How do you foresee California homes-for-sale inventory trending in 2021?
- It will decrease along with buyer demand. (38%, 18 Votes)
- Neither inventory nor buyer demand will change. (38%, 18 Votes)
- It will increase beyond buyer demand. (25%, 12 Votes)
Total Voters: 48
If you thought 2020 was a hard time to be a homebuyer, just wait. The first few weeks of 2021 have already seen record lows for multiple listing service (MLS) inventory and days on market.
Nationally, 52% of homes reached a pending status within two weeks of listing as of the first week of February 2021. This share is up from 43% a year earlier, according to Redfin.
Digging further into the data, here in California, the share of homes off the market within two weeks of listing as of the first week of February 2021 include:
- 74% of Sacramento homes, up from 60% a year ago;
- 69% of San Diego homes, up from 56% a year ago;
- 69% of Fresno homes, up from 51% a year ago;
- 64% of San Jose homes, up from 63% a year ago;
- 61% of Bakersfield homes, up from 49% a year ago;
- 48% of Riverside homes, up from 31% a year ago; and
- 46% of Los Angeles homes, up from 34% a year ago.
Bucking the trend, fewer San Francisco homes are selling within two weeks than a year ago. 58% of San Francisco listings sold within two weeks, down from 62% a year earlier, according to data from Redfin. However, with only a small number of homes selling each month, San Francisco tends to be more volatile to begin with, and a variance of a few points isn’t saying too much about the metro area’s overall trend.
In fact, according to Zillow, the typical home was listed for just 14 days before reaching a pending status in December 2020, averaged across California’s largest metros.
As homes fly off the market, the source is pent-up homebuyer demand, fueled by historically low interest rates and unmet by a shrinking inventory of homes for sale. The result has been homes selling rapidly and above list price.
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2021 is a turning point for housing
2021 is shaping up to be a frustrating year for homebuyers, and a daunting year for sellers, too.
The backdrop to today’s extreme inventory shortage and rising competition is the ongoing 2020 recession. Going into 2021, half of California’s 2.7 million jobs lost at the outset of the recession are still missing. Roughly 5% of mortgaged homeowners are seriously delinquent and many more renters are behind on rent.
And yet, despite these worrisome losses, the foreclosure and eviction moratoriums have continued to prop up the housing market, along with expectations that home sales will escape the worst of the recession. Thus, home prices have continued to rise and homebuyers have eagerly snatched up available inventory the moment it hits the market.
However, when the moratoriums expire later this year, the housing market will take a turn for the worse. With potentially millions of homes heading for foreclosure, the impact on home sales will be severe. As serious delinquencies turn into notices of default (NODs) and trustee’s sales, distressed sales will cause homebuyers to pause in caution. Once they sense prices are falling, they will sensibly wait for prices to hit bottom before venturing back into buying behaviors.
Of course, this may be tempered by any number of interventions, such as another extension of the moratoriums or, better yet, more government assistance in the form of job creation. Either way, real estate professionals will remain successful by preparing for the worst — a slowdown in home sales and prices to occur over the next two-to-three years.
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