BACK TO MAIN PAGE

What’s going on in the California housing market? May 2020 Real Estate Update

June 26, 2020

7 MINUTE READ

california housing market

There’s a lot going on in the California housing market. April was the first full month of the state-wide shelter in place order in California, due to the coronavirus global pandemic. And while it’s true that the last couple of months have been a roller coaster whirlwind for everyone, the impact has been especially impactful on the real estate industry. 

In the beginning, real estate agents weren’t allowed to show any property at all. Then, they could show properties — but only vacant properties. Next, they could show properties that weren’t yet vacant, but everyone was required to follow a long list of CDC guidelines, as well as a number of other guidelines to help ensure the health and safety of all parties involved. 

Even today, there are still no open houses being held, and many real estate professionals are advising their clients to hold off on moving, if at all possible, simply to help them avoid any unnecessary risks. What does all of this mean? A significant drop in home sales. In fact, Southern California home sales were down more than forty-one percent, when comparing May 2020 home sales to May 2019, according to the California Association of Realtors. That’s the biggest drop in sales since the 2008 housing market crash. Existing, single-family home sales averaged $588,070 according to the latest stats from CAR, and overall sales were down 13.9  percent lower than the prior month (April 2020), and 41.4 percent lower than the previous year. 

Indicators of current market conditions in California

What’s more, real estate experts agree that it’s impossible to predict when house sales will come back. And part of that is that because before people will even consider going out and buying a house, they need to feel comfortable with going out at all. One indicator that some insiders are looking at is restaurant reservations. Restaurant reservations can be a great indication of how comfortable people are with going out in public. 

Another indicator to watch is the unemployment rate and unemployment data. A high rate of unemployment will almost always suppress the housing market, causing a drop in sales. Another thing to consider when looking at unemployment data is how many of these job losses are temporary — and how many are permanent. 

Some experts predict that it may take years for the market and home sales to fully recover. But, as always, it is important to look for the silver lining in these types of conditions. Fortunately, housing prices have remained relatively stable and untouched, since supply and demand have both been lowered and are still acting in equilibrium. In fact, when looking at home prices statewide, the median price in May was $588,070, down 3.0 percent from April 2020 — and down 3.7 percent when compared to May 2019.

C.A.R.’s May 2020 resale housing report

The California Association of Realtors reports key points from their May 2020 resale housing report: 

  • At the regional level, all major regions dipped in sales by more than 35 percent from last year, with the Bay Area and Central Coast dropping the most at -51.1 percent each, followed by Southern California (-45.6 percent), and the Central Valley (-36.6 percent). 
  • Fifty of the 51 counties tracked by C.A.R. experienced a year-over-year loss in sales, with Monterey declining the most from last year at -63.0 percent, followed by Mendocino (-59.7 percent), and San Benito (-59.2 percent). Counties that experienced a sales decline from last year averaged a loss of 42.2 percent from the year prior. Del Norte was the only county with an increase from last year. 
  • Median prices continued to dip in May from last year in the Central Coast and the Bay Area but inched up slightly in the Central Valley region. The median home price was virtually unchanged in Southern California.  
  • Thirty-one of the 51 counties tracked by C.A.R. reported a year-over-year gain in price in May, with Glenn County growing the most at 31.9 percent. Of the 19 counties that experienced a price drop from last May, Plumas had the biggest decline of 23.3 percent.  
  • C.A.R.’s Unsold inventory Index jumped to 4.3 months in May from 3.4 months in April and was up from 3.2 months in May 2019. The index indicates the number of months it would take to sell the supply of homes on the market at the current rate of sales.
  • Total active listings continued to decline on an annual basis for the 11th consecutive month; the 34 percent year-over-year decrease in listings was the biggest drop since March 2013.
  • All major regions recorded a decrease in housing supply of more than 25 percent, with both the Southern California and the Central Valley regions falling by more than 33 percent. All counties in Southern California, except Ventura, declined 36 percent or more from last year, with San Diego dropping the most at 42.7 percent. The Bay Area also experienced a significant housing supply decline, but at a relatively smaller degree compared to the Southland. Eight of the nine Bay Area counties recorded a decline in active listings on a year-over-year basis in May, and six had a decrease of more than 25 percent. San Francisco was the only county in the region with an increase in active listings from last year.     
  • The median number of days it took to sell a California single-family home dipped to 17 days in May from 18 days in May 2019.
  • C.A.R.’s statewide sales-price-to-list-price ratio* was 99.7 percent in May 2020, up slightly from 99.3 in May 2019. 
  • The statewide average price per square foot** for an existing single-family home was $281 in May 2020 and $292 in May 2019. 
  • The 30-year, fixed-mortgage interest rate averaged 3.23 percent in May, down from 4.07 percent in May 2019, according to Freddie Mac. The five-year, adjustable mortgage interest rate was an average of 3.16 percent, compared to 3.65 percent in May 2019.

COVID-19 and its impact on the California housing market

Even though aspects of the real estate industry were deemed essential by state leaders, there were restrictions put in place that essentially made the traditional open house impossible. And while sales were down across almost all markets in April, with the coronavirus pandemic disrupting or even negating many deals that were in escrow, home prices still continued to see marginal increases year over year:

  • In Los Angeles County, home sales dropped 35.2 percent, while the median home price increased 3.8 percent to $630,000.
  • In Orange County, home sales were down 33.8 percent, while the median home price rose 2.7 percent to $755,000. 
  • In Riverside County, home sales were down 30.6 percent, but the median home price increased 5.8 percent. 
  • In San Bernardino County, home sales were down 20.9 percent, but the median home price rose 5.4 percent to $353,000. 
  • In San Diego County, home sales dropped 30.6 percent, while the median home price rose 4.3 percent. 
  • In Ventura County, home sales fell 34.6 percent, while the median home price increased 2.6 percent. 

Could COVID-19 boost the rural California housing market?

While no one really knows the true impact the coronavirus will have on the future, including what that means for the real estate industry. Current conditions have some real estate experts predicting that the public’s fear of contracting COVID-19 could possibly lead to a resurgence in rural real estate markets. 

Rural markets almost always have more affordable housing and offer more space, but the downside has always been the major commute that most residents would face to get to work.

However, in current conditions, many employers are realizing that production can be maintained or even increased by employing a remote workforce. And when the quality of life can be improved, it’s no surprise that most people say they would choose to embrace the change. Having the option to avoid a long commute while owning a home where homes are more affordable could very well benefit rural markets. 

Buying in the California housing market

If you’re ready to search for houses to buy or have questions about the current real estate market, we’re here to help. At Reali, we offer superior service and local agents, combined with the latest in technology.

Find an agent or contact us when you’re ready to get started!