California Housing Market Trends and Forecast

2020 brought remarkable changes to the housing market, some worse than others. As the pandemic changes course and the housing market begins to recover, what kinds of trends are expected in 2021?

Learn more about the housing market and start planning for the future of your business today.

Trend #1: Limited Inventory Drives Prices Up

One of the biggest trends you can expect to see in the California housing market is one that is happening on a national scale. Due to the limited inventory of listing on the market, housing prices continue to rise rapidly.

Last year, the statewide median home price in California rose more than 8% in one month to over $750,000. This is up nearly 24% from March of last year.

Why is this trend happening across the country?

In short, the U.S. housing market is more than 3 million homes short of demand. There has been a housing shortage in the U.S. for nearly ten years, but this past year has seen an increasing supply-demand balance issue as many housing contractors had to slow or stop new construction during the pandemic.

California is no exception to this ongoing issue, and this trend is not expected to change dramatically during 2021.

Trend #2: New Areas Open Up

With the ongoing trends seen in the California housing market in 2021, it might seem like expanding your operations could prove difficult this year. Buying new properties to expand your rental inventory will cost more than in the past, and it might not be the best time to do this.

What can you do to keep growing your business when the market is working against your plans?

If the areas that most of your properties are in are no longer accessible to your budget, it might be time to expand to new areas. While larger markets like Los Angeles and San Diego remain ever-popular, many smaller markets that were not previously popular like Dublin and Beaumont are starting to grow, and you might be able to move into these areas earlier. Though prices are already rising, the opportunity for a great business decision exists.

It’s time to consider how you can move just out of your primary region and how that might help your business keep growing even in this challenging time.

Trend #3: Late Year Changes Expected

Any changes that might occur to the supply-demand imbalance in California aren’t expected to be seen until late 2021 at the earliest. With the release and implementation of the COVID vaccine across the nation, new houses will continue to be built, and more houses may be put on the market.

Currently, mortgage rates are lower than they have been in some time, but those rates are slowly starting to climb up again. As they get higher, the rising rates could put a cap on the home price growth in California. This is because the higher rates will lead to higher monthly payments, creating less affordability in the entire market.

It’s hard to say exactly when these changes will hit. Until then, keeping an eye on median home prices and mortgage rates is a great way to monitor ongoing changes.

Trend #4: Rent Prices Recover

Rent prices in California and around the country decreased dramatically during 2020, and there has been a lot of worry among landlords and apartment owners on what will happen next. Check out the rents for South San Francisco apartments. The long-term forecast for renter growth is positive, as renter growth is expected to outpace homeowner growth for the next two decades.

Rent growth decreased or reversed in many parts of California during 2020. Since the beginning of 2021, however, rent has started to flatline and recover. Even in tech-heavy cities that were the most affected by pandemic rent decreases, the rents seem to have bottomed out.

This is a positive sign for the rental industry in California. While it will take some time to see what the future holds for the rental market in each area, the gradual reverse of decreasing rates is excellent to see.

Trend #5: Unknowns Still At Play

Those in the rental industry need to remember that this is an unprecedented time. Changes that have happened in the last year haven’t been seen this century, and it’s reasonable to expect that even more changes will occur.

A number of unknowns, such as the state of the moratorium on foreclosures, will directly affect supply and demand in the housing market. Foreclosures are up more than 30 percent in California. If these foreclosures are able to go through in 2021, more inventory will hit the market.

The best way to be sure of what is going on is to keep paying attention to the market as things change from month to month.