales grew 21.2% vs last year.

Even in the Los Angeles metro area, prices rose 4% (+$2,700) from September or 16.7% year over year. In the SF Bay area, house prices rose by $40,000  Incredibly, house prices in the Bay Area are still up 19% year over year.

California Home Sales Recovery. Screenshot courtesy of CAR.org.

Trending California Housing Stats

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 make 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.

Sales of higher end homes is soaring. Sales of homes above $3 million rose 119% which is higher than August’s 87% increase in August.

Home Sales by Region

Sales in the central valley barely grew while central coast region sales grew 15.4% and outlying counties grew 33%.

Home Sales and Prices in Major Metros

Los Angeles, San Francisco, San Diego House Prices continue to climb.

What’s notable about home sales in the major metros is price growth compared to last August. Homeowners who held onto their homes have been rewarded with whopping increases in sold prices.

In Metro Los Angeles, house prices rose 2.4% to $630,000 which was 16.1% higher than October 2019.  Overall LA home sales rose .4% or $2700 from last month, while sales rose 6%, which was 16.8% above last October’s sales numbers.

In LA county, house prices fell 2.6% to $728,160 from $747,380 in September, yet are well up compared to $653,570 in July. That price is up 13% over last October which translates to $80,000.

Up in the SF Bay Area, in October, house prices rose another $40,000 from September.  Sales of houses throughout the Bay Area still managed to rise 1.5% over September, and are up 17.5% from 12 months ago.

In San Francisco, house prices dropped 2.4% or $40,000 to $1,625,000. Sales of houses still rose strongly 22% and are still up 15% from last October.  Condo prices in San Francisco fell $10,000 to a new median of $740,000. Sales actually rose 1.5% during October.

In San Diego, home prices rose 1.9% over October’s, to a new median price of $749,000.  Sales fell by 7.1% in October, yet are still up 21.2% from 12 months ago.  Condo prices dropped by $10,000 or 2.1% to $475,000 average. That is up 20% from one year ago.

Orange County saw home prices rise $15,000 to $915,000 or 1.6% above September’s prices. Homes sales .7% month to month and are up 29.3% from last October.

In Sacramento, home prices rose .2% to $440,000 (up $11,000 since August) as sales declined .8% over September. Monterey saw house prices drop $10,000 on average (-1.2%) while sales fell 6.4%.

Pending Sales of Homes

Pending sales are leveling off of late from a torrid pace in the late summer. It could be the election and stimulus aid standoff are giving buyers pause for thought, and rising prices might be making home purchase unaffordable.

Pending Home Sales in September 2020. Graphic courtesy of CAR.org.

California Homes for Sale

The key issue for the market is a lack of California homes for sale. As sales have grown, the number of active listings continues to drop suggesting a crisis point might be met in future when a severe shortage is reached amidst post-pandemic buyers with renewed buying power.

Home Listings August. Screenshot courtesy of CAR.org.

Almost all districts reported declines in listings. The of the California districts, Central Valley had the biggest drop of 60.3% from last August, while Southern California (-49.9%), Central Coast (-60.3%), Far North (-43.9%), and San Francisco Bay Area (-31.9%) were next.

Early October Sales California

Car’s latest update suggests a marked drop in weekly sales, pending sales and listings from the previous week yet they’re up from one month ago.  Given we’re into October, these have to be viewed as strong stats. This likely is due to the California wildfire turmoil that has filled the air with dangerous smoke. That would deter buyers from searching and delaying their purchases in progress.

Weekly Data Snapshot. Screenshot Courtesy of CAR.org

And in comparison with last month’s early sales data:

Weekly Data Snapshot. Screenshot Courtesy of CAR.org

California Housing Market Forecast 2021

Updated C.A.R. Predicts More Home Sales and Higher Prices in 2021: Leslie Appleton-Young delivered her updated California housing market forecast for 2021.  She expects sales to continue to improve through 2021. The prediction is based on growing buyer demand that’s pushed California’s median price above $700,000 and low inventories that will cause price increases.

California’s weekly showings index rose to 182.3% higher than it was in September of 2019.  Mortgage rates have dropped back down and purchase applications rose 24.2% on an annual basis last week.

Screenshot courtesy of CAR.org and their 2021 Market Forecast.

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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 questionable.  Optimistically, if the return to work goes well, we should enjoy a steady return of the California housing market in the remainder of the year.

Screenshot courtesy of CAR

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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 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.

Infographic courtesy of CAR.org.

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.

Rent Prices were rising in California. Screen shot courtesy of Zillow.com

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

 

Read more Housing and Property Management Topics:

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