Forecast: Orange County, Los Angeles, SoCal Housing Market Will Remain Hot in 2021
Low housing supply across the region, record-low mortgage rates, and new work from home policies will fuel the region’s housing market in 2021, housing experts said.
Southern California is still a place where people want to live despite others leaving the state, “whether it’s the silver tsunami or unhappy people with the state’s politics,” said Aaron Norris, vice president of market insights at PropertyRadar. “With more people working from home and looking for more space, I don’t expect a slowdown next year.”
The Southern California housing market hit record milestones last year despite the coronavirus pandemic, high unemployment rate, and statewide and local shutdown orders. When the coronavirus pandemic began in mid-March, Orange and Los Angeles counties’ housing market initially stopped buyer activity.
In Orange County, demand tanked by 60% year over year from 1,630 pending sales in April 2019 to 1,060 pending sales in April 2020, according to Reports on Housing, a data company specializing in analyzing Southern California’s housing market. In Los Angeles, demand dropped 55% during that timeframe from 3,051 pending sales in mid-April in 2019 to 2,479 in 2020.
That all changed in May when mortgage rates began dropping. In May, the 30-day mortgage rates fell to 3.23%, the lowest since 1971 when Freddie Mac began tracking rates. In comparison, in May 2019, the mortgage rate was at 4.14%.
Buyers began to reemerge, and demand for housing increased, Steven Thomas, the chief economist at Reports on Housing said in his monthly newsletter. In just four weeks, pending sales increased by 74% in Orange County and 79% in Los Angeles.
“Despite COVID-19, the record-low mortgage rate environment was the rocket fuel that rocketed the Orange [and Los Angeles] County housing market to its hottest levels in years,” Thomas said.
As of December 24, the 30-year fixed-rate mortgage was 2.66%.
“For proper perspective, at the end of 2018, just two years ago, mortgage rates reached 5%,” Thomas said. “A $700,000 mortgage at 5% has a monthly payment of $3,758. Today’s 2.66% rate has a monthly payment of $2,824, a $934 per month savings.”
According to Thomas, low-interest rates are making homebuying affordable and boosting demand.
“It is no wonder buyers are still flocking to purchase even with home values rising to record levels,” he said.
According to the California Association of Realtors, the median home price sold in Orange County was $930,000 in November 2020, an increase of 13% from $822,000 in November 2019. In Los Angeles, the median home sold jumped 11% year over year from $594,000 in November 2019 to $664,000 in November 2020.
“Going into the new year, it will truly be out with the old because there will be very few homes from 2020 left on the market,” said Redfin chief economist Daryl Fairweather in a news release. “So those who resolve to buy a home in 2021 may need to wait with bated breath for sellers to list their homes. Redfin’s forecasts suggest the new year will bring many more new listings, but they will likely be snatched up quickly. So if you are a homebuyer, now is a good time to get preapproved for a mortgage, and come up with your wish list, so you can act quickly when your dream home hits the market.”
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