The average median home price rose 8.3% in the region last year, while 2020 transactions edged up 1.6%, figures from CoreLogic/DQ News show.
By Jeff Collins and Jonathan Lansner
Despite a raging pandemic that shuttered businesses and idled workers, the Southern California housing market came galloping back in 2020 from early coronavirus jitters.
Home prices continued their eight-year march upward, with 2020’s average median price rising 8.3% in the region, according to CoreLogic/DQ News.
Sales for the year totaled 233,289 transactions, and while that’s well below average, the market still eked out a 1.6% gain from the year before.
Sure, 2020 was a year of gloves, protective booties and face masks, hand sanitizer and one home tour at a time. But it also was a year of bidding wars and record-high prices, falling mortgage rates and a short supply of homes for sale.
“The market in Southern California in 2020 has been nothing short of remarkable,” said Ralph McLaughlin, chief economist for Hauz.com, a firm that helps residents buy homes. “An intense inventory shortage coupled with a low-interest-rate environment has caused local markets to skyrocket.”
The year ended on a high note as well, with the December median — or price at the midpoint of all sales — up 10.1% to $600,000, CoreLogic/DQ News figures show. Sales soared to 24,995 transactions, up 29% and the most for any month since June 2017.
Jitters to boom
When sales tanked in April and May, many experts expected 2020 to be a dark year for housing. Indeed, tallies for the first six months were the second-lowest in the past 33 years. But then the second half of the year logged the most sales for the July-to-December period since 2006.
“I thought people would be too scared to buy houses,” said economist Richard Green, director of the USC Lusk Center for Real Estate. “I certainly didn’t see a nearly double-digit increase in house prices in many places, that’s for sure.”
Economists credit record-low mortgage rates, government assistance and savings accumulated while people sheltered at home.
The 30-year fixed-rate mortgage steadily dropped throughout the year, falling a full percentage point from March and setting 16 record lows, according to Freddie Mac.
Rates on a 30-year, fixed-rate mortgage averaged 2.76% in the three months ending in December, compared with 3.7% a year earlier. That translates into 13% more buying power.
For example, a buyer paying 20% down would have a monthly house payment of $1,962 a month on a $600,000 median-priced sale. A year earlier, when the median was $545,000 and rates were 1% higher, the monthly payment was $2,007.
Inventory squeeze
At the same time, the inventory of homes for sale fell 40% to the lowest level since early 2004. The pandemic scared would-be sellers from the market, with some homeowners fearful of opening their doors to strangers.
New home construction in California also fell well short of the state’s goal of building 180,000 homes a year, broadening the supply gulf. Numbers from the Federal Reserve Bank of St. Louis show California builders got just under 92,000 building permits during the first 11 months of 2020, down 6.5% from the same period in 2019. In Southern California, building permits fell 10.2%.
“This has also put significant upward pressure on home prices,” said Jordan Levine, chief economist for the California Association of Realtors.
Southern California wasn’t alone in seeing prices and sales go up this year. Statewide, the median house price jumped 17% in December to a record high of $717,930, and December sales were up 28%, California Realtors reported. The San Francisco Bay Area median rose 16% to $1.06 million, with sales up 40%.
For the year as a whole, sales of California houses rose 3.5% from 2019 levels, and the average median was up 9.8%.
“The market more than made up for lost time during the second half of the year,” Levine said.
Nationally, existing home prices and sales also rose in December, with 2020 home sales reaching their highest level since 2006, according to the National Association of Realtors.
Levine noted that the pandemic had disparate impacts on different sectors of the economy, with the so-called “K-shaped recovery” benefiting the pool of homebuyers while hampering likely renters.
“High-wage industries — which are where the majority of California’s prospective first-time and repeat homebuyers work — experienced far less economic impacts than the service-sector industries,” he said. “The home also became more important than ever before because of this crisis because it was a place to live, work, play, entertain, and everything else because we were all stuck at home.”
What’s ahead? Economists expect home prices to keep rising, at least for the next 12 months. But gains will be lower.
Calfornia’s Realtor association forecast the state will see a 3.3% sales gain in 2021, with prices up 4.4%. CoreLogic predicted U.S. home prices will rise 2.5% by next November, with a 3.5% gain in L.A. County.
““The market’s going to be on fire this year, no doubt about it,” said Chris Thornberg, a founding principal of Los Angeles-based Beacon Economics.
Last year’s home prices were up in all six Southern California counties included in the CoreLogic/DQ News report. Annual sales numbers were up everywhere but Los Angeles County.
Sales and prices also showed strong growth across the board in the final month of the year.
Here’s a breakdown of December’s monthly numbers by housing type:
Single-family houses: Sales were up 33.3% to 17,163 units. The median was up 14.2% to $645,000.
Condos: Sales were up 32.3% to 5,476 units. The median was up 8.9% to $510,000.
Newly built: Sales were down -0.2% to 2,356 units. The median fell 0.1% to $576,000.
Builder share: 9.4% of SoCal sales vs. 12.2% a year earlier.
Here’s a breakdown of December’s monthly numbers by county:
Los Angeles County: Sales were up 26.0% to 7,961 units. The median increased 11.4% to $700,000.
Orange County: Sales were up 17.7% to 3,611 units. The median increased 8.2% to $795,000.
Riverside County: Sales were up 39.8% to 4,903 units. The median increased 11.2% to $442,500.
San Bernardino County: Sales were up 34.7% to 3,266 units. The median increased 12.7% to $400,000.
San Diego County: Sales were up 27.1% to 4,174 units. The median increased 12.2% to $645,000.
Ventura County: Sales were up 39.7% to 1,080 units. The median increased 14.2% to $650,000.
The original article can be found here.