Booming demand coupled with shrinking supply sends prices soaring
California’s housing market continues to shrug off Covid, a partial lockdown and the pandemic-prompted recession, with home sales and prices soaring in December to finish off an impressive second-half of 2020.
Home sales climbed to an annualized rate of 509,750 units in December, a 28% gain compared to a year ago — and the largest annual increase since May 2009, according to the California Association of Realtors. December was also the fifth-consecutive month of double-digit gains.
For the year, home sales increased to an annualized rate of 411,870 units, up 3.5% from a year ago. The annualized rate represents what would be the total number of homes sold if sales maintained the monthly pace for the year.
Lockdown-powered slowdown faded in the second half of 2020
Regardless of how you slice and dice the figures, home sales were impressive in 2020, especially since the first five months were slowed with the pandemic and the statewide shutdown.
“It’s a testament to the strength of the market that even after the pandemic effectively shut down the spring home-buying season in 2020, the market was still able to recover the substantial sales lost in the first half of the year and even top 2019’s levels,” says CAR president Dave Walsh, vice president and manager of Compass San Jose office.
In fact, five of the seven regions in the state posted 30%-plus sales gains. The Bay Area topped the list at 40.2%, followed by the Inland Empire (Riverside and San Bernardino counties) at 34.9%. The Central Coast, from Santa Cruz to Ventura counties, was the laggard with a 17.1% increase from a year ago.
Buyers benefit from low mortgage rates
Near-record-low mortgage rates are helping offset fast-rising prices and keeping sales soaring.
“With mortgage rates expected to stay near the lowest level in history, demand for homeownership will continue to be strong, so home sales should remain elevated into the first half of 2021, as motivated buyers take advantage of the increased purchasing power,” Walsh says.
And buyers will definitely need the help. A critical decline in homes on the market — down 47% in December compared from a year ago — coupled with the booming demand pushed prices to a new record statewide. December’s unsold inventory index was 1.3 months, tying the record set in spring 2004. The average home entered escrow in 11 days, just two days more than the record low, down from 28 days in December 2019.
Red-hot housing market avoids winter chill
The state’s median-home price — meaning half the homes sold for more, the other half for less — increased 16.8% to a record $717,930 from a year ago. December was the fifth consecutive month of double-digit gains compared to the year earlier. All seven regions posted double-digit gains compared to a year ago, with the Central Coast leading the way at 17.9%.
“Home prices, which usually peak during the summer, were unseasonably strong in December,” says Jordan Levine, CAR vice president and chief economist. “The imbalance between supply and demand continues to fuel home price gains as would-be home sellers remain reluctant to list their homes during the pandemic, contributing to a more than 40% year-over-year decline in active listings for the seventh straight month.”
The Bay Area was the priciest region in the state, with five counties topping $1 million in December. San Mateo County is the current leader at $1.7 million, followed by San Francisco at $1.58 million.
Kings County in the Central Valley had the lowest median price at $281,750 –or about $435,000 less than the statewide median.