With the positive overall economy and increased job growth, California was expecting to see positive results in the real estate market. Despite the optimistic predictions, 2020 brings a lot of changes. Because the ongoing pandemic situation came out of nowhere, no one was expecting to face such a difficult situation. Since many buyers backed out, the sales activities took a shocking decline. In general, Q1 is showing a drop in home sales, culminating in Q2. Even more, rentals are affected widely because of the current uncertainty of jobs. However, there is the other side of the coin. July is showing that there is still room for optimism for the California housing market in 2020.
The situation of the California housing market in 2020
At the moment, home prices are not stable in the Golden State. Even though there are signs of improvements, the substantial and widespread price increase is not leaving a lot of choices. Unfortunately, both large and small cities across California are experiencing economic disturbances. People are losing their jobs and many businesses are closing. Which, generally, leads to a lack of interest and decreased purchasing power. However, recent reports are showing positive results. As the situation is calming, people are adjusting to the ongoing situation. Things are starting to slowly improve, and with some luck, the situation will be much better by the end of the year.
It is a turbulent second quarter of 2020
With the grim results from May, it was much difficult to expect deal closures to happen. But, June surprisingly shows the situation is starting to improve. All the turbulency that’s happening in the Q2 of 2020 motivates the people to adapt to the situation.
One of the reasons why the housing market is in a questionable situation is property showing. It’s was nearly impossible to sell a property without showing it to potential buyers. As a solution, many are starting to use digital technology to overcome this. Virtual showings, videos, photos, and 3D technology are replacing “in-person” tours.
Also, as of June, many realized that now is a great opportunity to buy or sell a property. Low mortgage rates coupled with changes in prices and the increase in the number of listings should not be taken lightly. Overall, in just one month the California housing market is finally showing some positive results.
The number of housing option
One point of view is that slowdown in the California housing market is a sign that its economy is going forward. Even before the crisis, some states were showing periodical break from growth, statistically. But, why is that happening?
The answer is quite simple. The number of listing on the market can simply be a reflection of housing shortages. When you have a strong economy but the construction of new places doesn’t follow the trends, these stagnations occur. Of course, those who are satisfied with living costs will stay where they are. However, others who wish to buy won’t find as rich offer if nothing new is building. There are, however, some indications that the number of housing constructions will increase by the end of 2020. But, given the uncertainty, no one can give a definite answer and predictions.
California rental market situation
This is one of the worst periods for California’s rental market. A large percentage of renters are in a difficult situation because of the crisis. Despite the regulations and laws that protect them in these difficult times, many people choose to leave. Even though rental prices are dropping, it’s hard to predict for how long it will going to last. On the bright side, we are seeing some improvement since June. The economy is slowly renewing since reopening, prices are still relatively low, so people are coming back.
- The price of 1-bedroom and 2-bedroom rentals in San Francisco is lower by 2-2.5%
- In San Jose, the percentage is even bigger, about a 3% price drop.
- Oakland, on the other side, is showing an increase in price for almost half of the percentage.
It seems like now that the situation is changing for better, and people are looking for spacier places. The increased demand for Family Affair Moving and other moving companies in California are pointing out these changes. This probably has something to do with work from home trends that are going to stick with us for a long time. Even after the crisis is over.
How will different generations affect the California housing market?
- At the moment, all things are showing that Baby Boomers will play a major role in both selling and buying homes. As it happens, retirements might become a fuel that will set a real estate market motors in motion. You can expect to see the first signs as early as by the end of 2020.
- Generation X, as parents of Millenials, might help markets shifts by looking for housing options in their downsizing goals.
- Millennials, or Generation Y, will add to the sales volume as they are acquiring better jobs. The better pay grades that will be needed to start or grow a family will allow them to shift from renting to owning. That will eventually increase the number of first-time buyers.
All things considered, unemployment might be the greatest challenge. Depending on how the situation is developing in the next few months, it will actively affect California’s housing market changes.
What to expect?
You can probably expect to see improvement in the California estate market as the economy stabilizes in 2020. August and September will be slow, but the Q4 predictions suggest greater moving. Once people find new stability, many canceled deals might come into realization by that time. At the moment, the offer is sparse, but that will definitely change. Especially if we manage to avoid further troubles with the infamous pandemic. Also, current interest rates will probably remain low to motivate more buying, at least by the end of the year. Still, it’s possible that financial market recovery will postpone these positive changes. The mortgage rates are showing suspiciously unstable behavior. The opportunistic changes in rates don’t look like we can rely on them to remain low with certainty. In the worst case, we will need to wait the next year, for a year of recovery.
Overall, the situation in the California housing market looks promising. Given all the difficulties we are facing today, the rates of recovery are surprisingly high. Of course, some new trends will emerge. For example, more interest in small cities, towns, and suburbs. But none of those are critically substantial to cause some major-type disturbance on the housing market. Yes, some places will increase their prices, but others will lower them at the same time. Finally, this year will show us that no matter what, we constantly need to invest in new housing construction in the future.
Lisa Roberts has been engaged in writing blog articles for the last 7 years. Although she started off her career in the moving industry, her experience brought diversification to the content topics she covers. Today, her range of topics spans from moving across the globe to everyday lifestyle tips, marketing, real-estate news, etc. In her spare time, Lisa enjoys running, reading books and spending time with her dogs Lue and Sill. As a great lover of life, she finds something practical and useful in every experience, which contributes to her portfolio as well.