2020 started hot for the California housing market. Sales were growing annually at double-digits and median prices were up 7.1% year-over-year. But the outbreak of COVID-19 is putting a damper on the economy as a whole. Will this economic struggle impact California real estate market trends for 2020?
Whether you’re a veteran agent or you’re just now thinking about getting licensed, you need to know what’s happening in the market. And you need to know how the changing market conditions will affect your business.
Here are the California real estate market trends for 2020.
COVID-19 May Cause Slowing in the Otherwise Hot California Housing Market
As the global economy takes a substantial hit from loss in production due to COVID-19, California agents (and agents-to-be) are wondering if the California housing market may be in jeopardy.
The short answer: the current economic condition will absolutely have a negative impact on the California housing market, but it’s no reason for California real estate agents to panic.
The fact is, we’re overdue for an economic downturn. Markets are cyclical; they’re constantly moving up, then falling back a bit, then surging up again. COVID-19 may be pushing us into the next downturn several months earlier than expected, but economists have been warning of a 2020/2021 recession anyway.
Contrary to popular belief, a slow-down in the housing market is not a kiss of death for real estate agents. Some agents may choose to leave the industry for a “more stable” job during the recession. This means less competition for the agents who remain in the industry!
For California real estate agents who are willing to learn how to operate in a recession, these normal market downturns provide ample opportunities.
Fear of a Recession May Entice Some Homeowners to Sell
Speaking of opportunities, the changing economy may create a sense of urgency for some sellers.
Consider this: the California housing market has been going strong since starting the recovery from the Great Recession back in 2011/2012. The Zillow Home Value Index (which estimates the median value of all local homes, not just the sales prices of recently sold properties), shows median home values in California increasing from $302K at the bottom of the recession to $571K in 2020!
This means homeowners have enjoyed impressive appreciation over the last decade. Between these gains and the threat of declining values, California real estate agents should be able to find seller leads comparatively easily.
Low Interest Rates Provide Some Incentive for Buyers
But what about buyers? Buyers may be hesitant to enter the market if there is a risk of home values declining. And that’s where the historically low interest rates can provide some incentive.
Lower-than-expected inflation and uncertainty in the global economy have reduced interest rates from 4.94% in November 2019 to under 4% at the beginning of 2020. And with the COVID-19 impact, rates have fallen even lower. This is big news for prospective buyers.
A drop in interest rates means your buyers will save money on their mortgage interest, so they can afford to spend more on their home. Did you know that a 1% dip can add $30,000 to your client’s budget! As a California real estate agent, you get to share this good news with your buyer clients and prospects. Make 2020 the year they finally buy a new home. As long as they are in it for the long-term, they can withstand a short-term decline in home values, and enjoy the recovery period after.
Have you been considering getting your California real estate license? With the less-resilient agents leaving the market because of the projected California real estate trends for 2020, you’ll be able to enter a market with less competition. 2020 could be the year you launch your new California real estate career!