The share of first-time California homebuyers reached a 10-year high over the summer, accounting for over 38 percent of the buyer pool, according to the California Association of Realtors’ (CAR) 2020 Annual Housing Market Survey.
Millennials, who have now reached their peak homebuying years, were enticed by record-low mortgage rates and expanded home search radiuses afforded by remote work. The top reasons cited by Californians who purchased a home in 2020 were renter fatigue (25 percent), the desire to own a larger home (20 percent), and wanting to live in a better area (19 percent).
Lower borrowing costs gave first-timers more buying power, allowing them to purchase higher-priced properties while maintaining affordable monthly payments. For some, this meant that owning made more financial sense than renting and spurred them to make the leap to homeownership.
More than half (54 percent) of all first-time buyers surveyed reported purchasing a home because they were “tired of renting.” However, the ongoing housing supply shortage and rising home prices are expected to shrink the number of first-time homebuyers by year-end and into 2021.
Changing lifestyle needs and falling mortgage rates caused homebuyer competition to heat up. Of the California homes sold in 2020, 59.2 percent received multiple offers with an average of 4.8 offers per home. By contrast, fewer than half (47.7 percent) of home sales in 2019 ventured into multiple offer scenarios.
More than a third of homebuyers (35.5 percent) paid over asking in 2020, compared to 26.7 percent in 2019. This was the highest level recorded in seven years and a 16 percent increase over the long-run average.
Competition was fiercest among mid-range homes priced between $500,000 and $1 million, with 67.3 percent receiving multiple offers. For-sale homes in this bracket typically netted six offers, had a 37.3 percent likelihood of receiving an above-asking offer, and sold the fastest with a median of 10 days on the market.
California home sellers were the real winners of 2020, however, netting an average profit of $210,000 from their sale — a whopping 63.8 percent increase over the original purchase price. Those who lived in their homes for less than five years typically earned a 16.5 percent profit, while sellers who stuck it out for more than five years generally raked in a 100 percent profit.