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4 Predictions for the Market in 2021

The California Association of Realtors recently released their housing market forecast report for 2021 and the skies are blue, friends! 

In April of this year, home sales plummeted as the state went into lockdown. Buyers stopped buying and sellers pulled their homes off the market. 

Then, this Summer, home buyers started to look again. With the supply of housing still low, the market rebounded into a seller’s market. And as we approach the end of the year, California’s real estate market is regarded as one of the “bright spots” of the economy right now. 

Mashvisor California Real Estate Market Statistics – September 2020

  • Median Property Price: $843,751 (up 5.5% from August)

  • Price per Square Foot: $465

  • California Homes for Sale: 36,098 (down 31% from August)

  • Days on Market: 71

  • Price to Rent Ratio: 25

  • Traditional Rental Income: $2,842 (up 5.1% from August)

  • Traditional Cash on Cash Return: 2.2% (up 43% from August)

Taking into account the statistics above and the forecasts recently put out by the California Association of Realtors, Fannie Mae, and Mashvisor, here are our predictions for the Market in 2021: 

Low Mortgage Interest Rates

Low mortgage rates and pent-up demand will keep the seller’s market going through 2021.  Fannie Mae’s mortgage rate forecast calls for an annual rate of 3.2% by the end of 2020, with rates dropping as low as 2.9% in 2021.

The average for 30-year, fixed mortgage interest rates will dip to 3.1 percent in 2021, down negligibly from 3.2 percent in 2020 and down from 3.9 percent in 2019, remaining low by historical standards.

Pent-Up Demand

As seen from Mashvisor’s September data, the inventory of homes for sale continues to drop. C.A.R’s data supports this trend - reporting a drop in active listings in major regions across California, with the Southern California housing market being among the regions with the highest YoY drop – 52.4%. The data points at the recent wildfires and COVID-19 as the reason for the drop as many sellers have chosen to wait it out before returning to the market. Experts do believe there will be a gradual rise in homes for sale as the year goes on. 

Home Prices Will Continue to Rise

Mashvisor’s data reveals that California home prices rose from August to September. C.A.R. reported that California’s home prices surpassed $700k for the first time. This was a 6.1% increase from July.

The baseline scenario of C.A.R.'s "2021 California Housing Market Forecast" sees a modest increase in existing single-family home sales of 3.3 percent next year to reach 392,510 units, up from the projected 2020 sales figure of 380,060. The 2020 figure is 4.5 percent lower compared with the pace of 397,960 homes sold in 2019.

The California median home price is forecast to edge up 1.3 percent to $648,760 in 2021, following a projected 8.1 percent increase to $640,330 in 2020 from $592,450 in 2019.

Home Insurance Will Become More Expensive

One overlooked California housing market prediction for 2021 is the clear impact of the wildfires on the cost of home insurance. And rising premiums lead to another hurdle for real estate transactions: Buyers are running into trouble getting financing for homes that are difficult or costly to insure.  Despite soaring interest rates, demand is high. 



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