Is a housing market crash on the way in 2021?
With the real estate market experiencing surging prices, scant inventories, and a backlog of new home construction, many consumers are wondering if what’s gone up must come back down — in other words, are we headed for another housing market crash? Let’s take a closer look.
Memories of the Great Recession Are Still Fresh
Few people foresaw the housing market crash 15 years ago that ignited a worldwide recession. Fueled by low interest rates, loose mortgage lending standards, and the nation’s unshakeable faith in homeownership, home values rose at record rates year after year. When the housing bubble burst, some nine million families lost their homes to foreclosure or short sale between 2006 and 2014. Housing values plunged 30% or more, homeowners lost a collective $7 trillion, and it took nearly a decade for most markets to recover. Even today, several local real estate markets have not fully recovered.
READ ALSO: 5 Arizona housing market predictions for 2021
With the robust market activity we’ve seen lately, are we in for a repeat housing market crash? The short answer is “not likely.” Today’s mini-boom cannot be sustained, but a crash as serious as the last one is highly unlikely because of a few determining factors:
Factor #1: Higher Lending Standards
Loose mortgage lending practices ultimately brought down some of the nation’s largest banks and mortgage companies. The fallout forced Congress and federal regulators to make significant adjustments that have since fundamentally changed how mortgage lending is regulated.
Since then, standards have been raised and the process of obtaining a mortgage is now more transparent. “Anyone can get one” types of loans are illegal, while borrowers must undergo rigorous income and asset checks. An entirely new regulatory agency, the Consumer Financial Protection Bureau, was created to enforce this new regulatory framework. Lenders who do not comply with these standards risk severe penalties.
As a result, the housing finance marketplace is now more robust and safe than it was 15 years ago. Any dip in the housing market will be cushioned by these stricter regulations.
Factor #2: Pandemic Mortgage Forbearance
When the housing market crashed in 2007, the influx of foreclosures pumped housing supply into areas with falling prices and weak labor markets, while also preventing recently-foreclosed borrowers from re-entering the market as buyers. According to the Federal Reserve, foreclosures during a time of high unemployment could depress prices, plunging homeowners across the country deeper into negative equity.
However, in the pandemic era, the effects of mass unemployment bear little resemblance to the Great Recession, thanks in large part to forbearance programs that have allowed homeowners to postpone their monthly mortgage payments without suffering penalties.
As of early March 2021, 2.6 million homeowners’ mortgages were in such forbearance plans. As the pandemic economy has slowly recovered, many homeowners have since resumed their employment, and thus their home payments. According to CoreLogic, by the end of 2020, overall mortgage delinquencies declined 5.8% due to the forbearance program. The share of mortgages 60 to 89 days past due declined to 0.5%, lower than 0.6% in December 2019.
It’s worth noting, however, that serious delinquencies — defined as 90 days or more past due, including loans in foreclosure — increased when owners who owed large amounts left forbearance. By year end 2020, the serious delinquency rate was 3.9%, up from 1.2% in December 2019.
Inevitably, some owners in forbearance will fail to secure a loan modification or a lengthy repayment period from their lenders. Unless the government provides a bailout for these beleaguered owners, they will lose their homes when forbearances end. ATTOM Data Solutions expects at least 200,000 defaults in 2021 and a 70% increase in foreclosures over the subsequent two years ─ a significant increase from current levels, but a far cry from the 6 million foreclosures following the 2007 crash.
Factor #3: The Cushion of Homeowners’ Equity
Equity is the difference between the current market value of your home and the amount you owe on it. In other words, it’s the portion of your home’s value that you actually own. Equity can be an incentive to stay in your home longer; if prices rise — something we’ve seen almost universally across the country in recent months — your equity increases, too.
Why does this matter? Simply put, higher levels of equity cushion homeowners from default when home values fall.
Over the past decade, American homeowners have enjoyed housing stability and growth, building up large home equity reserves. In the third quarter of 2020, the average family with a mortgage had $194,000 in home equity, and the average homeowner gained approximately $26,300 in equity over the course of the year. In contrast, 2009 saw nearly a quarter of the nation’s mortgaged homes valued for less than the amount their owners actually owed on those mortgages.
Factor #4: Price Growth Will Slow, But Not Stop
The sales boom following the outbreak of the COVID-19 pandemic in April 2020 surprised many real estate economists; like most other business sectors, real estate was expected (if not required in many locations) to lock down. But by mid-April, sales were soaring as buyers, many of them millennials, took advantage of record-low mortgage interest rates. Through the remainder of 2020, rates remained below 3%, and existing home sales reached their highest level in 14 years.
The combination of solid sales and depleted supplies drove the nation’s median existing-home price for all housing types to $309,800, up 12.9% from December 2019 and marking 106 straight months of year-over-year gains.
The multi-year run of significant price increases will end, at least temporarily, but inflationary pressure on entry-level homes will continue in most markets until new home construction will relieve it. Economists at Fannie Mae, Freddie Mac, the Mortgage Bankers Association, and the National Association of Realtors forecast median prices will rise between 3 to 8% in 2021, a significant drop from 2020 but nothing like the crash in prices seen in the last housing crash.
A Moving Target
While no one can say for sure what will happen with the real estate sector, most experts are confident that we’ll experience a market dip, but certainly not a crash. Still, it’s important to stay informed of market trends, consumer sentiments, and expert insights. Check back with Homes.com for all the latest!
Will The Housing Market Cool Off By Fall? Here’s What Experts Predict
Today’s hot housing market is one of the peculiar outcrops of the pandemic. Housing supply was already low before Covid-19, but it was further hampered as lockdowns took place and people began looking for new homes, driven by a host of reasons—from the desire to leave populated cities to better home offices or just fear of missing out (FOMO).
The Federal Reserve’s steps last year to keep the financial markets liquid and to ensure mortgage rates stayed low have continued. But the low mortgage rates pale in comparison to soaring housing prices in the past year.
Home prices nationwide, including distressed sales, grew by 17.2% in June 2021 compared with June 2020—a record high, according to the latest CoreLogic report. And while there have certainly been hot seller’s markets in the past, none quite compare to the current market where more than 50% of homes for sale have fetched over the asking price.
“We’ve been tracking housing prices for over 20 years, and we’ve never seen anything like this,” says Frank Nothaft, chief economist at CoreLogic.
Historically, the fall ushers in less competition and better deals as children return to school and the holidays overtake schedules. But the pandemic altered that trend last year, and many cities are going through double-digit percentage increases in housing prices.
To get some insight into what prospective buyers and sellers can expect as we enter the midpoint of summer, Forbes Advisor spoke to housing experts across the country to get their forecast on home prices, rates and buyer appetite in the coming months.
Are Home Prices Slowing Down?
While a full-on celebration might be too soon, prospective homebuyers can breathe a little easier, based on predictions from real estate experts. Prices are beginning to decelerate in some areas as more inventory has become available for single-family homes.
According to the National Association of Realtors, unsold homes rose 3.3% to 1.25 million from May to June this year. Although the increase in inventory is not enough to satisfy demand, it might give buyers hope and possibly buying leverage with more options to choose from.
“Mortgage applications have dropped to an 18-month low, and we are seeing some real buyer fatigue in the market,” says Tamar Asken, real estate agent at Avenue 8 in Los Angeles. “Sellers are responding to lower buyer enthusiasm with price reductions.”
In Northern Virginia, home prices were up 10.9% year-over-year (YOY) in June 2021 compared to the same time last year. The more affordable areas of Northern Virginia, like Fairfax City, saw a sharper rise in YOY median home price gains (15.1%) compared to their more expensive nearby areas like Falls Church, which experienced a smaller rise of just 3.2%.
“The market in Northern Virginia has slowed significantly during the past month, with fewer offers and longer days on market,” says Ryan McLaughlin, CEO at the Northern Virginia Association of Realtors (NVAR). “While this would be a normal pattern in a typical year, given the intensity of the spring market, it is surprising. It could well be due to an uptick in travel as pandemic restrictions eased.”
Cape Cod, part of the “Zoom towns” (areas that got popular as more people were able to work from home) housing frenzy that took hold last year, is starting to see a slight reprieve from the hopped-up demand.
Last year, the early pandemic buying spree slashed Cape Cod inventory from approximately 2,300 homes to 230 homes as cities shut down and buyers flocked to the coastal town, says Ken Hager, general manager of Gibson Sotheby’s International Realty on Cape Cod. But Hager says that the market is beginning to normalize.
“Looking ahead, we could see price increases continue on Cape Cod as well as across the country, but at a much slower pace. And prices will likely retreat from panic-buying highs,” Hager says.
However, for some communities, the pandemic gave them a much-needed boost from the lagging price appreciation still leftover from the last housing crisis. Wisconsin, for instance, was slower to recover from the 2008 crash, when foreclosure filings hit a record high of 21.5%.
“In many of our neighborhoods, it took until 2018 to return to those pre-crisis values. Since then, we have seen double-digit appreciation, but it has largely been a reversion to the mean,” says Rick Ruvin, lead partner with the Falk Ruvin Gallagher team at Keller Williams in Milwaukee. “Locally, we are anticipating an evening of the playing field and a return to offers with the typical inspection and financing contingencies.”
Buyer Behavior Is Becoming Less Risky
Similar to how the pandemic triggered a sanitizer and toilet paper buying spree, consumers also flocked to the real estate market last year. As demand for houses picked up, interested buyers have pulled out all the stops to outbid the competition.
This caused all sorts of strange and perhaps reckless behavior, including buyers forgoing contingencies in the sales contract meant to protect them and their earnest money, which can amount to thousands of dollars. Some buyers were using their retirement savings, while others were getting loans so they could appear to be all-cash buyers.
But this going-for-broke approach could be declining, says Brady Miller CEO of Trelora, a real estate company based in Denver, Colorado. Whether it’s because inventory is beginning to ramp up or home prices are flattening, some buyers realize that they might be putting too much on the line and “are taking the power position back once they go under contract,” Miller says.
Even Asken, who’s based in Los Angeles’ notoriously expensive and competitive market, says she is noticing that more buyers are now proceeding with caution.
“I do not see the same level of desperation and urgency we saw a few months ago,” Asken says. “After large price increases, many properties just don’t feel like such a good deal anymore.”
Mortgage Rates and Home Price Forecasts for the Fall
While history would indicate that fall is when you can get a better deal on real estate, last year bucked all trends with enormous home sales growth recorded in the fall season. So are we likely to see a repeat later this year?
Ralph B. McLaughlin, chief economist and senior vice president of analytics at Haus, Inc., says that demand will go back to its usual cooling-off period in the fall, noting the recent expansion of inventory and retreating home prices.
“I think it’s absolutely likely that price growth will slow throughout the end of the year, as they’re already slowing from their peak in June,” McLaughlin says. “We expect price growth to moderate to the mid-high single digits by December.”
However, McLaughlin added that he doesn’t expect inventory to recover fully until next spring.
Likewise, Nothaft was cautiously optimistic, pointing out that inventory is on a rising trajectory thanks partly to lumber prices easing and the construction of new sawmills in the U.S. But Nothaft also agrees that housing supply is a long way from meeting demand.
Nothaft also expects mortgage rates to increase as we head into fall and the new year. The mortgage rates on both fixed 30-year and 15-year mortgages have been sitting at record-low averages since last summer, bobbing between the low-3% and mid-2% range. These low rates have only encouraged an already fiery housing market, so higher rates should help subdue demand.
“Mortgage rates are rock-bottom and record low, but they will not stay like that forever,” Nothaft says. “Over the course of 2022, we’ll see a gradual rise, probably about half a percentage point higher than in 2021. On the margin, that will moderate demand.”
Buyers Shouldn’t Wait to Prepare
The best course of action for buyers waiting on the sidelines is to start getting your finances in order now—if you wait to do that until a deal comes along, you’ll be too late.
This is a good time to work on your credit score—a higher score means lower rates, which translates into lower monthly payments. You can get weekly free credit reports from all three credit bureaus until April 20, 2022. After that, you’re entitled to one free credit report from each bureau per year.
Keep in mind that as home prices rise, so does your down payment requirement. What was a 5% down payment on a house last year is much higher this year as home prices continue to tick up, so keep saving and explore down-payment assistance (DPA) options.
Not only do you have to save for a down payment, but there are also closing costs and reserve money you’ll need in the bank, too. If you want help navigating the homebuying process, a great place to start is with a housing counselor. The U.S. Department of Housing and Urban Development (HUD) has a directory of free, HUD-approved housing counselors on its website.
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It’s no secret that the COVID-19 pandemic has turned the real estate market into a wild domain. If you’re looking to buy or sell a home, you’re likely eager to know how long this will last.
In June 2021, home prices across the U.S. surged 24.8% year-over-year — to a median sale price of $386,888 — according to Redfin. During the same time period, the number of homes sold increased 20.6% and the number of homes for sale tumbled 39.6%.
See: The Cost To Own a 3-Bedroom Home in Every State
Read: Real Estate Investing Guru Mindy Jensen Says To Avoid These Types of Properties
Mortgage rates have reached record lows during the pandemic and have once again been on the decline since late June. Specifically, the 30-year fixed-rate mortgage was 3.02% on June 24, dropping to 2.78% on July 22.
While an economic upturn was predicted, the Delta variant could send that to a screeching halt. On July 27, the Centers for Disease Control and Prevention reinstated their recommendation that fully vaccinated people in areas of substantial or high transmission wear a mask indoors.
Only time will tell if additional COVID-19 restrictions will return, and how this could impact the housing market. However, several real estate agents and experts have weighed in with their opinion of what the market will look like for the rest of the year.
See: The Best Place To Buy a Home in Every State
Check Out: 32 Insider Tips for Buying and Selling a House
“The real estate market in the first half of 2021 bore the surging demand from a millennial reshuffling,” said Greg Toschi, CEO of Poplar Homes, a California-based real estate technology and services company. “Millions of older millennials are creating families and were planning to buy a home in 2022 to 2025.”
However, he said a lot people decided to make the move earlier, instead of following their original homebuying timeline.
“We saw this in the rental market with a 100% increase in the number of people moving to buy a home or change jobs,” he said. “All that demand was pulled forward and unleashed like a sling shot — alas, prices skyrocketed.”
Toschi said this also happened during what is typically the hottest season for homebuying, which contributed to the surge. Heading into the fall months, activity usually slows and prices tend to drop. Right now, he said many homebuyers are opting to wait to make a purchase because prices are too high.
“Inventory numbers are also climbing,” he said. “But prices probably won’t go down much as normal.”
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Look: 25 Tricks To Sell Your House for a Bigger Profit
While the enthusiasm of those who have been shopping for a new home for awhile might fade, he noted there are still tons of new buyers entering the market.
“If the COVID Delta variant leads to further lockdowns and quarantines, the real estate market will probably behave in a similar way as the last lockdown,” he said. “Though I’m not sure it will deter buyers who built up a lot of motivation during quarantine.”
Jason Gelios, a realtor in Southeast Michigan, said he’s starting to notice a bit of a difference in the market.
“There is a slight change happening in the current housing market where buyer demand has actually decreased,” he said. “In my market of Southeast Michigan, we are still seeing more buyers than homes available, however we aren’t seeing lines of people waiting to view a home.”
Despite the shift, Gelios predicted the real estate surge isn’t stopping anytime soon.
“We will see a slight increase in mortgage rates, probably 3.5% by mid-fall, and a slight increase in housing inventory as we approach the later part of 2021,” he said. “We don’t anticipate a full switch in the housing market until sometime in 2022 where it would be considered favoring buyers.”
Learn: 40 Cities That Could Be Poised For a Housing Crisis
Read More: 8 Insider Tips to Get Rich in Real Estate
Betsy Ronel, a licensed real estate salesperson with Compass in Westchester County, New York, said she thinks the market in her local area will soften slightly until the winter months, because buyers are discouraged.
“Then, depending on this Delta variant and mask laws, the market might quiet down until the spring,” she said. “I think either way we will have a stronger spring market, but we won’t be back to a more balanced market for some time.”
Ronel said she believes the market will be in recovery mode for the foreseeable future.
“It’s a national issue, so things are stalled everywhere in some way,” she said.
Of course, not every U.S. city has experienced a chaotic real estate market during the pandemic.
“While many suburban markets have enjoyed significant price appreciation due to COVID, some of the best cities in the country have been discounted — New York being one of them,” said Daren Herzberg, a licensed associate real estate broker and co-founder of The Babst + Herzberg Team at Compass in New York. “Now is the time to buy.”
He said a significant amount of people are returning to New York City and taking advantage of the double discounts rarely enjoyed on real estate, which is bringing the Big Apple back to life at record pace.
Plan Ahead: What Homes Will Be Worth in Your State by the End of 2021
“On top of that, outdoor dining, bike lanes and a brand new and better selection of retail will make the best city in America feel like the Roaring ’20s,” he said. “And on top of that, historically low interest rates and a vibrant economy should make a move into real estate compelling in any market — in spite of recent price increases.”
While the real estate market has largely been hot across the U.S., local market conditions vary and will continue to do so. If you’re planning to buy or sell a property this year, check with a licensed real estate agent in your area to learn more about regional trends.
More From GOBankingRates
Last updated: Aug. 2, 2021
This article originally appeared on GOBankingRates.com: The Housing Market Forecast for the Rest of 2021, According To Realtors
Goldman Sachs: Home prices to climb another 16% by the end of 2022
Prices 2021 home
California Housing Market Report & Predictions 2021
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.
Redfin Home price report. Screenshot courtesy of Redfin.
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?
California Home Sales August 2021. Screenshot courtesy of CAR.
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.
California Resale home listings for August. Screenshot courtesy of CAR.
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.
California Resale home history chart. Screenshot courtesy of CAR.
“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.
Mortgage payment growth history chart. Screenshot courtesy of CAR.
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
California Single Family House Sales and Prices August 2021. Screenshot courtesy of CAR.
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.
Screenshot courtesy of CAR.
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.
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.
California Housing Inventory. Screenshot courtesy of CAR.
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 plateau’d 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 Median House Price history chart. Screenshot courtesy of CAR.
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 plateu’d 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.
California Median Condo Price history chart. Screenshot courtesy of CAR.
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 Median Condo Price history chart. Screenshot courtesy of CAR.
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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.
|Pos.||City||Price||M/M %||Y/Y %||Price||M/M %||Y/Y %|
|1||San Francisco, CA||$2,650||0.00%||-24.30%||$3,500||0.00%||-22.90%|
|3||San Jose, CA||$2,100||-3.70%||-17.60%||$2,650||-1.10%||-12.50%|
|8||San Diego, CA||$1,800||-1.10%||0.00%||$2,400||0.00%||0.00%|
|9||Santa Ana, CA||$1,700||0.00%||0.60%||$2,380||0.40%||8.70%|
|12||Long Beach, CA||$1,600||0.00%||0.60%||$2,010||0.50%||0.50%|
California Rent Prices by City
Rent prices in California Cities. Screenshot courtesy of Zumper.
California renters have asked “will rent prices drop?” and it appears they have. In the Bay area especially, rent prices have fallen significantly.
Rent price drops across California cities, 2021. Screenshot courtesy of Zumper.
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.
For Landlords and Property Managers: This is an ideal time to Demo a modern Property Management Software Platform
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.
Screenshot courtesy of CAR.org.
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.
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.
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.
California Economic 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.
The expected 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.
Booming Online Software Solutions
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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- the best insight into market trends, new technology, and investments
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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.
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.
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Read more Housing and Property Management Topics:
See also: Housing Market | Property Management Software | Property Management Software Demo | Housing Market Forecast | Apartmentalize | Trade Shows Conferences | Apartment Management Software | Housing Market Forecast 2021 | Hawaii Real Estate Forecast | Los Angeles Home Prices | San Diego Housing Market | Florida Property Management Companies | California Property Management Companies | Arizona Property Management Companies | South Carolina Property Management Companies | Property Management Companies
By Gord Collins
Gord is ManageCasa's content researcher and writer capturing the imagination of investors, property managers, and landlords. His 20 years of real estate marketing includes stints with digital marketing agencies, real estate publishers, and Realtors.
Whether you’re buying, selling or staying put, you might be feeling unsure about whether a change in home prices will impact your housing plans this year—especially after everything that happened in 2020. Shudder. We get it.
The cool thing is, home prices haven’t been dropping—a relief for sellers. They haven’t been shooting up like a bottle rocket either, which keeps buyers from getting overwhelmed by sticker shock.
Sure, keeping an eye on home prices can give you an idea of what to expect if you plan to buy or sell a house any time soon. But making a decision based on a single trend is almost the same as making one based on a fortune cookie—As the sun will rise, so shall your home plans. What? Exactly.
So just be careful not to let data dictate your housing decisions—only your personal situation and finances should do that. With that said, let’s unpack the latest housing price trends.
Ready. Set. Go!
What’s the Average Price of a House?
Leading up to 2021, the U.S. median home price was $340,000.1 Keep in mind, median price is a benchmark that tells us half sold for more and half sold for less than that amount. Median prices are usually a better way to look at housing price trends (unless you’re buying a mansion on a private island) because average prices can be super exaggerated by a small share of high-end transactions.
Find expert agents to help you buy your home.
To be clear, that $340,000 median represents both newly built and existing homes. But even if we take those sparkly new homes out of the equation, median prices for just existing homes were also well within that $300,000 range—a nearly 15% growth compared to 2019.2
Also good to know: Home prices have experienced a trend of nonstop growth for nearly a decade!3 And while price growth could slow down if inventory increases, right now it’ll probably continue because too many buyers are competing for homes in a market with record low inventory.4
Home prices have experienced a trend of nonstop growth for nearly a decade! And while price growth could slow down if inventory increases, right now it’ll probably continue because too many buyers are competing for homes in a market with record low inventory.
What Will Happen to Home Prices in 2021?
Overall, experts expect home prices to grow by 8% in 2021—and by 5.5% in 2022.5 So, if you’re thinking of selling, odds are you’ll still make a pretty penny. But if you’re waiting to sell because you think your home will double in value soon, don’t count on it.
On the flip side, if you’re looking to buy, with the growth rate cooling down and the market evening out, there’s less likelihood that prices will shoot up like crazy from year to year.
Overall, experts expect home prices to grow by 8% in 2021—and by 5.5% in 2022.
Recent Home Price Trends
Okay, if you listen to any expert blab about real estate for long enough, you’ll learn that location is important. So, let’s see how current existing home prices change when we look at median prices based on region.
Versus Last Year
Home prices definitely vary widely based on your part of the country. Homes in the Midwest were the least expensive, while those on the West Coast sold for the highest prices—something to think about before you drop everything to start an acting career in L.A.
By Age of Home
Unsurprisingly, another factor that dramatically impacts home price is whether you decide to purchase a newly built home or a previously owned one.
In 2020, the median price for a new home was $334,000, while a previously owned home was $260,000.7 So, if you’re thinking, I want a home that’s brand-spankin’ new. Just make sure the extra $74,000 for a new home works with your budget.
Most buyers don’t seem to mind living in a previously owned home if it means paying a lower price. In fact, the majority (85%) of the homes purchased last year were previously owned.8
In 2020, the median price for a new home was $334,000, while a previously owned home was $260,000.
By Buyer Status
It’s also interesting to know first-time home buyers typically purchased homes that were $230,000, while repeat buyers bought $297,000 homes.9 And whether you’re married or single obviously has an influence on the price of the home you buy as well. Take a look:
How does size affect price? Last year, the median price per square foot was $140.11And if you’re wondering what the neighbors are doing, most people purchased homes that were 1,900 square feet with three bedrooms and two bathrooms.
What Do Today’s Home Prices Mean for You?
Okay, now we know how prices change based on different factors. But what does that all mean for you?
Well, if you’re planning on buying a house, home prices might look intimidating. But remember, just because you saw house prices that other people in the nation are paying, that doesn’t mean you should look for a house in that price range.
Instead, focus on your own budget. Don’t worry about the pricing trends. A good real estate agent can help you find a home you love that’s within your budget.
If you’re not paying in cash, make sure you get a 15-year fixed-rate mortgage. And whatever you do, never buy a home that’ll cost you more than 25% of your take-home pay in monthly housing payments (including taxes, insurance and homeowners association fees).
Use our mortgage calculator to test out different home prices and see how much house you can afford.
Never buy a home that’ll cost you more than 25% of your take-home pay in monthly housing payments (including taxes, insurance and homeowners association fees).
When it comes to home prices for sellers, the main question is: How much money can I make on my home sale? Of course, the answer depends on a huge variety of factors. But for a ballpark, recent sellers sold their homes for a median of $66,000 more than they purchased it.12Cha-ching!
To make sure you get what your home is worth, work with a real estate agent who’s experienced in your area. They’ll be able to do a competitive market analysis to find out what similar homes are selling for in your area so you can price your home right the first time.
Now, maybe you own a home but you aren’t planning on selling it any time soon. You’re probably curious to know how much your home value is growing or appreciating. Well, get this: People who owned their homes for 4–15 years sold them last year for around $50,000–80,000 more than they purchased them—that’s right, tens of thousands of dollars in growth!13
And those who lived in their homes for 16–20 years before selling earned a median of $85,000—and an average profit of almost 50%!14
So, if you’re thinking about downsizing in the next year or two or planning to buy that retirement dream home, you may be in good shape. And even if you’re not, it’s likely that your home sweet home is going up in value.
How to Buy or Sell a Home for the Best Price
Having an experienced real estate agent is hands down the key to buying or selling a home for the best price. You’ll benefit by working with a professional who knows the ropes and can help you keep costs down or get you the value you deserve for your home.
For a quick and easy way to find the best-performing agents in your market, try our Endorsed Local Providers (ELP) program. The real estate agents we recommend always put your needs first and actually care about helping you keep your financial goals in balance.
Find a real estate pro in your area!
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I did it once, replied the mother and purred water with smelly air into the toilet with a shit, "To the daughter of one of my colleagues at. Work, she was already a big girl, about twelve years old, probably because her mother was afraid that she could not cope with her alone.
How it was. Tell me in more detail !, the son insisted.