The market is really hot. How long can it last?
In recent months, the national and Southern California housing markets have been red hot. Bidding wars are common. Homes fly off the market in days. For example, in the Culver City/Mar Vista neighborhoods, since the beginning of December, a total of 66 single family homes have sold at a median home price of $1,672,500 and and average of 31 days on the market. Properties that are priced above market are taking much longer to sell.
In November, the regional median home price jumped 11%, while sales climbed 19%, according to DQNews.
Many experts say the frenzy is due in large part to the pandemic. Whereas many low-wage workers worry they’ll face eviction, the economic downturn has left relatively unscathed the higher-wage workers more likely to buy homes in the first place.
Federal Reserve policy has helped drive mortgage interest rates into the recently unheard of 2% range at the same time people are spending more time at home and realize they could use more space.But the torrid pace of the for-sale market raises the question: Just how long can this continue?
For some, the pandemic simply accelerated decisions planned for the near future. And unemployment is still high, which will hinder home-buying dreams for others. The pandemic upended everything. With no need to immediately plan for the big day, they found themselves not only with time to home shop but also with a new desire and added ability.
Interest rates are expected to remain low, which typically draws people into the market. Lower rates can make homes affordable but at the same time can push prices higher by enabling people to bid more.
The Federal Reserve, and others, also predict unemployment will drop next year as the vaccine rollout continues. Then there are people who have maintained employment throughout the pandemic and have saved because they’re not traveling or eating out.
Predictions, of course, are fraught at any time, particularly during this pandemic.
One unknown is the concept of working from home. Many tech companies have said their employees can continue to work from home through the summer or even the end of the year.
If the pandemic eases in 2021 and more businesses reopen offices, the immediate desire for a larger place could dissipate, lessening a trigger that recent buyers say kickstarted their move from smaller rentals or places they owned. If schools aren't able to reopen safely, we will likely see the trend of people leaving California to move closer to family to have help with kids online learning or just help in general.
But some experts said many employers have realized work-from-home policies have been successful and will probably remain flexible once they let people back into the office.
As employees get confirmation they can work from home beyond the pandemic at least a few days a week, even more people are likely to move, seeking out the larger house or neighborhood they always wanted if not for the commute.
In short, many economists predict a market increase of 1% to 2% over the next year. If you are thinking about your options and need helping buying or selling your home, we are here to help you!