There’s no hiding the damage the coronavirus pandemic initially did to California’s housing market. Realtors had to cancel showings, and landlords watched their empty units remain vacant for months. Public health measures and stay-at-home orders made real estate transactions extremely tricky, and the uncertainty of the job market made buyers and lessees anxious. About half of all agents reported a drop in buyer interest, and around 54% of realtors had buyers who had originally shown interest in a property back out entirely.
But the real estate industry is essential, and thus, powered through the pandemic as other non-essential businesses further suffered. Realtors and customers quickly adapted to the new world, setting up virtual tours and signing contracts online. And even as the economy suffered unimaginable loss in 2020, the CA real estate industry saw a hefty boost.
There wasn’t a single county that didn’t see a double-digit leap in the media price of homes in March. San Bernardino County saw the biggest increase—18.3 percent to $429,500—but Los Angeles County wasn’t far behind with a 17.2 percent increase to $750,000. Orange County continues to be the highest of the counties with the largest media home price of $835,000, which represented a 10.6 percent jump last month.
So what’s causing this dramatic rise? And what’s next for the housing market’s future?
The market is hot and showing little to no signs of cooling down any time soon. California home values have risen nearly 114% over the last decade, according to the Zillow Home Value Index. If we go by this calculation, we can conclude the current typical home value across all regions in California is around $654,629, indicating 50% of the housing stock is worth less and 50% is worth more.
Back in May of 2020, the typical home value was around $583,000, meaning within just a year, home values have gone up by over 12%. This currently makes California a seller’s market: the demand is far, far exceeding the supply. With buyers now making offers higher than listing price trying to outbid each other, sellers have quite the advantage when it comes to making negotiations. Buyer demand is at an all-time high right now, pushing home prices up by a double-digit rate of appreciation.
Unfortunately for buyers, the current inventory doesn’t show any signs increasing any time soon: the low inventory coupled with higher home prices and quick-selling homes is dwindling the stock at an alarming rate.
Rates are hovering around 3% and have been since earlier this year. This doesn’t mean applications have gone up, despite the favorable drop. The COVID-19 crises caused a halt in the labor market, driving up the price of lumber and other home-building materials, making it difficult for homebuyers to find homes to purchase. And with properties staying on the market for an average of just over two weeks, buyers can expect the inventory to continue to dwindle.
Mortgage brokers and lenders can expect a boom as the economy picks back up. These record-low interests rates are attracting more and more Millenials, who now make up the majority of the home-buying market, and are opting to spend their hard-earned money on mortgage payments that aren’t much higher than the exorbitant rent they’ve been shelling out year after year.
Realtors can expect a rush of showing requests from buyers eager to close on a property as quickly as possible to secure their potential home before someone else snatches it up from underneath them. And sellers can continue to expect to see their properties, if listed at the proper market value, close faster than they’d ever imagined.
It’s likely we’ll continue to see realtors push for 3D virtual tours, making their lives a bit easier not having to schedule every showing request in-person, for the most part, we’ll see the typical processes– such as appraisals and construction– pick back up as the state officially reopens.