The year 2020 — the year of the pandemic — was a turbulent one, and California has felt its adverse effects. The state is one of the worst hits in the country, eventually becoming an epicenter of COVID-19 cases as of October last year. There is hope brought about the vaccine rollouts, but the effects of the pandemic are expected to take hold for some time. The possible long-term effects encompass various psychological, social, and societal consequences.
And just as important is COVID-19’s financial impact. The global recession disrupted economic activity, putting many entrepreneurs out of business and workers out of jobs. Marcus defines a recession as a downturn in the national economic activity, which can last for at least a few months. In a recession, consumers may be cash-strapped due to unemployment, the general decline of business, or investment value going down. For real estate brokers or land developers that could spell trouble for business, as there could be fewer homebuyers and investors active in the market.
But 2020 strayed from predictions and the California housing market remained strong amid a global health crisis. That said, we’ll take a look at what the new year could bring.
A Good Time for Homeowners
In 2021, one can expect the housing market to be favorable for homeowners. Both the buying and selling markets are expected to remain healthy. Higher-wage workers are more likely to buy homes, according to recent data. This is due to the extremely low mortgage interest rates. In December of 2020, it was at 2.67% — the lowest the average has been in fifty years.
One should expect highs and lows in the home buying cycle especially if you’re a seller. However, 2020 closed with 45,000 new and resale home transactions in California, which suggests that homebuyers are no longer delaying their purchase. It could be an opportune time for sellers.
Rent Situation on Slow Recovery
On the other hand, renters might find it particularly tough to get by. The nationwide business shutdowns have led to multiple job losses and reduction in incomes and people might still be recovering. In the beginning of the pandemic, around 40,000 California renters were facing eviction due to unpaid rent. The good news is that, many state leaders including Governor Newsom have approved legislations to extend the moratorium on eviction. The state also has a rental assistance program for individuals who are at risk of housing instability and homelessness.
Home Inventory to Increase Gradually
With more people now buying homes, the surplus of inventory will likely continue to drop in number. But now that the demand for housing is picking up, and economic activity has resumed, builders could be looking at replenishing the inventory of homes and rental units moving forward. In November of last year, more than 1.5 million homes were set to be built, and this trend will continue in 2021.
More People to Move Out of Urban Areas
In May of last year, an article on Record Searchlight covered why the pandemic could have led to the boom in rural real estate. It stated reasons such as the shift to remote work and the more affordable rural housing options. Their predictions turned out to be correct, as more and more people are moving out of their urban homesteads and opting, instead, for houses in rural or even suburban areas. In particular, people from San Francisco and the Bay Area are likely to move to areas like Sacramento and Santa Monica. Apart from the low-priced housing options, another reason for this is that these areas are less populated, and make for safer living conditions.
Overall, the predictions for the California housing market this year are positive. The number of sales and low mortgage fees are enough to keep the market afloat in such turbulent times. Hopefully, this boom continues long after the pandemic.
By Jennifer Vaanya