February’s Southern California home prices reached an all-time high due to buyers competing during a shortage of homes for sale, which signals that the pandemic home-buying trends are extending into 2021. Southern California home sales surged 17.6% from February of 2020, and the six county’s median home sale prices jumped to $619,750.
The high numbers are driven by the historically low interest rates and demand for more space extending into 2021. Another factor is that millennials are entering into their early 30s, which is a time when many people purchase their first home. The increase in demand is not being met by the amount of homes for sale, which has led to bidding wars and subsequent higher prices. For example, the number of new listings coming onto the LA County market during the four weeks that ended on March 7 was just 4% higher than during the same period in 2020. Due to homes selling quickly during the pandemic, buyers had 13% less home options to choose from than during 2020. Homes are not coming on the market because some owners do not want to buy another home during a tough market, some may have refinanced at record low interest rates and they are satisfied with their current mortgage. Another factor is that wealthy home owners are choosing to buy another house farther from their jobs, yet they’re holding onto their old home as they are unsure as to where they want to settle down as the economy starts to recover and the pandemic slowly subsides. Builders are trying to keep up with the demand for housing, but it takes time and high lumber costs have made projects more difficult to start.
Prices and sales are rising throughout Southern California:
- The median sales price rose 14.3% to $708,500 in February while sales climbed 19.1% in LA County.
- The median sales price rose 9.6% to a record $820,000 while sales climbed 13% in Orange County.
- The median sales price rose 16.5% to a record $465,000 while sales climbed 18.3% in Riverside County.
- The median sales price rose 17.7% to a record $412,000 while sales climbed 21.5% in San Bernardino County.
- The median sales price rose 14.6% to a record $672,750 while sales climbed 13.8% in San Diego County.
- The median sales price rose 13% to $650,000 while sales climbed 23.9% in Ventura County.
The major factor in the price boom and sales has been the drop in borrowing costs during the pandemic with the average rate on a 30-year fixed mortgage below 3% for the first time. However, in recent weeks rates have been on the rise and now average just above 3%. With the economy improving and the pandemic subsiding, rates could keep rising, however experts expect borrowing costs to remain on the low side throughout 2021.
Source: LA Times