The California real estate market will continue to rebound from the financial shock of this year’s coronavirus pandemic, thanks to rock-bottom home mortgage rates and strong homeownership need, Realtor economic experts forecast Tuesday, Oct. 13.
Continued financial uncertainty, lingering unemployment and a lack of houses on the market will keep that rebound in check.
And that’s presuming there’s not a major revival in COVID-19 cases next year.
The California Association of Realtors’ financial forecast this year looks at a number of situations in anticipating whether house prices and sales will increase or fall next year.
Under AUTOMOBILE’s “most likely” scenario, mean prices for existing homes, that make up two-thirds of the marketplace, will increase a modest 1.3% next year, hitting $648,760, the forecast said.
Sales– which have declined for the last three years– are forecast to increase 3.3% to 392,500 single-family deals. Even at that rate, sales still would be 1.4% below 2019 levels.
“We remain in a healing. We absolutely have seen an improvement,” AUTOMOBILE Chief Economic expert Leslie Appleton-Young said throughout the trade group’s annual convention, held online this year. “But the momentum has actually slowed. … There’s still a large group of individuals who need support.”
The most likely scenario presumes a COVID-19 vaccine will be available in the first half of 2021, and simply a modest increase in cases in the coming winter season.
Things will turn out far in a different way if the vaccine is sluggish to show up or there’s a new revival in cases.
A worst-case scenario would occur if there’s likewise an increase in foreclosures, no financial development, and Congress stays deadlocked over federal financial stimulus plans. If those things were to occur, the forecast would shift to a 9.8% drop in house sales and a 16.4% drop in the mean house cost.
“If that comes to fulfillment, it looks like an environment where sales continue to fall this year and next year also,” said Jordan Levine, AUTOMOBILE’s deputy chief economist.
Even so, low home mortgage rates are expected to continue to sustain cost development. AUTOMOBILE forecast the average 2021 rate for a 30-year, fixed-rate home mortgage will be 3.1% next year, down from 3.2% this year.
The variety of houses on the marketplace– down 50% in 2020– are expected to remain low in the coming year, developing more upward pressure on prices.
Southern California likely will see a similar pattern to the statewide trend, Appleton-Young said.
This year’s mean house cost– or cost at the midpoint of all sales– is forecasted to increase 8.1% from 2019, due in part to strong sales of higher-priced houses, bring up the general averages.
While house worths increased in all cost sections this year, the most significant cost development remained in the top 20% of the marketplace, Appleton-Young said. That’s since professionals and other high-income earners weren’t struck as hard by the pandemic as were individuals and tenants operating in the dining establishment, hotel and hospitality sectors.
AUTOMOBILE economic experts likewise do not anticipate the economy returning to full strength next year, even under its most likely scenario.
The U.S. GDP will increase 4.2% in 2021 after a forecasted drop of 5% this year. California tasks are forecast to increase 0.5% in 2021, following a forecasted loss of 12.7% this year. And the state’s unemployment rate still will be 9%, down from this year’s projection of 10.8%.
“Even in our standard scenario, we have actually still got a great deal of healing left to do,” Levine said.
Foreclosures likewise are forecasted to increase next year, although not nearly to the degree they did throughout the Great Recession.
For example, AUTOMOBILE economic experts forecasted bank-owned houses will make up between 5% of next year’s listings in a best-case scenario to 30% in a worst-case scenario.
By contrast, 60% of houses selling at the start of 2009 were bank-owned, with cost discounts in the 60% variety. A worst-case scenario for next year visualizes discounts of 40% for foreclosed houses.
Eventually, the real estate market is ending 2020 in much better shape than anybody expected, Appleton-Young said. For example, house sales shifted from a 41% drop in May to a 15% gain in August, AUTOMOBILE figures reveal.
”The healing returning has actually been definitely spectacular,” Appleton-Young said. “There’s simply a great deal of uncertainty, so we tend to be conservative looking at next year.”