California Real Estate Market Prices Hit Record High in May 2021





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.

Table of Contents

  • Will The Housing Market Go Up or Down in California?

  • Six California Metros Feature in The Top 20 Hottest Housing Markets

  • California Housing Market Trends For May 2021

  • California Housing Market Forecast 2021-2022 (Latest Projections)

  • Latest Weekly Trends & Forecast From California REALTORS®


  • Impact of COVID-19 on The California Housing Market (Summary)


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.


Existing-Home Sales

  • 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.


Conclusion


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. 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.



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