The California Association Of Realtors (CAR) peered into its crystal ball to make predictions about the health of the state’s housing market in 2021. The rosy outlook is contingent on a COVID-19 vaccine, which likely won’t be distributed en masse until sometime next spring.
The forecast calls for a slight, 3.3 percent increase in existing single-family home sales next year, totaling 392,510 units.
“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.
Despite a stronger-than-expected performance in 2020, lockdown restrictions on in-person showings during the spring led to a 4.5 percent annual drop in the number of homes sold throughout the state.
Home prices are anticipated to rise in tandem with sales, inching up 1.3 percent to $648,760 in 2021. So far this year, California has seen its median home price spike 8.1 percent to $640,330 thanks to a combination of historically low mortgage rates, changing homebuyer preferences and dwindling supply levels.
“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,” continued Radsick.
CAR reasons that average 30-year, fixed mortgage rates will continue to fall, hitting 3.1 percent in 2021. That’s 10 basis points lower than where rates currently stand and a marked improvement over 2019’s 3.9 percent average.
In what’s sure to be good news for would-be buyers, CAR Senior Vice President and Chief Economist Leslie Appleton-Young predicts the breakneck pace of home price appreciation will slow in 2021.
“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,” concluded Appleton-Young.