Bargain-basement mortgage rates and people with more money than living space drove a surge in Southern California home sales and prices last month compared to December 2019’s numbers, continuing a residential real estate boom in an otherwise pandemic-crippled economy.
According to data released Friday by real estate firm DQNews, the median home sales price in the region rose by 10.1 percent from December 2019 to $600,000 in December 2020, with sales rising by 29 percent over 2019, the Los Angeles Times reports.
Housing experts say the upswing is largely due to people whose finances have remained relatively stable throughout the crisis, and who were likely to have bought a home anyway—especially people looking for more space after their workplaces have shuttered.
“The number one thing I am hearing is that ‘We need more space—we are all at home now,'” Rex brokerage agent Kara Birkenstock told the Times.
Another factor in the real estate rise are record-low interest rates, partially due to a Federal Reserve policy aimed at energizing the economy.
Government controlled mortgage lender Freddie Mac reported on Thursday that the average rate on a 30-year fixed mortgage dropped by 3.6 percent from last year, hitting 2.77 percent this week.
According to a Redfin mortgage calculator, someone buying a $600,000 house with a 20 percent down payment at last year’s average rate would have a monthly mortgage payment of $2,892, including property taxes and insurance. By today’s rate, they’d pay $2,675, saving $217 a month.
With such deals to be had, though, prospective buyers are finding out that rising demand has made home sales very much a seller’s market, where bidding wars ensue.
Some industry watchers predict that this year’s sales will see a smaller bump than in 2020, when prices jumped by double digits in recent months. One indicator of the slowing trend is the fact that December’s median price didn’t budged from November, and both months fell 2 percent short of September’s all-time high.
Still, some experts say it’s too soon to gage whether the market will actually lose steam, since prices rise and fall from month to month, and it’s certainly not unusual for real estate agents to boast about bidding wars.
Selma Hepp, an economist at CoreLogic, tells the Times, “It continues to be a very strong market.”
John Burns Real Estate Consulting also forecasts a robust future for home sales in major SoCal markets this year, predicting price increases of 7 percent to 10 percent, compared to 2020’s estimated increases of 9 percent to 14 percent.
While some California renters are enjoying the benefit of slightly lower rents while vacancies rise, as a whole, news is bad: eviction cases are expected to double statewide over the next year.