California Housing Market Report & Predictions 2021 (ManageCasa)
California Housing Market
Prices of single family homes rose in August to a new all time high, even while sales slipped 3.3% compared to July. The average price of a California house rose 2.1% to $827,940 while the average condo price stayed level.
Economic conditions in California have improved as the pandemic numbers have eased. 60,000 unemployed people transitioned back to employed status. Yet, many more are coming off of the Federal stimulus supports which will have a temporary effect on the real estate and rental sectors.
CAR believes this is a cooling trend and will be with us for a while however, they still feel optimistic about the changes and that better news is ahead. Certainly a full recovery of the economy is still ahead in 2022. For this fall however, buyers keep asking if home prices will fall?
Redfin in its August report said home prices in California rose 16.7% year-over-year in August while the number of homes sold rose 4.7%. They report that the number of homes listed for sale fell 27.8% and there are 50% fewer homes for sales compared to last year. 64% of homes sold above asking price while only 10% sold at below asking.
Sales Momentum Keeps Falling
New listings are down and sales are flat for the time being however, and with the Fed announcing interest rate hikes for 2022, more buyers might be eager to buy a house or condo. Migration back to the cities will have an impact on the Los Angeles, San Jose, and San Francisco housing markets.
Home prices actually fell in the Bay Area, Inland Empire and Far North regions, particularly San Mateo, Napa and Marin counties. Statewide sales-price-to-list-price ratio is 102.8% now, up from 100% even last August 2020. Year-to-date home sales across California rose 21.3% yet much of that was during a very hot spring period. Could this spring’s housing market forecast be for another jump?
Two-thirds of all counties reported by C.A.R. saw active listings drop year over year. 27 counties had a reduction of more than 10% year over year. 17 counties experienced an increase in home listings.
Covid 19, fiscal crisis, drought, inflation, heat wave, forest fires and more cooled the California housing market. Demand however remains strong and more buyers are chasing fewer homes. However, fewer sales took place in August and we’d expect sales to continue their usual downward path into the winter season this time around.
“While home sales at the lower end of the market are underperforming due to a lack of supply and the economic uncertainty induced by the COVID resurgence, the higher-priced segments continue to see double-digit sales growth that’s keeping the overall market from moderating too fast,” said C.A.R. Vice President and Chief Economist Jordan Levine.
Mortgage Rates and Applications
Freddie Mac reported the 30-year, fixed-mortgage interest rate averaged 2.84% in August, slightly reduced from 2.94% 12 months ago. The 5 year, adjustable mortgage interest rate averaged 2.425%, compared to 2.91% in August 2020, according to the California Association of Realtors.
Mortgage payment price growth is a concern for the market, as inflation increases and further rate hikes for 2022 were announced this week. Mortgage applications had their 17th straight month of declines year over year. Of course, affordable housing supply and rising home prices are likely the main reason for that.
California real estate is always a hot topic and rental house investment is wise and property management software is the foundation for profitable rental portfolios. Learn more.
California Housing Chart
Some experts however, including CAR’s, believe home prices are headed down and the market will calm further. We’re interested in hearing about your experiences and thoughts and comments in the comments section below. Please do share this post with others and give a link to our property management software. It’s the best asset any California landlord will have to build their business and grow their ROI.
California real estate is always a hot topic and rental house investment is wise and property management software is the foundation for profitable rental portfolios. Learn more about ManageCasa’s amazing solution for landlords.
August Home Prices and Sales Volume
Biggest Monthly Price Reductions:
- Marin County down $190,000 (-10.9% ) to $1,560,000
- Plumas down $57,000 (12.5%) to $397,500
- Contra Cost down $50,500 (-5.4%) to $889,500
- San Mateo down $185,000 (-8.8%) to $1,925,000
Biggest Monthly House Price Rises:
- Central Coast up $36,500 (+4.1%) to $905,000
- Santa Barbara up $273,960 (+32%) to $1,111,960
- Ventura up $32,000 (+3.4%) to $853,000
Read more on the San Francisco Market, San Diego market, and Los Angeles market.
Please note that CAR designates the Los Angeles Metropolitan Area as a 5- region that includes Los Angeles, Orange, Riverside , San Bernardino , and Ventura. The Bay Area includes: Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, Solano, and Sonoma. And the Inland Empire includes Riverside and San Bernardino counties.
Home Sales and Prices Last Week
Last week in week ending Sept 18, closed sales rose while listings fell. Inventory is up slightly but not enough to make a difference.
CAR notes the positive side in lower interest rates and a better than average jobs report.
With buyer fatigue, summer vacations, and ultra high home prices, we’re seeing much less interest in the housing market. It’s believed 75% of Californians cannot afford to buy a home in the state.
What’s Available is Getting Sold
New listings are lagging and sales are down from July and versus last August as well.
Housing Inventory
Overall across the nation, new housing starts are down. Labor and material shortages are part of the reason, while in California, NIMBYism and land use restrictions are the biggest culprits. However, the California governor just announced a new bill that allows 4 housing units to be built on lots that previously had one. This change to the single family zoning laws could generate a lot of renovation and flipping activity in the state.
However, given California homes high prices, the state still has one of the lowest cash offer rates among buyers. 70% of homes still sell above asking price. This graphic highlights the dramatic climb in 2020, which plateaued and then went onto even higher levels in 2021. With limited land and a resurgent economy, will 2022’s price growth be as dramatic?
California Condo Market Heated Up This Summer
In the absence of affordable single family homes which continue to be in strong demand, buyers are turning to the condo market. Prices have been rising although plateaued in August. Condo and apartment investors are sensing the upward trajectory of multifamily and apartment unit rent prices and are likely keen on competing for units too.
Napa, Solano, San Mateo and Santa Cruz saw huge leaps in condo prices in August, while Riverside, San Bernardino and Santa Cruz saw big drops in price and sales. This change might be due to workers returning to the urban regions to their workplaces. This trend might continue for many months as the pandemic eases.
California Rental Housing Market
The pandemic resulted in a large number of residents exiting California, and many vacating apartments in the major metros. Not surprisingly, one and two bedroom rent prices have dropped. while rent drops year to year are well down from the beginning of the pandemic, month to month drops have flattened or are beginning to reverse.
A Zumper report shows the California one bedroom median rent was $1,762 in June. Let’s review Zumper’s findings.
California Rent Prices by City
California renters have asked “will rent prices drop?” and it appears they have. In the Bay area especially, rent prices have fallen significantly.
Is it a Good Time to Buy a Home in California?
According to C.A.R.’s monthly Consumer Housing Sentiment Index, in April, 59% of consumers said it was a good time to sell, up from 55% the previous. Only about 25% feel it is a good time to buy a home, unchanged from last year.
Certainly, the vaccinations will free up many older California residents perhaps to sell their homes at record prices. However, homeowners may be very cautious about relinquishing their valuable property when moving is difficult and costly, and homes are very hard to find. Without certain places to go, listings don’t grow as expected.
It’s absolutely the biggest seller’s market ever across California. And perhaps more so for the pandemic destination cities within the state.
The top challenge to the housing market in CA now as the coming end of pandemic stimulus payments to homeowners, renters, and small businesses. The end of the eviction moratorium could throw a large number of homes onto the market as owners can’t meet their mortgage obligations. The state’s unemployment rate improved to 7.9% in May but remains one of the highest unemployment rates in the nation.
Relocating to New Cities for Safety, Room and Improved Lifestyle
CAR’s forecast report shows the reasons people are relocating and buying, See some of that info below.
Sales and especially prices for condos in NAPA have rocketed (condo prices, see below, shot up almost 30% and sales rose 33% over February number). Condo prices in Shasta were up 81% over February and in Monterrey, were up 48%.
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.
Home listings continue to plummet which means price pressures could be intense as stimulus money arrives and the recovery begins. New funds would certainly help save landlords and the rental market, and support suburban housing markets around San Diego, Los Angeles, and San Francisco. See more on the Bay Area rental market.
Will California’s Home Price Rise in the last half of 2021?
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. The trend is here and the return of buyers is here. A number of factors are contributing to California’s positive sales stats:
- desire to live away from the city in suburbs and rural regions and willingness top pay top dollar for homes
- record-low mortgage rates
- moving to regions (pandemic destination) that offer more room perhaps with an office or garden
- wealthy buyers have the funds ready
“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.
California Realtor’s Survey
The latest survey of Realtors shows fewer are withdrawing offer, more are listing new properties, and are not optimistic about sales or prices.
California Housing Market Forecast
C.A.R. Predicted More Home Sales and Higher Prices in 2021: Leslie Appleton-Young delivered her updated California housing market forecast for 2021. She expected 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. As know now, sales have declined.
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.
** Sourced from ManageCasa