The California housing market will begin to recover from the economic shock of this year's coronavirus pandemic, thanks to rock-bottom mortgage rates and solid demand for homeownership, predicted by Realtor economists on Tuesday, October 13,2020. But continuing economic instability, persistent unemployment, and a shortage of homes on the market will hold the recovery in check.
And that's assuming there's no big re-emergence of COVID-19 cases next year. The California Association of Realtors' economic forecast this year is looking at many scenarios to determine whether home prices and sales will rise or fall next year.
In the most likely scenario of Automobiles, median prices for existing homes, which make up two-thirds of the market, will grow modestly by 1.3 per cent next year, reaching $648,760, the forecast said. Sales—which have declined over the last three years—are expected to grow by 3.3 per cent to 392,500 single-family transactions. Even at that point, revenue will still be 1.4% below the pace of 2019.
A worst-case scenario would arise if there were also an uptick in foreclosures, zero economic growth, and Congress stayed stuck to federal stimulus plans. If these things were to happen, the projection will change to a 9.8% decrease in home sales and a 16.4% drop in the median house price. "If that comes to fruition, it looks like an environment where sales continue to fall this year and next year said Jordan Levine, CAR Deputy Chief Economist.
Even so, low mortgage rates are expected to continue fueling price inflation. CAR expects that the average rate for a 30-year fixed-rate mortgage will be 3.1 per cent next year, down from 3.2 per cent this year. The number of homes on the market—50 per cent lower in 2020—is projected to remain low in the coming year, putting more upward pressure on prices. Southern California is likely to see a similar pattern to the state-wide trend, Appleton-Young said.
The median house price of this year—or the mid-point price of all sales—is expected to grow by 8.1 per cent from 2019, owing in part to the strong sales of higher-priced houses, which will raise the overall average.
Though home prices increased in all price segments this year the largest price rise was in the top 20% of the market, Appleton-Young said. That's because professionals and other high-income earners have not been hit as hard by the pandemic as tenants and people working in the restaurant, hotel and hospitality sectors have been. Nor do CAR economists expect that the economy will rebound to full strength next year even in its most likely scenario.
The rapid growth of COVID-19 ('Coronavirus') cases continues to generate instability in the global economy and domestic financial markets. However, C.A.R. is not revising its current 2020 housing market outlook, but will continue to track the market for negative macroeconomic impacts on housing demand as well as on the supply chain impacts that could adversely affect the cost of new home construction in the coming months and quarters.
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