Monday Market Update: 2021 California Housing Forecast

Moderate Home Price Growth & Low Rates Are Expected Next Year According to CAR®

If you follow our blog annually, then you know that this time of year marks what we call the ‘crystal ball’ phenomena! As 2020 wraps up and 2021 draws near, many industry resources and media outlets are releasing projections as to what the new year will hold in terms of housing. This week, we wanted to share with you the highlights of what the California Association of Realtors® is forecasting for 2021; you can also view the news release and watch the video for further detail.

2021 CAR® Forecast Highlights

| “An extremely favorable lending environment and a strong interest in homeownership will continue to motivate financially eligible buyers to enter the market,” said C.A.R. President Jeanne Radsick. “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.”

| California’s non-farm job growth is projected to increase 0.5% and the state’s unemployment rate will hover around 9% in 2021 compared to 2020’s projected final unemployment rate of 10.8%. Household income growth is expected to rise 3.3% next year as well.

| The average 30-year fixed mortgage rate is expected to fall to 3.1% in 2021, down from 3.2% in 2020 and 3.9% in 2019.

| The pace of home price growth is expected to moderate in 2021, with home sales up 3.3% and median home prices up 1.3% across the state (that figure will vary greatly region to region).

| The data above is based on a ‘Most Likely’ scenario according to CAR®. The video forecast created does also outline a worst case scenario in the event of another state shutdown for 2+ months, in which household income could drop 4.2% and assumes no new federal economic stimulus. In that event, a ‘Worst Case’ outlook could include a drop in home sales of 9.8%, as well as a drop in statewide home prices as high as 16.4% and a small rate increase to 3.2%.

It is also worth noting that California is the world’s 5^th largest economy, so much of the discussion you will see in the video is centered around the GDP output and consumer spending trends. Also notably, job losses have not hit potential homebuyers as hard as expected, with correlations to employment and industry type and existing home ownership status.

If you have any questions at all about what the CAR® 2021 Housing Forecast means for you, please do not hesitate to reach out. While we cannot predict what the new year will bring, we can provide current home valuations, experienced perspective across economic climates and steadfast support via objectivity and analysis.