A mutual friend just sold their California home for $2,350,000. The house was on the market for three (3) days. The seller and the buyer split the difference between the $2,400,000 asking price and the buyer’s counter of $2,300,000. Unreal? Unusual? No and no. Here’s why.
LOCATION: The home is in Southern California in a highly attractive ‘two-comma’ neighborhood. (See the two commas in the prices above?)
SUPPLY: Why was it so quick? There are few houses on the market in that neighborhood.
DEMAND: BIG homes are trendy because of COVID. People want to shelter in place in luxury.
INTEREST RATES: Interest rates are low (and should remain low next year).
Many people ask us what we think will happen in the California real estate market in 2021. We have a few sources that we believe can predict the future as well as anyone.
The California Association of Realtors and Zillow:
The weekly numbers above are mixed, but low-interest rates have led to a surge in California home sales year-to-date, the likes of which have not been seen since February 2009. The question is whether the sales trend will continue in 2021.
The ZILLOW graph below (Courtesy of Zillow.com) shows a market forecast for home prices and sales in 2021. The California Association of Realtors has stated that low-interest rates should keep home sales rising in 2021, but the pandemic’s effect on the economy and a limited supply of homes on the market (some expect as much as 50% lower than in 2020) could dampen sales growth. Even so, the predicted trend is positive throughout most of 2021.
Another resource is the Home Buying Institute (HBI)
- Home-price appreciation will pick back up as the vaccine rolls out. Demand and home prices will go up.
- Suburban and rural markets will win. Redfin, the national real estate brokerage firm, reported homebuyers’ interest in leaving crowded cities after the Covid outbreaks in early 2020.
- Supply of sale homes will increase as control over the contagion progresses, and as sellers and buyers leverage virtual tour technology.
- According to the groups like Fredda Mac and the Mortgage Bankers Association, mortgage interest rates should remain between 3.0% and 3.5% well into 2021. Low rates will spur demand and keep prices up.
- If we have a vaccine and IF we can control the spread of the Covid-19 virus as the vaccine rolls out, there should be a gradual increase in home sales in California despite a faltering economy.
Forbes Magazine and PwC U.S.
Based on insights and proprietary data from more than 1600 experts in the real estate industry, the Emerging Trends in Real Estate 2021 report reveals trends affecting the real estate industry. With the pandemic, lower density areas for both commercial and residential real estate have seen higher demands, with the Sunbelt market seeing the greatest increase in demand. The report indicates the particular preference for so-called ‘18-hour cities’ with a lower cost of living but offers the same urban amenities as 24-hour cities (NY being a prime example). Demand is driven by such things as affordable housing, lower taxes, decent job prospects, and non-grid-locked commutes.
Remote working is pushing home buyers out of cities to safer, healthier neighborhoods. Cities will shift focus to recoup losses from Covid workforce changes and the retail industry’s difficulties. Commercial real estate may be in for some rocky months in 2021. In this Forbes article, “18-Hour Cities, Remote Work and More Emerging Trends That Will Shape Real Estate in 2021,” writer Brenda Richardson states, “An analysis by the National League of Cities predicts that 65% of cities will delay or cancel infrastructure projects due to the pandemic.”
Residential real estate in California should be okay, but the crystal ball is murky for commercial real estate. The 18-hour cities in California will undoubtedly be stronger than our 24-hour city centers like San Francisco and Los Angeles. There may be some fallout of real estate agents along the way. With single-family residence supply remaining tight, it may be difficult for newer real estate sales professionals to weather the pandemic storm. Those who have a good handle on the markets, trusted teams, and a firm footing in their local real estate niche will be here for the long haul. The CREM Group is one of those.
Residential real estate in California should be okay, but the crystal ball is murky for commercial real estate. The 18-hour cities in California will undoubtedly be stronger than our 24-hour city centers like San Francisco and Los Angeles. There may be some fallout of real estate agents along the way. With single-family residence supply remaining tight, it may be difficult for newer real estate sales professionals to weather the pandemic storm. Those who have a good handle on the markets, trusted teams, and a firm footing in their local real estate niche will be here for the long haul. The CREM Group is one of those. * * *
As long time probate real estate agents and as attorneys working in and around all kinds of properties in Los Angeles and Orange Counties, the CREM Group has made sure we support our clients, so they know the alternatives to buying, selling, or renting probate, trust, and conservatorship homes and commercial properties in California. – – – – –
As always, contact us by email here if you have any questions about real estate, probate real estate, conservatorship, or trust real estate properties, especially in Los Angeles and Orange Counties in California.
DISCLAIMER: This content is meant purely for educational purposes. It contains only general information about real estate matters. It is NOT legal advice and should not be treated as such. We recommend consulting a legal or tax professional before acting on any material, opinion, or perspective described herein. * * *
COVID-19 Safety. As all of us at the CREM Group market and sell our inventory of probate, trust, and conservatorship homes for our clients, we adhere to the COVID-19 regulations set by the California Association of Realtors