The California housing market ended the previous year on a high note as sales remained strong in December and the median house price reached another record high. The same momentum has been carried forward in 2021. Homes in California are staying on the market for about seven days (median time) before going under contract, with 70% of homes selling above their list prices, according to the data released by C.A.R. for May 2021.
California’s median home price sets another new record high as the statewide median price inched up 0.5 percent on a month-to-month basis to $818,260 in May. The new median sales price of existing single-family homes is 39.1 percent higher than the $588,070 recorded last May when the real estate market in California tanked during the spring lockdown.
The year-over-year price increase was the largest ever, and it was the second month in a row that the state had an annual increase of more than 30%. It was the second time since June 2013 that the state recorded an annual increase of over 30 percent, according to the California Association of Realtors (C.A.R.). Just like the national housing market trends, the tight inventory and low mortgage rates are fueling the rise in California home prices. While this kind of price appreciation impacts housing affordability, higher home prices will hopefully encourage more sellers to list their homes for sale, which would in turn reduce the rate of appreciation.
On a monthly basis, closed escrow sales of existing single-family detached homes were down 2.7 percent from 458,170 in April but were up 86.7 percent from a year ago, when 238,740 homes were sold on an annualized basis. The sharp increase in annual sales was predicted, given how hard the housing market was impacted by the federal shutdown last year when home sales fell to their lowest point since the Great Recession.
“The overheated housing market is showing signs of a much-needed cooling and could be a sign of waning buyer interest as the torrid pace of home price increases and buyer fatigue adversely affected demand,” said C.A.R. President Dave Walsh. “We’re seeing many would-be buyers taking a break and hoping to see more listings as the economy reopens and prospective sellers list their homes for sale.”
Housing price gains were widespread with all the 51 counties in the state seeing annual price gains and 50 of them reporting at least a double-digit growth rate from last May. Thirty-two counties set new record high median prices in May. Mono had the largest price growth of 119.2 percent in May, followed by Santa Barbara (103.8 percent) and Plumas (57.2 percent).
In May 2021, three of the five major regions set new highs for median prices, with each region increasing by more than 20% year over year. The San Francisco Bay Area had the highest year-over-year gain of 38.9 percent, followed by Southern California (33.1 percent), the Central Coast (32.6 percent), the Central Valley (27.1 percent), and the Far North (22.1 percent).
- The San Francisco Bay Area had the highest year-over-year gain of 38.9 percent, with the median price being $1,340,000.
- Southern California had a year-over-year price gain of 33.1 percent, with the median price being $752,250.
- The Central Coast had a year-over-year price gain of 32.6 percent, with the median price being $900,000.
- The Central Valley had a year-over-year price gain of 27.1 percent, with the median price being $445,000.
- The Far North had a year-over-year price gain of 22.1 percent, with the median price being $365,000.
- The Los Angeles Metro Area had a year-over-year price gain of 35.5 percent, with the median price being $725,000.
- Inland Empire had a year-over-year price gain of 28.9 percent, with the median price being $510,000.
California is a seller’s market and home prices have reached new record-highs across all the regions due to tight supply. Homes are moving nearly 46% faster than a year ago; the median time on the market was 7 days in May. Nearly 70% of homes sold above the asking price in May. New construction can’t keep up with demand in the California housing market. Every major region saw home prices continuing to increase from last year by double digits as buyers competed amid a shortage of homes for sale.
There is an increase in demand leading to bidding wars and subsequent higher selling prices. These trends show us that the California housing market remains very competitive. Growth of sales are prices are driven by low mortgagee rates, buyers seeking more living space, and a perennial shortage of houisng supply. Homes are selling quickly with a minimal price reduction. The statewide sales-price-to-list-price ratio was 103.8 percent in May (a record high). If it's above 100%, the home sold for more than the list price. If it's less than 100%, the home sold for less than the list price.
High demand across all of California's sub-markets means that low inventory and lightning-fast market conditions are not going away soon. There just aren’t enough homes listed for sale to satisfy the demand from buyers. C.A.R.’s Unsold Inventory Index (UII) remains low at 1.8 months in May, slightly up from April but remained sharply below last year’s level. The index indicates the number of months it would take to sell the supply of homes on the market at the current rate of sales.
Will The Housing Market Go Up or Down in California?
Each month C.A.R. surveys 1,000 California consumers regarding their sentiments about various aspects of the housing market or the economy that directly impact housing to create a California Housing Sentiment Index. In May 2021, the overall housing sentiment index reached 74 (-2 from last month). With mortgage rates near historic lows and buyers’ interest remaining high, the California housing market is showing robust sales gain and record-breaking price as we move into the sixth month of the summer homebuying season.
Even as mortgage rates dropped below 3% again, some purchasers were discouraged by the rapid rise in home prices. Encouragingly, the number of new listings being added to the MLS each day has finally started to exceed closed sales and C.A.R. is still forecasting at least 10% growth in home sales this year. If the economy improves, rates could keep rising slowly, but many experts expect borrowing costs to remain low by historical standards throughout 2021. Here's what consumers feel at this time.
Is it a good time to buy a home in California?
C.A.R.’s monthly Consumer Housing Sentiment Index for May 2021 found that only 19% of consumers believe that now is the good time to buy a home, and 81% think this is not a good time to buy. That’s +6 last month. As a result of continuously rising prices in all the major regions, the housing market sentiment also shows that only 27% of the consumers feel that it will be easier to find a home over the next twelve months. 73% said it won't be easier.
Is it a good time to sell a home in California?
72% of Californians in the survey think this is a good time to sell a house. That’s an increase of +6 over the April 2021 poll. More than half of the consumers (62%) who participated in the survey feel that home prices will rise in the 12 months. That’s a gain of +3 from the previous month. However, only half of the people feel positive about the economic recovery. Only 48% (+1 from last month) believe that economic conditions will improve in the state over the course of the next 12 months while 52% still have a negative outlook.
Six California Metros Feature in The Top 20 Hottest Housing Markets
Realtor.com takes into account market demand and the pace of the market to determine an area’s hotness. That is determined by the number of unique viewers per property and the number of days a listing is active on Realtor.com’s website. In their latest hottest housing markets report for March 2021, California had six in the top 20, more than any other state.
These hottest markets saw median listing prices 18.9% higher, on average than the national price in March. The report shows that spillover and secondary markets continue to dominate the list as buyers prioritize space while remaining close to major hubs.
Vallejo-Fairfield metro area was no. 3, with the median listing price of $550,000. It had the lowest median number of days on the market, at 11. It has been on the company’s top 20 list for the last several years. Other Northern California cities in the top 20 include Yuba City in Sutter County, which came in seventh place with a median listing price of $427,000.
The Santa Cruz-Watsonville metro area was No. 8, with a median listing price of $1.2 million, and Stockton-Lodi metro area followed at No. 9 with a median listing price of $468,000. The Modesto area came in at No. 12, with a median listing price of $499,000. And in the far northwest corner of the state, the Eureka-Arcata-Fortuna area came in at No. 18, with a median listing price of $439,000.
California Housing Market Trends For May 2021
Here are some of the highlights of how the California housing market performed in May 2021, according to the June 16 release by C.A.R.
- Sales growth remained concentrated in higher-priced markets, while home sales in the lower-end continued to be lackluster.
- Demand in the million-dollar segment increased by more than 200 percent year-over-year.
- Sales of homes priced $2 million and higher surging over 300 percent from a year ago.
- Sales of homes priced below $300,000, on the other hand, have continued to plummet, with year-over-year sales down 34% in May.
- Tight housing supply continues to be a major stumbling block for sales in the lower price range.
- At the regional level, all major regions had at least 44 percent year-over-year growth in sales from last May when the market hit its lowest point in 2020.
- The Central Coast had the highest year-over-year increase of 111.8 percent; sales increased by more than 99 percent in all four counties in the region.
- The San Francisco Bay Area came in second with a growth rate of triple-digits (104.6 percent) from last year.
- The Southern California region also experienced double-digit year-over-year increases of 80 percent in sales from a year ago.
- The Central Valley posted a sales gain of 44 percent.
- The Far North region also remained strong and experienced double-digit, year-over-year sales growth of 58.6 percent.
- Nearly all counties — 49 of 51 — tracked by C.A.R. recorded a year-over-year sales increase in April, with 17 counties more than doubling the sales level reached a year ago.
- Six of the counties with more than 100 percent growth rate had a median price above $1 million in May 2021.
- Mono had the sharpest gain of 400 percent from last year.
- Del Norte (-59.1 percent) and Glenn (-4.3 percent) were the only counties with a sales decline from last year.
California Median Home Price
- In May, three of the five major regions set new highs for median prices, with each region increasing by more than 20% year over year.
- The San Francisco Bay Area had the highest year-over-year gain of 38.9 percent.
- Southern California was the second strongest growing at 33.1 percent.
- The Central Coast had the third-highest price growth rate of all regions with its median price increasing 32.6% year-over-year.
- The Central Valley region had a growth rate of 27.1% year-over-year and the Far North posted a growth of 22.1 percent.
- All 51 counties tracked by C.A.R. reported a gain in median price on a year-over-year basis.
- 50 of them reporting at least a double-digit growth rate from last May.
- Thirty-two counties set new record high median prices in May.
- Mono had the largest price growth of 119.2 percent in May followed by Santa Barbara (103.8).
- Marin had the smallest price growth of all counties with an 8.8 percent increase from May 2020.
California Housing Supply
- Homeowners reluctant to list their homes for sale during the pandemic are still contributing to a shortage of active listings.
- Supply should improve in the spring homebuying season as more of the state’s COVID-19 restrictions would be lifted by then.
- The Unsold Inventory Index (UII) improved slightly from 1.6 months in April to 1.8 months in May but remained sharply below last year’s level.
- The increase in inventory month-over-month is attributable in part to a minor increase in supply, but a slowdown in housing demand in May also contributed to the increase.
- The index indicates the number of months it would take to sell the supply of homes on the market at the current rate of sales.
- After a 6.6 percent monthly increase in May, active listings hit their highest level in six months, and have continued to rise in line with the seasonal pattern.
- Housing supply normally rises during this time of year and continues to rise until late July or early August.
- Active listings continue to fall more than 50 percent in April from last year, recording four straight months that housing supply was cut in half from a year ago.
- The month-to-month increase rate is comparable to the average growth rate of 6.7 percent from April to May between 2015 and 2019.
- All counties reported by C.A.R. saw a decline in active listings from last May, and nearly all counties — 49 out of 51 — dipped more than 20 percent from year-ago levels.
- Ventura had the largest decline in housing supply, dropping 63.5 percent year-over-year.
- Lassen (-1.8 percent) and San Francisco were the only two counties in the state with a single-digit decline in active listings from the prior year.
Median Days & Sales Price to List Price Ratio
- The median number of days it took to sell a California single-family home remained unchanged at the record low of 7 days in May, down from 17 days in May 2020.
- C.A.R.’s statewide sales-price-to-list-price ratio posted a record high in May at 103.8 percent and was 99.7 percent in May 2020.
- Looking at sale-to-list percentages can help buyers and sellers get a sense of how to negotiate on pricing. The higher ratio of 100% or above shows a strong market favoring sellers.
- The statewide average price per square foot for an existing single-family home remained elevated.
- At $387, May’s price per square foot was an all-time high.
- The price per square foot was $281 in May a year ago.
Mortgage Interest Rate
- The 30-year, fixed-mortgage interest rate averaged 2.96 percent in May, down from 3.23 percent in May 2020, according to Freddie Mac.
- The five-year, adjustable mortgage interest rate was an average of 2.62 percent, compared to 3.16 percent in May 2020.
California Housing Market – Regional Sales and Price Trends – May 2021
At the regional level, all major regions saw sharp sales gains in May, with each region growing at least 44 percent from last year. The Central Coast had the highest year-over-year increase of 111.8 percent. Three out of five major regions reached new record high median prices in May, with each region growing more than 20 percent from a year ago. The San Francisco Bay Area had the highest year-over-year gain of 38.9 percent.
These monthly and yearly trends numbers can be positive or negative depending on which side of the fence you are — Buyer or Seller? Home sales rebounded in June 2020 for the first time since the pandemic and California’s median home price reached $626,170, improving 6.5 percent from May and 2.5 percent from June 2019.
The monthly price increase was higher than the historical average price change from May to June and, in fact, was the highest ever recorded for a May-to-June change. Factors are businesses reopening, mortgage payments are falling, and some sellers are more ready and eager to sell. Sales remain strong in a traditional off-season and this year looks promising across the region.
It looks like 2021 will end with a new record at home sales and prices. All 51 counties tracked by C.A.R. reported a gain in median price on a year-over-year basis, with 50 of them reporting at least a double-digit growth rate from last May. Nearly all counties — 49 of 51 — tracked by C.A.R. recorded a year-over-year sales increase in May. Whether you’re looking to buy or sell, timing your local market is an important part of real estate investment.
For sellers in the California housing market, it is a good time to sell. A low inventory would keep the prices from falling. Sales Price to List Price ratio has been 103.8% in May 2021. 70.7% of homes were sold above their initial asking prices on MLS. A seller would always prefer this ratio to be close to 100% or higher.
For buyers in the California housing market, it is a good time to buy. Low-interest rates continue to fuel optimism for homebuying. The 30-year, fixed-mortgage interest rate averaged 2.96 percent in May, down from 3.23 percent in May 2020, according to Freddie Mac. Interest rates remain low giving buyers the purchasing power and home prices a boost. Fortunately, new listings have finally started to rise, which could help to sustain a higher level of home sales deeper into summer by providing much-needed supply.
All of these factors have led the market to optimism in homebuyers. Recent forecasts from industry groups like Freddie Mac and the Mortgage Bankers Association have predicted that the average rate for a 30-year fixed mortgage could stay within the low 3% range well into 2021.
California Housing Market Forecast 2021-2022 (Latest Projections)
What are the California real estate market predictions for 2021 & 2022? California housing market is shaping up to continue the trend of the last few years as one of the hottest markets in the U.S. Let us look at the price trends recorded by Zillow over the past few years. Since 2012, the California home values have appreciated by nearly 114% — Zillow Home Value Index.
ZHVI is not the median price of homes that are sold in a month within a geographic region. It is calculated by taking all estimated home values for a given region and month (Also called Zestimates), taking a median of those values, applying some adjustments to account for seasonality or errors in individual home estimates. It, therefore, represents the whole housing stock and not just the homes that list or sell in a given month.
By this calculation, the current typical home value of homes in California is $654,629. It indicates that 50 percent of all housing stock in the area is worth more than $654,629 and 50 percent is worth less (adjusting for seasonal fluctuations and only includes the middle price tier of homes).
In May 2020, the typical value of homes in California was around $583,000. Home values have gone up 12.5% over the last twelve months. It can be said that California is currently the seller's real estate market which means that demand is exceeding the supply, giving sellers an advantage over buyers in price negotiations.
There are fewer homes for sale than there are active buyers in the marketplace. Buyer demand remains robust, which has been pushing home prices up by a double-digit rate of appreciation. Although the latest price forecast is not available earlier Zillow had predicted a growth of 10.6% in ZHVI by November 2021.
Courtesy of Zillow.com
Latest Weekly Trends & Forecast From California REALTORS®
CAR's latest weekly housing data for the week ending May 29, 2021, shows that since the recovery began, housing has been at the forefront of economic growth, but multiple indicators suggest that hot market conditions are driving the market to cool sooner than expected. Closed sales are expected to climb by double digits in May and June, while overall home sales are declining from their decades-high levels at year's end.
California REALTORS® are positive about the market as we move into the sixth month of the summer homebuying season. About 48% of them expect sales to improve in the upcoming week, while nearly 58.8% believe prices will increase from the prior week. With the passing of the American Rescue Plan Act, the economic outlook is more positive than it was a couple of months ago when California was still under a lockdown.
The economy is slowly recovering. There was strong growth in employment in May and a surge in consumer confidence to the highest level in the year. California ended May with its 9th consecutive week with fewer than 100,000 new claims for pandemic and traditional unemployment insurance. With less than 65,000 new unemployment claims filed, last week also marks the smallest number of claims since March of 2020. As the economy is poised to reopen in the coming weeks, many of the service sector jobs, which bore the majority of the job losses, are expected to to begin to recover.
Tight supply, however, remains a concern as it continues to hold back demand and continues to put pressure on affordability. Although the amount of new listings entering the MLS is still below normal levels, a rise in supply could aid would-be buyers in an extremely competitive market and help to maintain a high number of house sales.
On the flip side, the economic recovery will continue to put upward pressure on mortgage rates. Rates are still below last year’s level though and they should remain so in June. The margin between this year and last year, however, is narrowing and we could begin to see interest rates rising above last year’s level starting in June if inflation remains elevated in the coming weeks. The average 30-year fixed-rate mortgage (FRM) dipped slightly to 2.96% last week – remaining below the critical 3% threshold.
Last week, the number of fresh mortgage purchase applications dropped by 24% to the lowest level since January. New applications began to slow in April after climbing for 52 weeks in a row on a year-over-year basis. Mortgage applications began to decline in mid-May, and by the first week of June, they had dropped by double digits. This is in line with last week's C.A.R. and Fannie Mae home purchase attitude indexes, which indicated rising buyer pessimism as prices climb and competition for limited available listings remains fierce.
Fewer California REALTORS® expect prices and listings to go up in the coming week. The results from the latest C.A.R. weekly survey suggest that nearly 58.8% expect prices to go up next week. They believe housing demand is still stronger than normal so far in 2021, and tight supply will continue to put upward pressure on housing values.
Survey results also suggest that supply will remain tight as 51.6% of those who responded to the survey believed listings will increase in the following week, which is 9,9% more than last week. Therefore, robust price growth will not ease up until some balance between supply and demand is restored. Low-interest rates, which are still low, could give buyers the purchasing power and home prices a boost.
California’s housing market forecast for 2021 is on the positive side but things could vary a bit, given the seriousness of the ongoing pandemic. Here's a rundown of the latest market trends.
- All parties involved – buyers, sellers, and agents – agreed that home prices will likely remain on their upward trend in the short term.
- 58.8% (-1.2%) of California Realtors® feel prices will rise in the coming weeks.
- 48% (-5.3%) think that sales will grow in the coming weeks.
- An average of 950 daily closed transactions was reported in the past week. That is up 2.4% week-over-week.
- An average of 996 contracts was signed per day in the past week. That is down 3.2% week-over-week.
- Seller's optimism continues to dip in the latest weekly trends. An average of 879 new listings per day was reported in the past week, which represents a decline of -12.2%.
- About 51.6% (+9.9%) of California Realtors® think listings will be up next week.
- Interest rates always fluctuate, just as the real estate market does.
- We don’t see huge changes ahead in the coming months.
- They could fluctuate as more economic data become available throughout the year but the average 30-year fixed-rate average will likely stay close to 3 percent in 2021.
- A few months back, Zillow had predicted that home prices will rise by 10.6% until November 2021.
- Most California sub-markets saw big home-price gains in 2020.
- The same trend is being seen in 2021.
- All 51 counties tracked by the association reported a gain in median price on a year-over-year basis, as tight supply and heated market competition continued to put upward pressure on home prices.
- An ongoing shortage of supply is the main reason for price appreciation.
- With the cost of borrowing at historic lows, buying a home makes more sense than renting for many first-time buyers.
- For repeat buyers, there is an increasing desire for a larger second home.
- Affordability is at the Lowest Level Since Mid-2018, according to C.A.R.’s Traditional Housing Affordability Index (HAI).
- The percentage of buyers who could afford to purchase a median-priced home in California in the first quarter of 2021 dropped to 27% from 35% in the first quarter of 2020.
- The C.A.R.’s 2020 Annual Housing Market Survey finds that 39 percent of REALTORS® who responded said their buyers are opting for a bigger home.
- This trend is likely to continue in 2021 as well.
- 35 percent said buyers are opting for a property with more rooms.
- 37 percent said buyers are opting to live in a suburb rather than a city.
- 26 percent said buyers are opting to live in rural areas rather than cities or suburbs.
Here's a rundown of the forecast released by CAR on April 27, 2021.
The California Association of Realtors’ economic forecast this year looks at several scenarios in predicting whether home prices and sales will rise or fall in 2021. Low mortgage interest rates and pent-up demand will bolster California home sales in 2021.
- The housing market still doing unseasonably well in 2021.
- Lots of buyer demand amidst all-time low rates.
- Time to get serious about supply & new construction impacting much more than just the real estate market.
- 2nd worst Jobs-to-Construction ratio in the nation.
- 2nd worst state for overcrowded housing.
- Ominous trends for the population and economy.
- In the previous forecast released in October 2020, the sales figure was projected to be 4.5 percent lower compared with the pace of 397,960 homes sold in 2019.
- However, the California housing market data closed unexpectedly above 2019's figures.
- Existing sales YTD were +3.5% above 2019.
- $717,930 record-setting median price in December.
- The CAR's latest forecast points towards an increase in existing single-family home sales by 11.2 percent in 2021.
- The California median home price is forecasted to edge up 8.0 percent in 2021, following an 11.3 percent increase in 2020.
- Low mortgage rates are expected to continue to fuel price growth.
- The average 2021 rate for a 30-year fixed-rate mortgage will be 3.0%, down from 3.1% in 2020.
- Housing Affordability Index is projected to be 27%, down from last year when it was 32%.
- Affordability will prevent many from achieving ownership.
Impact of COVID-19 on The California Housing Market (Summary)
Before the coronavirus outbreak, the declining interest rates bolstered February home sales and prices in the California housing market. The no. of home sales in February went up 6.6 percent from the 395,700 level in January, marking the first time in three months that sales jumped above the 400,000 benchmarks. February also marked the eighth consecutive month of year-over-year sales increases, according to the CALIFORNIA ASSOCIATION OF REALTORS®.
According to a United States Department of Commerce report, the median price nationwide for a home sold in February was $345,900, up 6.3 percent from January. As the coronavirus pandemic hit the country, the sales activity in the California housing market took a sharp decline. Many buyers backed out of purchase due to coronavirus concerns. Due to the Covid-19 outbreak, the new California home sales also began to drop from March onward. Here's the review of the California real estate market from March onward.
Impact of COVID-19
The immediate impact of the coronavirus pandemic on the California housing market was that realtors canceled their open houses and half of all agents reported a drop in buyer interest. A flash poll conducted by C.A.R. between March 14-16 found that 54% of realtors had buyers who backed out from buying a home because of the coronavirus, and about 45% had sellers who backed out from selling a property. The pandemic further impacted the buying or selling of a house as California issued a statewide ‘stay at home’ order on March 19 to slow the spread of the coronavirus.
All non-essential businesses were essentially shut down. The real estate industry and many businesses that support it have been deemed non-essential. Real estate transactions like home buying, title research, residential leasing, and renting were allowed to continue. So were things like building maintenance and cleaning. Home construction was typically allowed to continue, as well. This meant that people could continue to live in their apartments and call the property manager to get the plumbing fixed.
Home sales and purchases already begun could be completed. However, it became much more difficult to arrange open houses or take photos of a property for sale. Some realtors adapted by setting up virtual showings of properties, whether it was via cell phone video, high-resolution photos, or drone. However, photographers can’t travel to properties, while stagers and appraisers can’t travel to homes that owners want to sell.
This froze the housing market for the most part due to shelter-in-place orders. Financial services were considered essential; this included banks and mortgage lenders. Unfortunately, the shutdown of up to 80 percent of the country means many are afraid to take out a home loan even if they still have a job. That is why mortgage applications fell by 30 percent in the last quarter of March 2020 while unemployment applications hit a record three million.
The U.S. Initial Unemployment Insurance Claims are that over 40 million people have already lost their jobs.
As new coronavirus cases were detected in California and the ‘shelter-in-place’ mandate was extended, a sharp sales decline increased unsold inventory – leading to a balanced real estate market. The COVID-19 pandemic kept both buyers and sellers on the sidelines in the California housing market. Many potential sellers delayed putting their homes on the market, which led to fewer new listings. Some of the buyers were excited and decided to not enter the market due to their weak financial condition. California home sales experienced the worst month-to-month sales decline in more than four decades.
Home sales dropped sharply in April from both the previous month and year as the housing market began to feel the full impact of the state’s stay-at-home order, according to C.A.R.
This was because of a decline in open houses and home showings which are impossible to be held in such conditions. Existing, single-family home sales totaled 277,440 in April on a seasonally adjusted annualized rate, down 25.6 percent from March and down 30.1 percent from April 2019. Additionally, sales in escrow were also delayed by the closure or limited availability of all the essential services related to a home sale.
The statewide median price remained above the $600,000 benchmark for the second consecutive month in April, price growth showed clear signs of softening when compared to the past six months. The April statewide median price of $606,410 for existing single-family homes in the state dipped 1.0 percent from March, and the 0.6 percent gain was essentially flat from April 2019, when the median price was $603,030. The year-over-year price gain was substantially smaller than the six-month average gain of 7.8 percent recorded between October 2019 and March 2020.
California home sales fell to the lowest level since the Great Recession as the housing market suffered the full impact of the coronavirus pandemic in May, according to a June 16 release by CALIFORNIA ASSOCIATION OF REALTORS®. As housing demand in California fell sharply in May, home prices also took a dip. The median home price fell below last year’s price for the first time since February 2012 and breaking the state’s 98-month year-over-year price gain streak.
All major regions dipped in sales by more than 35 percent from last year. The Bay Area and Central Coast dropping the most at -51.1 percent each. Southern California home sales dropped by -45.6 percent, and the Central Valley by -36.6 percent. Existing single-family home sales were down by 13.9 percent from April and down by 41.4 percent from May 2019. May’s statewide median home price was $588,070, down 3.0 percent from April and down 3.7 percent from May 2019. Year-to-date statewide home sales were down 12.9 percent in May.
Median prices continued to dip in May from last year in the Central Coast and the Bay Area but inched up slightly in the Central Valley region. The median home price was virtually unchanged in Southern California. The unsold inventory index jumped to 4.3 months in May from 3.4 months in April and was up from 3.2 months in May 2019. Total active listings continued to decline on an annual basis for the 11th consecutive month.
The 34 percent year-over-year decrease in listings was the biggest drop since March 2013. The median number of days it took to sell a California single-family home dipped to 17 days in May from 18 days in May 2019. C.A.R.’s statewide sales-price-to-list-price ratio was 99.7 percent in May 2020, up slightly from 99.3 in May 2019.
After the California real estate market suffered its worst month in 13 years, California’s Realtors and landlords saw a big rebound in June. The housing markets in Los Angeles, San Francisco, San Jose, San Diego, and Sacramento saw the biggest recovery. Home Sales were up 42.4 percent from May and down 12.8 percent from June 2019. The luxury market suffered the most with more than 50% drops in sales. Sales Price to List Price Ratio of 99.5% in June means homes are selling very close to their listing prices.
June’s statewide median home price was $626,170, up 6.5 percent from May and up 2.5 percent from June 2019. Throughout the state, single-family home prices rose 6.5% to $626, 170, or a rise of $38,000 from the previous month. Sales grew 42.5% from May. California condo prices rose 4.6% and month-to-month sales increased by 68.5%. Condo prices have risen 4.6% YoY while sales slumped 16.2%.
The return in the COVID-19 cases remains a concern across the nation as well as California, and it may hinder the recovery of the housing market in the second half of 2020. Meanwhile, the lowest ever mortgage rates have been able to increase buyer activity, which in turn may help to sustain the rise in sales in the coming months.
After falling to the lowest level since the Great Recession, continued to improve in August as home sales climbed to their highest level in more than a decade as the median home price broke last month’s record and hit another high, according to September 16 release by C.A.R.
Existing, single-family home sales totaled 465,400 in August on a seasonally adjusted annualized rate, up 6.3 percent from July and up 14.6 percent from August 2019. August’s statewide median home price was $706,900 up 6.1 percent from July and up 14.5 percent from August 2019. Year-to-date statewide home sales were down 6.8 percent in August.
In September, the California housing market outperformed expectations, breaking a record high median price for the fourth straight month. Existing, single-family home sales totaled 489,590 in September on a seasonally adjusted annualized rate, up 5.2 percent from August and up 21.2 percent from September 2019.
September’s statewide median home price was $712,430 up 0.8 percent from August and up 17.6 percent from September 2019. Year-to-date statewide home sales were down 3.7 percent in September. The home price exceeded the $700,000 mark for the second consecutive month.
Existing, single-family home sales totaled 484,510 in October on a seasonally adjusted annualized rate, down 1.0 percent from September and up 19.9 percent from October 2019. October’s statewide median home price was $711,300 down 0.2 percent from September and up 17.5 percent from October 2019. Year-to-date statewide home sales were down 1.3 percent in October.
Existing, single-family home sales totaled 508,820 in November on a seasonally adjusted annualized rate, up 5.0 percent from October and up 26.3 percent from November 2019. November’s statewide median home price was $699,000 down 1.7 percent from October and up 18.5 percent from November 2019. Year-to-date statewide home sales were up 1.3 percent in November.
Existing, single-family home sales totaled 509,750 in December on a seasonally adjusted annualized rate, up 0.2 percent from November and up 28 percent from December 2019. December’s statewide median home price was $717,930, up 2.7 percent from November and up 16.8 percent from December 2019. For 2020 as a whole, sales of existing statewide homes were up 3.5 percent from last year.
Existing, single-family home sales totaled 484,730 in January 2021 on a seasonally adjusted annualized rate, down 4.9 percent from December and up 22.5 percent from January 2020. January’s statewide median home price was $699,890, down 2.5 percent from December and up 21.7 percent from January 2020.
Existing, single-family home sales totaled 462,720 in February 2021 on a seasonally adjusted annualized rate, down 4.5 percent from January and up 9.7 percent from February 2020. February’s statewide median home price was $699,000, down 0.1 percent from January and up 20.6 percent from February 2020, according to C.A.R.
Existing, single-family home sales totaled 446,410 in March 2021 on a seasonally adjusted annualized rate, down 3.5 percent from February and up 19.7 percent from March 2020. March’s statewide median home price was $758,990, up 8.6 percent from February and up 23.9 percent from March 2020. Year-to-date statewide home sales were up 17.1 percent in March.
The most important thing to remember is that it is a health crisis – not an economic one. This pattern differs from a standard economic recession, which is a situation in which economic activity falls for 6-18 months and then recovers more slowly. Due to a wave of job losses nationwide, this will create many distressed home sellers in the California real estate market, as well. Yet this is a buying opportunity for investors who have financing.
The slowdown in what is normally a busy season will cause some realtors to go out of business. Mortgage brokers and lenders will experience a boom in business since record low-interest rates cause a spike in mortgage refinances. We’ll also see a flurry of activity in the California real estate market as people pick up where they left off. For example, those who wanted to move before school starts in the fall aren’t going to wait another year to see what the housing market is going to do.
They’ll rush to showings and try to close on a property, as long as their personal financial situation is stable. We can expect the summer of 2021 to see record activity in the California housing market due to the standard spike in real estate transactions before the school year starts.
On top of this are the young graduates and couples that want to buy their own homes. Plus there will be long-term renters who recognize the opportunity that low mortgage rates represent, searching for homes once they can be pre-approved for a mortgage and visit properties.
There will be a slower economy for a while, but several ongoing trends aren’t going to reverse themselves. Millennials will want to move out of their parent's homes and into their own. We can’t say there will be a coronavirus-led baby boom, but many families having been stuck inside with their kids will decide they want a larger home, yard, or both.
We can talk about the many people who’ve moved out of California to other states. Yet the state continues to attract immigrants from around the world. And young native-born Americans flock here for high-paying jobs, as well. That isn’t going to change due to the virus. Tech giants expanding to Seattle or Portland haven’t relocated their development hubs out of Silicon Valley.
Furthermore, the demand for rentals in the California housing market remains strong. This is why we don’t expect to see a decline in monthly rents, though housing prices may fall significantly before shooting back up. A secondary effect of the coronavirus outbreak is that it has crimped supply chains around the world and slowed down construction.
This will drive up the value of both new and existing properties in the California housing market since the supply of new and redeveloped properties has been stifled. And there is certainly the possibility the California housing market will see bidding wars on the few available and desirable properties by people who have more margin thanks to historically low mortgage rates.
We can expect a few shifts in the California housing market long-term. Realtors will probably continue to utilize 3D virtual tours, using 360 cameras to capture images of every room in the house. This helps them sell the home 24x7x365, whether or not everyone is stuck at home.
While appraisers, stages, and construction crews can’t work remotely, we can expect far more back-office work in the real estate industry to be done remotely because that’s become commonplace. We can also expect online contract reviews and digital signatures to become the norm because it allows real estate transactions to move forward through some of the participants are at home.
Demand for housing was very strong before the coronavirus hit the U.S. This pandemic is not expected to last nearly as long as the United States subprime mortgage crisis, which was a nationwide financial crisis, occurring between 2007 and 2010.
The sharp sales drop in May was the steepest we’ve seen but there are encouraging signs that show the market is recovering and should continue to improve for the remainder of 2020.
Some of the realtors saw no decline in their businesses even during the peak of the pandemic. According to them, the real estate sector was really active even in the pandemic. The way of operating business has changed. People are working from home. They are using applications like FaceTime to show buyers homes instead of traditional open houses.
Lenders experienced a surge in demand as opportunistic buyers move to take advantage of low mortgage rates. Brett Jennings, the founder of Real Estate Experts, writes, “our market is still thriving” in Santa Clara County, seeing only a few cancellations despite shelter-in-place conditions and the fact that “we have one of the highest counts of active COVID-19 cases in California.”
According to Dr. Svenja Gudell, the chief economist of Zillow Group, when they examined pandemic histories ranging from the 1918 flu epidemic to the 2003 SARS outbreak, they noted that economies “snapped back quickly once the epidemic was over.”
Residential real estate is likely to fare far better than the commercial real estate sector. Sometimes, you have to take advantage of these market disruptions to see that many investors will pump the brakes on investing out of fear and other illogical emotional reasons, while others see the opportunity of having access to more real estate inventory, possibly better pricing, and still historically low-interest rates.