California house sales will rebound slightly next year from the pandemic, and home prices will continue edging upward, thanks to rock-bottom mortgage rates and strong homeownership demand, according to the state Realtors’ 2021 housing forecast.
But lingering economic uncertainty and a shortage of homes for sale will keep 2021 price and sales gains in check.
Even with rising employment and rebounding gross domestic product, the overall economy won’t be back to full strength by 2021, forecast numbers show.
“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,” said California Association of Realtors Chief Economist Leslie Appleton-Young.
Sales of existing single-family homes are forecast to increase to 392,500 transactions in the state next year, up 3.3% from this year’s projected total of 380,100.
If the 2020 projection is accurate, this year’s sales will have declined for a third straight year, dropping 4.5%.
Next year’s forecasted sales still would be down 3.3% from 2019 levels.
Existing houses make up about two-thirds of all home sales.
Meanwhile, prices are expected to continue rising next year. The median price of an existing house is forecast to hit $648,800, up 1.3% from 2020’s projected median of $640,300.
This year’s price is projected to rise 8.1% from 2019, due in part to strong sales of higher-priced homes, which skews the median upward, Appleton-Young said.
Prices have risen steadily since 2012, when the median for the full year was $319,300.
The U.S. GDP will rise 4.2% in 2021 after a projected drop of 5% this year, according to the forecast. Employment isn’t expected to get back to pre-pandemic levels, with non-farm jobs rising just 0.5% in 2021. That would follow a projected loss of 12.7% this year.
The 2021 jobless rate is forecast to dip to 9% next year, down from a projected rate of 10.8% in 2020.
Financing also is expected to remain close to historic lows. The 2021 mortgage rate for 30-year fixed-rate loans will average 3.1% in 2021, according to the forecast, compared with a projected year-long average of 3.2% this year.
The 30-year mortgage averaged 2.87% last week and has been below 3% for the past 2 ½ months, according to Freddie Mac.
“An extremely favorable lending environment and a strong interest in homeownership will continue to motivate financially eligible buyers to enter the market,” said 2020 CAR President Jeanne Radsick of Bakersfield. “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.”
Source: Orange County Register