California Home Prices Expected To Stagnate As Sales Slow In 2021
October 14, 2020
LOS ANGELES , CA — California home price increases and sales are expected to slow in 2021, but the Los Angeles-based California Association of Realtors doesn’t forecast widespread price drops.
Despite the economic uncertainty caused by the pandemic, California home sales are expected to climb a modest 3.3% next years, and home prices will edge up 1.3%, the California Association of Realtors forecasted Tuesday. Low mortgages rates and pent-up demand are credited with propping up the market despite the pandemic slow-down. CAR leaders expect interest rates to continue to fall.
“An extremely favorable lending environment and a strong interest in homeownership will continue to motivate financially eligible buyers to enter the market,” said CAR President Jeanne Radsick, a Realtor in Bakersfield. “While the economy is expected to improve and interest rates will stay near historical lows, housing supply constraints will continue to be an issue next year and may put a cap on sales growth in 2021.”
Home prices, which frequently see 10% year over year growth in Southern California, are expected to remain largely stagnant, according to CAR. The group anticipates that the California median home price will climb to $648,760 in 2021 after climbing more than 8% in 2020 to $592,450.
“While home prices rose sharply in 2020, driven by strong sales of higher-priced properties and a limited inventory of homes for sale, the pace of price growth will be more moderate in the coming year,” said Leslie Appleton- Young, CAR’s senior vice president and chief economist..
“The uncertainty about the pandemic, sluggish economic growth, a rise in foreclosures, and the volatility of the stock market are all unknown factors that could keep prices in check and prevent the statewide median price from rising too fast in the upcoming year,” added Leslie Appleton- Young.
CAR expects home sales of 392,510 units, up from the projected 2020 sales figure of 380,060.. The 2020 figure is 4.5% lower compared with the pace of 397,960 homes sold in 2019.
The CAR forecast projects growth in the U.S. gross domestic product of 4.2% in 2021, after a projected loss of 5% in 2020. With California’s 2021 nonfarm job growth rate at 0.5%, up from a projected loss of 12.7% in 2020, the state’s unemployment rate will dip to 9% in 2021 from 2020’s projected rate of 10.8%, according to CAR data.
The average for 30-year, fixed mortgage interest rates will dip to 3.1% in 2021, down from 3.2% in 2020 and from 3.9% in 2019, remaining low by historical standards, CAR economists say.
City News Service and Patch Staffer Paige Austin contributed to this report.