California’s Housing Market Forecast
In the midst of the unexpected Corona Virus pandemic, buyers are wondering if housing prices will fall and stay lower throughout 2020. Others are wondering about a full housing market crash.
Prices have risen in January and February in Los Angeles
According to a fairly pessimistic view from Capital Economics, US home sales could fall by 35% compared with the last quarter of 2019. This would the lowest sales since the beginning of 1991.
With a work shutdown in effect in California (and UK, Australia, Germany, and Canada), the answer is obvious, home sales will freeze. Home prices will fall. Californian’s can’t buy homes if they can’t get to a showing. All sales activities have come to a halt. And young buyers may lose their down payment or even their job due to the virus outbreak. Consumers drive the housing markets.
When the virus passes, buyers may find finding and buying a home is affordable. With mortgage rates at ultra-low levels, this could be an opportune time to buy a house or condo at a bargain price.
How Far Could Housing Prices Fall?
How far will prices likely fall? Experts seem to be of the opinion they won’t drop far. It would take an extended period before buyers give up, and where mortgage defaults occur. New construction was rolling along nicely, but this has likely been slowed considerably.
China’s battle with Covid 19 is coming under control. They’re reporting few new cases of the virus. If the US follows a similar timeline, it might be only a month until the disease passes.
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Housing Crash Predictions?
Hoards of millennials, working poor, and homeless people are praying for a California housing market crash, but prices aren’t crashing.
With such strong demand driving the whole California housing market it’s unlikely a crash will happen. In fact, with the extra economic activity spawned by housing construction and household formation, there is upward price pressure. And the US economy as a whole is booming and we could be looking at an even longer run of economic prosperity.
Interest Rate Goes Up now, why?
U.S Mortgage Rates Surge Again as Lenders Look to Tank Demand
Mortgage rates continued to defy gravity in the week ending 19th March, with 30-year fixed rates rising for a 2nd consecutive week.
Despite the continued spread of the coronavirus across the U.S and risk aversion, 30-year fixed rates surged by 29 basis points to 3.65%. The upside in the week was attributed to a lack of capacity to meet an even greater surge in demand for new mortgages and refinance applications. Lenders cranked up lending rates in yet another bid to curb applications.
California Home Prices
Los Angeles County has seen it’s prices rise 7.8% month to month, and 9% year over year.
The Real Story of California’s Real Estate Market
The real story of California’s housing market is a persistent lack of supply, something that may never be remedied. That means overall home prices and perhaps rent prices might flash up in 2020. And this is despite recent high home construction numbers reported across the country.
Active listings fell for the 5th straight month, down 22.5% from last November. This was the 3rd consecutive double-digit drop and the largest since April 2013. Unsold inventory index dropped from 3.7 last year to this November’s rate of 3.0.
Will California Real Estate Recover in 2020?