California Home Price Growth Sets Record in January: Home prices continued to power through the traditional slow season in January with the largest annual price gain in nearly seven years. The statewide median hit $699,890 in January 2021, down from December’s $717,930, but gaining 21.7 percent from the $575,160 recorded last January.
California Home Sales Maintain Strong Rate of Growth: January home sales were up 22.5% from a year ago. The year-over-year, double-digit sales gain was the sixth consecutive and the third straight month that sales increased more than 20% from a year ago, driven by strong growth in California’s core housing markets, especially in the San Francisco Bay Area.
California REALTOR® Optimism Remains High in February: In our weekly survey of California REALTORS®, optimism about market conditions has been on the rise in recent weeks. Last week, 52.9% of respondents expected sales to grow, which is up from the week before and well above the levels reported in even November and December. Expectations for prices also increase to nearly two-thirds of members (65%) while expectations for listings are at their highest levels in months.
2021 C.A.R. Forecast More Optimistic Too: Based upon strong January closed sales, encouraging weekly data for February, low rates, and ongoing growth in various measures of buyer demand, the California Association of REALTORS® has revised its forecast for home sales and prices in 2021 higher than previously estimated. Existing single-family home sales are expected to rise by more than 11% this year and home prices are expected to increase by 8%.
Encouraging Public Health Data in California: California saw the number of new coronavirus cases fall further last week, continuing a trend that began in mid-January. On Wednesday the 17th of February, California registered less than 4,100 new cases—the lowest level since new infections began to rise at the beginning of November. Encouragingly, this improvement in new cases has also begun to impact the number of daily deaths, which has now been falling for the past two weeks.
Interest Rates Creep Up: The typical rate on a 30-year fixed-rate mortgage increased to 2.81% last week from 2.73% the previous week. Many blame this on a robust increase in retail sales during January, which some fear has the potential to create more inflation. Last week, 10-year Treasury rates increased by 7 basis points as well—roughly matching the increase in mortgage rates. Altogether, bond rates have increased roughly 70 basis points since last summer, so some additional increase in mortgage rates is expected but rates will remain low by historical norms.
Buyer Demand Still Growing, But At Slower Pace: The number of new purchase mortgage applications went up again last week, continuing the 39-week long streak of growing buyer demand that started back in May 2020 and fueled much of the growth in closed sales California enjoyed during the second half of the year. However, there is mounting evidence that the expansion, will cool to more modest levels of growth. Year-to-year increases have been below 20% for the past 7 weeks consecutively after averaging more than 20% growth for the preceding 32 weeks. Buyer demand is still increasing, it is just doing so more slowly than it was at the end of 2020.
Initial Jobless Claims Remain Elevated: California will not report January employment and unemployment figures for a few weeks, but recent jobless claims data suggests that full recovery is still a ways off. Initial claims for unemployment insurance in California have risen for the past two weeks. In addition, nearly 750,000 Californians filed continuing claims for the previous week, and many more are still receiving pandemic unemployment assistance. Another round of stimulus is in negotiations, and these figures suggest that many Californians still need additional relief.