Q2 2022 Southern California Real Estate Market Update

The following analysis of select counties of the Southern California real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere Real Estate agent.

 

Regional Economic Overview

Total employment in the counties covered by this report has risen more than 600,000 jobs over the past year, recovering 97.3% of the jobs lost due to the pandemic. Unsurprisingly, Los Angeles County still has the largest shortfall (-254,000 jobs), followed by Orange County (-44,100) and San Diego County (-15,000). Riverside and San Bernardino counties are now well above pre-pandemic employment levels. The region’s unemployment rate in May was 3.6%, down from 8.2% a year ago. The lowest rates were in Orange County (2.4%) and San Diego County (2.7%). The highest unemployment rate was in Los Angeles County, where 4.5% of the labor force was without a job. The Inland Empire continues to outperform, and I am hopeful that the rest of the region will return to pre-pandemic employment levels by the end of the year. However, it’s likely that Los Angeles County may take somewhat longer to fully recover due to its size.

Southern California Home Sales

❱ In the second quarter, 47,596 homes sold, down 19% from a year ago but up 13.1% compared to the first quarter of the year.

❱ Pending home sales, which are an indicator of future closings, were down modestly from the first quarter. However, I still expect that the summer will see a decent number of sales.

❱ The largest drop in sales was in Orange County, but all markets saw significant declines. That said, the spring market was in place in San Diego, Los Angeles, and Orange counties, which experienced double-digit percentage increases in sales compared to the prior quarter.

❱ Listing activity has risen across the region, which has given buyers more in the way of choice. That may explain, to a certain degree, why pending sales have pulled back; buyers are not feeling as pressured as they were when inventory was very low.

A bar graph showing the annual change in home sales for various counties in Southern California from Q2 2021 to Q2 2022. All five counties listed show negative percentage year-over-year changes: San Bernardino at -10.6%, Riverside at -14.0%, Los Angeles at -17.5%, San Diego at -23.6%, and Orange at -28%.

Southern California Home Prices

❱ Home prices in the second quarter rose 10.9% compared to a year ago and were 5.4% higher than in first quarter of 2022.

❱ Rising mortgage rates have not had as much of an impact as some expected, but increased financing costs appear to have taken at least some of the heat off the market, as demonstrated by the slowing pace of price growth compared to 2021.

❱ There was double-digit price growth in every county other than Los Angeles. Riverside County led the way with prices rising by 16.7%. The rest of the region also saw very impressive sale price growth.

❱ With relatively high mortgage rates and more homes coming to market, I have started to watch list prices closely. Compared to the first quarter, median list prices are still up an average of 8.7%, suggesting that sellers remain rather bullish.

A map showing the real estate home prices percentage changes for various counties in Southern California. Different colors correspond to different tiers of percentage change. Los Angeles County is the only county with a percentage change in the 8% to 9.9% range, while Orange County is the only county in the 12% to 13.9% change range. San Bernardino and San Diego are in the 14% to 15.9 % change range, and Riverside is the only county in the 16% + range.

A bar graph showing the annual change in home sale prices for various counties in Southern California from Q2 2021 to Q2 2022. Riverside County tops the list at 16.7%, followed by San Diego at 15.9%, San Bernardino at 15%, Orange at 13.8%, and Los Angeles County at 8.8%.

Mortgage Rates

Although mortgage rates did drop in June, the quarterly trend was still moving higher. Inflation—the bane of bonds and, therefore, mortgage rates—has yet to slow, which is putting upward pressure on financing costs.

That said, there are some signs that inflation is starting to soften and if this starts to show in upcoming Consumer Price Index numbers then rates will likely find a ceiling. I am hopeful this will be the case at some point in the third quarter, which is reflected in my forecast.

A bar graph showing the mortgage rates from 2020 to the present, as well as Matthew Gardner's forecasted mortgage rates through Q2 2023. He forecasts mortgage rates continuing to climb to 5.9% in Q4 2022, then tapering off to 5.58% in Q1 2023 and 5.53% in Q2 2023.

Southern California Days on Market

❱ In the second quarter of 2022, the average time it took to sell a home in the region was 16 days, which was 2 fewer days than a year ago and 5 fewer days than in the first quarter of the year.

❱ Compared to the first quarter of 2022, days on market dropped in all counties covered by this report, which was impressive given the higher number of homes for sale.

❱ Homes in San Diego County continue to sell at a faster rate than other markets in the region. All counties other than San Bernardino (where it took one more day for homes to sell than a year ago) saw market time drop.

❱ With inventory levels rising, some may think that the market is set for a correction, but I disagree. Sales are still higher than in 2019 and it took half the time to sell a home in the second quarter of this year than it did during the same period in 2019.

A bar graph showing the average days on market for homes in various counties in Southern California for Q2 2022. San Diego county has the lowest DOM at 12, followed by Orange at 14, Los Angeles at 18, San Bernardino at 19, and Riverside at 20.

Conclusions

This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.

The trend in the job recovery remains positive, and the prospect of a return of all the jobs lost due to the pandemic is becoming more palpable. The housing market is still performing well, even in the face of higher inventory levels and rising financing costs. That said, the frenetic pace of activity of the past 18 months or so will slow, but not to a degree that is concerning.

A speedometer graph indicating a medium seller's market in Southern California for Q2 2022.

More listings led to more sales, which is a little counterintuitive especially given far higher mortgage rates than we’ve seen in years. The market remains favorable to home sellers, and they are still in the driver’s seat.

About Matthew Gardner

Matthew Gardner - Chief Economist for Windermere Real Estate

As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.

In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.


Windermere Tower Properties Shows the Love to Riverside Educators and Small Businesses.

Windermere Tower Properties celebrated Valentine’s Day with the launch of the “Show the love” campaign to honor and recognize local educators for their commitment to students in our community. Throughout the pandemic it has become apparent that our local schools are the center of our community and essential, for not only the development of our youth, but also for our local economy to thrive. Teachers, cafeteria workers, custodians and all school staff have been versatile in meeting the needs of our students and our community, putting others before themselves. Since the beginning of the pandemic educators have pivoted to adjust to public health mandates while still focusing on the goal of creating learning environments for our students to succeed.

The entire team at Windermere Tower Properties wanted local educators to know we value their commitment and empathize with the social and emotional toll the pandemic has had on their profession. The “Show the Love” campaign allowed the Realtors to partner with their brokerage and select a local school to buy lunch or a treat for their entire staff from an area small business. This successful campaign reminded our local educators that they are loved and supported small business owners and our local economy.

On February 14th the Realtors at Windermere Tower Properties handed out more than 900 lunches or treats to more than 15 elementary school sites throughout Riverside including: Pachappa, La Granada, Longfellow, Lake Hills, Alcott, Madison, Jefferson, Franklin, Kennedy, Twain, Hawthorne, Washington, Foothill, Twin Hills, Woodcrest, Woodrest Christian, and Springs Charter School. Local eateries like Sub Station, Antoines, DeMatteo’s, Northgate Gonzales Market, Upper Crust, Riverside Cookie Shop, Cactus Cantina, Crumbl, and local Girl Scout troops were some of the area businesses that were supported. “The staff in the front office were so overwhelmed with gratitude,” said Realtor Associate, Heidi Carter.

“The receptionist told me since the pandemic we haven’t celebrated holidays the same way and often times offices were bare and didn’t look like they were celebrating the holiday at all. They really needed this.” Carter said.

Colette Lee, co-owner of Windermere Tower Properties, stated, “We are really happy this campaign turned our so well in its first effort. We want to “show the love” every year and support even more schools next time around.”

For more information contact Windermere Tower Properties at (951) 369-8002 or visit www.windermeretower.com


Q3 2021 Southern California Real Estate Market Update

The following analysis of the Southern California real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere Real Estate agent.

REGIONAL ECONOMIC OVERVIEW

The job recovery in Southern California continues to be quite the roller-coaster, with solid monthly gains followed by significant drops. In the first quarter of the year, more than 326,000 jobs returned, but that was followed by a less-than-stellar 8,300 increase in the second quarter. The latest third quarter numbers (most recent data is from August) showed that the Southern California region has added more than 27,000 positions, but this is still underwhelming.

The COVID-19 Delta variant is impacting the job market, and a lack of available workers isn’t helping. In aggregate, the region has recovered 1.31 million of the 2.02 million jobs that were shed when the pandemic hit, but this means Southern California is still down more than 700,000 positions. The region’s unemployment rate in August was 8.2%, down significantly from 14.2% a year ago. The most recent data shows the lowest jobless rates were in Orange (6%) and San Diego (6.6%) counties. The highest rate was again in Los Angeles County, where it was 9.7%. Although the current pace of the job recovery is muted, I hope it will pick up in the not-too-distant future, but the likelihood of reaching full employment anytime soon appears to be unrealistic.

SOUTHERN CALIFORNIA HOME SALES

❱ In the third quarter, 50,313 homes sold in Southern California, representing a 0.1% drop from the same period in 2020 and 4.7% lower than in the second quarter of this year.

❱ Pending home sales, which are an indicator of future closings, were 4.5% lower than in the second quarter of this year, suggesting that the final quarter may also be down.

❱ Year-over-year, home sales rose in Los Angeles County, but pulled back in the remaining markets covered by this report. Compared to the second quarter, sales pulled back in all markets other than San Bernardino, where sales rose 6%.

❱ The issue is not demand, rather a lack of supply is holding the market back. Listing activity is down 22.3% from a year ago, and this is impacting sales. That said, listings were 17.1% higher than in the second quarter and, with more choice starting to emerge in the market, we could see sales volumes pick back up.

A bar graph showing the annual change in home sales for various counties in Southern California during the third quarter of 2021.

SOUTHERN CALIFORNIA HOME PRICES

A map showing the real estate market percentage changes in various counties in Southern California during the third quarter of 2021.

❱ The average price of homes sold in the region was $971,184. This was 19.1% higher than a year ago, but 1.4% lower than in the second quarter of 2021.

❱ Mortgage rates remain remarkably competitive, even if they are off the historic low of last December. Also of note is that jumbo mortgage rates are remarkably competitive—an important factor in expensive markets such as Southern California.

❱ The region saw double-digit price growth across all counties contained in this report. Year over year, prices were up more than 19%, but they were down 1.4% from the previous quarter.

❱ As stated in last quarter’s report, I believe interest rates will rise slowly, which is likely to bring out more buyers. With inventory levels starting to tick up, I am expecting the regional housing market to trend higher, but likely not until the spring.

A bar graph showing the annual change in home sale prices for various counties in Southern California during the third quarter of 2021.

DAYS ON MARKET

❱ In the third quarter of the year, the average time it took to sell a home in the region was 17 days, which is 16 fewer days than a year ago and 2 fewer days than in the second quarter of 2021.

❱ Three counties saw the time it took to sell a house drop compared to the second quarter of this year: Riverside, Los Angeles, and Orange. Market time was static in San Bernardino County and rose by one day in San Diego County.

❱ Homes in San Diego County continue to sell at a faster rate than other markets in the region. In the third quarter, it took an average of 14 days to sell a home there—9 fewer days than it took a year ago.

❱ With it taking an average of a little more than two weeks for a home to find a buyer, the market remains very tight. That said, with inventory levels rising, it is possible that days on market will start to creep higher, especially as affordability constraints potentially limit the number of qualified buyers.

A bar graph showing the average days on market for homes in various counties in Southern California during the third quarter of 2021.

CONCLUSIONS

A speedometer graph indicating a seller's market in Southern California during the third quarter of 2021.

This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.

The third quarter was quite a mixed bag, with rising inventory levels but lower sales and prices compared to the second quarter. When I look at list prices, which is a leading indicator, as opposed to sale prices, which are a lagging indicator, I notice some softening in San Bernardino, Los Angeles, and Riverside counties. Although not a cause for concern, it may suggest that the market is about to start to cool—albeit modestly.

As such, I have chosen to move the needle a little more in the direction of home buyers, although sellers still have the upper hand.

ABOUT MATTHEW GARDNER

Matthew Gardner - Chief Economist for Windermere Real Estate

As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.

In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.


10 Mistakes to Avoid When Buying a Home

Whether you’re a first-time homebuyer or have purchased a home before, the same mistakes can rear their head at any point in the buying process. By working closely with your agent, you can identify these pitfalls ahead of time and adjust accordingly. Mistakes in the buying process can lead to higher costs, added stress, and even terminated contracts. Here are ten common mistakes to avoid when buying a home.

10 Mistakes to Avoid When Buying a Home

1. Not getting pre-approved

Getting pre-approved is a key component of the early stages of the buying process and will help to maximize your chances of getting your offer accepted. Getting pre-approved will give you a concrete idea of how much you can borrow, how much house you can afford, the estimated monthly costs of your mortgage and its corresponding interest rates. It also communicates to sellers that you are a serious buyer.

2. Not identifying your price range

Pursuing listings you can’t afford is a surefire way to start your home buying process off on the wrong foot. Buying a home that’s outside your budget will put added pressure on your finances and increases your chances of foreclosing, should your financial situation take a turn for the worse. Use the general rule that your house payment should never be more than 25-30% of your take-home pay, and as you prepare for talks with your lender be sure to account for all the expenses you will incur, including private mortgage insurance (PMI) if applicable.

3. Taking on new credit

Opening new lines of credit at any point in the home buying process will slow things down and can affect your chances of getting a home loan. Adding another credit card to your collection or taking out a loan will change your credit score, causing a ripple effect that can bring the buying process to a halt. Because new credit changes your debt-to-income ratio, lenders will likely want to review your mortgage approval and your risk of non-payment. This forces sellers to wait around for your application while competing buyers speed ahead of you in line.

4. Not purchasing adequate homeowner’s insurance

It’s understood that a home is a valuable asset that needs to be protected, but it is still all too common for homeowners to be under-insured. A homeowner’s insurance policy covers your home, your belongings, living expenses and injury or damage to others that occur on the property in the event of a disaster. Work closely with your insurance broker to make sure you have adequate coverage for the most common risks in your area like flood, earthquake, and more.

5. Not looking for other loans

With a little resourcefulness, you can tap into new sources of financial support that will help to ease the burden of making a home purchase. VA Loans can be a lifesaver for active service and veteran personnel, offering zero down payment and lower-than-average mortgage rates. Other government loan programs such as USDA and FHA loans can greatly aid homebuyers with favorable loan terms. Be sure to thoroughly review the qualifications of these loans before applying.

6. Misunderstanding the down payment

When it comes to down payments, it’s not twenty percent or bust. Granted, with a twenty percent down payment your lender won’t require you to purchase mortgage insurance; but even if you’re short, there are a number of alternatives to private mortgage insurance (PMI) available to you, such as Lender-Paid Mortgage Insurance and a piggyback loans strategy. Work with your agent to identify trusted lenders in their network that can help you secure the right loan.

7. Not working with a buyer’s agent

A buyer’s agent will help you to identify which homes you can afford, work with you on formulating a competitive offer and preparing for negotiations with sellers and listing agents. Buyer’s agents will also handle the paperwork when it comes time to close the deal. A home purchase is an intricate transaction with many moving parts and having an experienced professional by your side who can navigate each step is invaluable. Typically, the buyer’s agent splits the commission of the sale with the listing agent, which is paid by the seller, so generally their services come at no additional cost to you.

8. Underestimating repair and remodeling costs

Regardless of whether you’re buying a fixer-upper or a home that needs a few simple upgrades, you can usually expect some repair and remodeling expenses once the home is yours. Before you start swinging hammers or tearing up drywall, take time to assess the scope of the projects and whether you can do them yourself or need a professional. Talk with your agent about which remodeling projects have the highest resale value for comparable homes in your area.

9. Buying a home without an inspection

Buying a home without having it inspected opens the buyer up to added risk. Without a home inspection, you forego the ability to negotiate repairs and concessions with the seller. Getting a home inspection is a small investment and alerts you of any potential home disasters that may be on the horizon. However, this mistake comes with an aside. In a seller’s market where a high number of buyers are competing for a limited number of available listings, waiving the inspection contingency is a common tactic for buyers looking to make their offer stand out. Work with your agent to figure out what’s best for you and your situation.

10. Forgetting about moving costs

It’s easy to get so focused on the purchase of the home that you forget about what it will cost to move there. Moving expenses can add up quickly, especially if you’ll be traveling across state lines or across the country. If you’re buying and selling a home at the same time, there’s also the question of where you’ll live in between closing on your current home and closing on your new one. If these costs aren’t accounted for, you can quickly be over budget before you set foot in your new home.

For more information on how to make the buying process smoother, read about how you can Increase Your Buying Power.


What is a Seller's Market?

When the housing market favors sellers, a seller can expect ideal conditions for selling their home. However, that’s not to say that a seller’s market doesn’t come with its own unique set of challenges for parties on both sides of the transaction. That’s why it’s critical for buyers and sellers to work with an agent who not only understands their wants and needs but who can also help them navigate highly competitive market conditions.

 

What is a Seller’s Market?

A seller’s market occurs when demand exceeds supply. When inventory is limited, competition amongst buyers is fierce. Median sales prices increase, days on market decrease, and homes commonly receive multiple offers, often over their original asking price.

 

Selling in a Seller’s Market

Though demand is high in a seller’s market, staging and making any necessary repairs are still important steps to take before hitting the market. An agent can help a seller make important decisions about which repairs and updates help add value to the home.

When it comes to offers and negotiations in a seller’s market, sellers have the leverage. It’s common for homes to fetch more than their asking price with multiple offers on the table. Though prices are being driven up by demand, a seller may choose to list their home at or just below fair market value with the hopes of starting a bidding war. Because competition is so high, buyers may be willing to waive an inspection contingency to help make their offer stand out. Agents can help sellers decide whether they should conduct a pre-listing inspection, which sometimes helps the seller get more offers and command a higher price.

With multiple offers on the table, it may be tempting to simply choose the one with the highest figure; however, the best offer is also the one that removes risk and aligns with the seller’s goals. Whether that entails waived contingencies, a shorter closing window, or an all-cash offer, in a seller’s market, the seller has the power to choose. Sellers should fully review each offer with the help of their agent before proceeding.

 

Buying in a Seller’s Market

Buyers in a seller’s market must act fast. Due to the high level of competition, they must be prepared for a frustrating scenario where their offers may not win out. This emphasizes the importance of working with a buyer’s agent. In a seller’s market, it’s more likely that the buying process will include such factors as seller review dates and escalation clauses. A buyer’s agent will help navigate these challenges while working with their client to make their offer stand out. They will formulate a strategy, comparing their client’s wish list and budget against the limited number of homes available and proceeding accordingly. A buyer’s agent will also set the expectation that, due to the competitive nature of the market, finding the right home may take longer than expected.

In a seller’s market, the buyer is at a disadvantage when it comes to negotiations. The chance of getting a contingent offer is minimal and pushing for certain closing dates and specific repairs may do more harm than good to their offer. A cash offer has significant power in a seller’s market. If a buyer can make a cash-heavy or even all-cash offer, it is likely to stand out to the seller. It gives the buyer more buying power and greatly increases their chances of winning a bidding war.

 

For more information on the conditions of your local market, visit our website for Quarterly Real Estate Market Updates from our Chief Economist, Matthew Gardner. For assistance planning a home sale or purchase, connect with a Windermere Real Estate agent here: Connect With an Agent


Knowing When to Sell Your Home

Of all the components involved in a successful home sale, there is perhaps no greater contributing factor than timing. Knowing when to sell your house gives you the best chance to make an impact when you hit the market. Every seller’s situation is unique but choosing when to sell comes down to how prepared you are, finding the right agent, and local market conditions. Once you’ve got a grasp of these elements, then you can decide if it’s the right time to sell.

 

Are You Ready to Sell?

Before you sell your home, your finances must be in order. Equity is a natural starting point for assessing your financial health. To calculate your equity, you’ll need to know your home’s market value. Your real estate agent can help you determine this by conducting a comparative market analysis (CMA), which involves comparing your home to others in your area by such characteristics as square footage, the number of bedrooms/bathrooms, age, and lot size. Once you know your home’s market value, subtract your current mortgage balance from that number and you’ll have your current home equity. If your equity is negative, then it may not be the best time to sell.

Beyond your home equity, there are plenty of other financial factors to consider when preparing to sell. Selling a home does not come without its own set of costs. Commission fees, home repairs, inspectionsand staging are just some of the expenses you can expect to incur. For more information on the costs involved with selling your home, talk to your Windermere agent.

Selling a home is an emotional process that comes with significant lifestyle changes, so it’s important to make sure it’s the right time for you and everyone in your household. Part of a real estate agent’s’ role is understanding how the varying emotions of the selling process apply to different people. For every fear, worry, and hesitancy you may experience when trying to decide if it’s the right time to sell, your agent can share similar experiences while working with past clients.

 

Local Market Conditions

The state of the real estate market in your area could dictate whether it’s the right time to sell. Various factors affect local market conditions like inventory, seasonality, mortgage rates, and home price growth. Talk to your real estate agent about what the local conditions mean for your selling strategy and what kind of buyer negotiations you can expect to encounter. Agents have the tools and know-how to perform a complete analysis of the market to help you decide when the right time is to sell.

 

Find the Right Agent

Real estate agents are the catalyst for a successful home sale. They not only bring a wealth of resources to the table, but they can also offer helpful advice on the optimal time to sell. Agents can assess your goals for selling your home, how that aligns with your budget, and how those factors fit into the context of current local market conditions.

To truly know whether it’s the right time to sell, it’s important to find the right agent who understands the needs of your household. The more an agent knows about your situation, the better they can formulate a selling strategy. This also allows them to understand what the best offer for your home looks like. When searching for an agent, ask for referrals from your inner circle. Interview multiple agents to get an idea of their qualities, and select the one that makes the most sense for you.

 

When you’re ready to sell, or if you have any questions about the selling process, talk to an experienced Windermere agent here: Connect with an Agent


Timeless Home Design

When decorating and designing, homeowners often strive for a home that may incorporate vintage and modern elements but remains timeless at its core. Fortunately, certain design principles and elements have stood the test the time and can help you curate the home you desire. Here is your guide to understanding how you can design a home that looks and feels timeless.

 

Principles of Timeless Home Design

Balance

When designing a space in your home, balance is a key concept to delivering a timeless ambiance. Achieved through a proportionate arrangement of objects and colors, balance will help create a logical pattern in your home that pleases the eye. Experiment with symmetry in your home to build balance. This doesn’t mean that there needs to be two of every object, rather in every space you should utilize the objects and color schemes present to create symmetry.

 

Focal Point

Imagine a living room without a couch or mantle, or a dining room without a dining table. These images are confusing because we simply don’t know where to focus our attention. A core principle of timeless design is that space should have a focal point to give order to the room. Focal points don’t always have to be derived from a built-in feature of the home, you can create one with furniture, artwork, or some other form of eye-catching décor.

 

Scale and Proportion

Scale and proportion are two fundamental concepts of interior design and are key to creating a timeless décor. Simply put, proportion refers to the relationship of items and colors, while scale refers to their relationship with the room. For example, if a room in your home has high ceilings, this allows for taller furniture and artwork, while the most spacious rooms in your house are the best home for large décor pieces and furnishings. Proper usage of scale and proportion also means leaving some space between items to let the room breathe, so to speak.

 

Colors and Patterns

For a timeless look and feel, choose more classic color and pattern schemes. Basketweave is a traditional pattern that helps to create symmetry. Stripes are always in style and can help to reinforce clean lines. Stick to neutral paint colors on your walls as they give you the flexibility to add décor without overwhelming the room. Combinations of off-whites, beiges, grays, and earthy tones will deliver that timeless feel you’re looking for.

 

Natural Elements

There’s nothing more timeless than nature. Materials like wood, stone, and marble have been a cornerstone of design since antiquity. Whether you utilize these materials in your home as furniture, accent pieces, or focal points, they will help create a trend-free, organic environment in any room.


10 Predictions for the 2021 Housing Market by Windermere’s Chief Economist

1. Economic Growth Will Pick up – But Not Until the Summer

As you are all aware, the job recovery has slowed significantly over the past few months and the December number – which saw employment levels actually drop by 140,000 jobs – was really quite appalling.

But… as bad as the numbers were last month, I am still expecting to see solid employment gains this year.

That said, I don’t see significant improvement until the vaccine starts to be distributed widely AND a majority of us choose to take it.

And when we get to that point – likely in the second half of this year – look for a lot more jobs to be added across the country, but employment levels will rise for a reason that most people aren’t thinking about, and it’s because I believe that the public – as they feel more comfortable going out – will start
to spend again.

In fact, it’s my forecast that spending will rise very significantly later this year and that will give a much-needed boost to the economy and the job market.

You see, we haven’t been spending our hard-earned dollars at normal levels for almost a year now and, quite frankly, the cash that we have been hoarding since the pandemic started is starting to burn a hole in our pockets.

So, my number 1 prediction is that we will see significant economic growth– and job gains – this year, but that most of the growth will come in the second half of 2021

 

2. The Move to the Suburbs is Real – But Don’t Get Carried Away! Looking now at the housing market, there’s been a lot of talk about a COVID-19 induced flight away from cities and into the countryside.

Well, the numbers don’t lie – there have certainly been more interest from buyers looking at markets outside of our core metros and this – obviously – is a function of the work-from-home phenomenon that I believe is not a flash in the pan, rather it is real and will be in place for a long time, if not forever.

But there is a bit of a wrinkle in this theory. In as much as we are certainly seeing suburban flight from markets like New York and San Francisco, the same can’t be said for much of the rest of the country.

In fact, according to a study recently published by Lending Tree, the percentage of owners who moved out of the top 50 largest metro areas in the country in 2020 was just 2.2% – now this is up from 1.9% in 2019 – but it’s hardly the tsunami that many had anticipated. And it’s also worth mentioning that some of the markets within Windermere’s footprint actually saw a net increase of migrating homeowners and not a drop. Examples of this include Denver which saw the number of households moving in up by 3.6% in 2020; Portland was up by 3.4%; Seattle by 3.3%; and Sacramento saw an in-migration rise by 2.9%. Although some households will move because work from home allows them to relocate to cheaper markets, it doesn’t mean that we are all headed out to the wild blue yonder.

In fact, I believe that – even though a good number of households will move – many will stay within striking distance of their workplaces, and I say this because I expect the work from home concept to be one where we work part-time from our homes, and part-time at our offices.

My number 2 forecast is that although people will move away from some of our core cities this year, many will still stay in the same region as work from home will not be a full-time situation for a majority of workers.

3. Not all Apartment Markets are Created Equal

The apartment market has been hit very hard by COVID-19 with rising vacancy rates putting significant downward pressure on rents in many large markets such as Seattle, San Francisco, Boston, and New York but guess what? We are actually seeing rents still rising in many smaller cities and these include Boise, Fresno, and Tucson, Arizona.

And this move away from expensive apartment markets is occurring for several reasons not least of which is – again – work from home, but it’s also due to an increasing number of renters turning into home buyers, and it’s also because the rent premium for being “close to the action” in major cities has faded and, because of this, I see previously overlooked suburbs and
small metros benefitting from growing demand.

2021 will be a tough year for many landlords in larger cities not just for the reasons I have already mentioned, but also because we are bringing on over 400,000 new apartment units across the country this year and many new developments are in these larger cities.

Number three forecast – Apartment owners in pricy markets will continue to suffer in 2021, but smaller markets will perform rather well and – after many years of being overlooked – I am also forecasting those apartment developers will start to turn their attention toward suburban markets and away from many of these larger cities. We haven’t seen that in over a decade.

4. The Luxury Housing Market Will Continue to Perform Very Well

One of the sectors that really performed far better than anyone – including me – had anticipated in 2020 was the luxury housing market, and I expect this sector to be very robust again this year and the reason for this, primarily, will be interest rates. Jumbo mortgage rates, which saw a spike at the start of the pandemic, have since dropped significantly and this is benefitting buyers of luxury housing.

Buyers of luxury housing will be very active this year and I see many focusing on some secondary markets – for value reasons – but I still expect that the classic luxury markets, like the Hamptons for example, will also do very well.

Other markets where the luxury sector will outperform are Miami – but this will be mainly due to tax changes in New York City driving owners to relocate – and I’m also watching Southern California and predict that luxury homes down there will also outperform this year.

One more thing I would mention is that I also expect that, as the country starts to reopen post-COVID, we will see a rebound in foreign buyers as well so keep an eye on that too.

Forecast number 4 – the luxury market will be more robust in 2021 than many had anticipated.

5. Cities will Start to Pay More Attention to Zoning (at Long Last!)

Many of you will be more than aware of my ongoing concerns regarding housing affordability. Now, we have seen some cities like Minneapolis, and even some States – and here I’m talking about Oregon – start implementing significant zoning changes to allow for more new home development in their markets which is impressive, but it certainly isn’t happening everywhere.

However, I believe that this year we will – at long last – start to see more attention from legislators when it comes to increasing the supply of land for residential construction and many will do this by adjusting current zoning policies to allow more land on which to build.

So why this new focus? Well, their attention will be driven by worries that high housing costs in their own markets may lead businesses to start to look at cheaper areas and – possibly – move away from their current locations, and other businesses that are thinking about expanding into new markets – well, they will be increasingly thoughtful about how housing costs in expansion markets will impact how much they have to pay their new employees.

You see, we know that almost every jurisdiction across the country is suffering from significant shortfalls in revenue and, because of this, legislators will have to start focusing on attracting new businesses – and retaining as many businesses as possible – in order to help replenish their coffers.

Forecast Number 5 – Although it won’t happen overnight, I am hopeful that discussions around zoning changes will start to pick up some steam this year.

6. Adaptive Reuse Will Gain More Traction

Over the past several months, many of you have asked me whether we will see office buildings converted to residential uses as there will be fewer workers occupying offices. Well, I am sticking to my belief that the cost of conversion and the layout of office buildings (primarily due to core depths, lack of plumbing penetration, and the like) just don’t lend themselves to conversion to residential uses – well, that is unless you buy them at bankruptcy prices!

That said, I am expecting to see other building types that may be better suited for conversion into either single residential use or a mix of uses, start to become attractive to developers.

And what are these other product types, you ask? Well, likely unsurprising to you is that I am looking at hotels – which are going to continue to be hard hit for, in my opinion, years… and retail malls – both strip as well as regional.

You see, we are already seeing more hotels – mainly inns and motels – be listed for sale as they are just not providing adequate cash flow and I expect
that some, but not all, may become ripe for conversion into residential uses.

As far as malls are concerned, look for more interest in the conversion of regional malls into mixed-use projects, but strip malls may get rezoned into single residential uses.

Number 6 – developers will start to pay more attention to the reuse of existing buildings in addition to ground-up construction.

 

7. What’s important in a post-COVID-19 home?

The pandemic has started to change what we are looking for in a home and it’s actually very interesting to see what is now becoming important to buyers. We know that work from home is real, but I see households moving not just because housing is relatively cheap further out, but many will look at their own homes – even if they are on the fence about moving – and realize that it’s just not set up for working remotely on a semi-permanent, or permanent, basis.

How many people do you know who have spent the past several months working from their dining room tables? I’m one!

But I also expect to see sellers who may not have an office in their homes, create dedicated spaces for an office set up to attract buyers or, where they just can’t do that, they will, at a minimum, create a dedicated Zoom space before listing their homes for sale!

I am also forecasting that you will also see new construction housing reflect these changes with builders better aligning their product with new consumer preferences and that demand for new homes will rise in 2021 as builders address these new requirements from buyers.

People want more space today because they are using their homes more and I already see builders addressing this with the average new home size rising last year following several years where new homes were actually getting smaller.

Also, when it comes to new construction, open floor plans — once a must — well they will be replaced too thanks to COVID-19 and buyers wanting more room separation.

And finally, I expect buyers who are looking to move a lot further out to become far more interested in markets that have high-speed internet access. Many of us take it for granted, but buyers will start to list this as a requirement, rather than an option – again possibly limiting moves too far out into the country.

Forecast Number 7 – Home preferences are changing – builders are already adapting, and owners of existing homes will have to do what they can to meet these new requirements.

 

8. Worries About Forbearance are Overblown.

Since last spring, a question that I have fielded probably more than any other, has revolved around the topic of forbearance.

The GSE’s have extended the forbearance program to the end of March so some of the pressure has been removed, but there are a lot of people who fear that – when forbearance expires – we will see a veritable tsunami of foreclosed homes come online and this massive increase in supply will lead to all homes seeing values drop.

Well, it won’t happen, and here’s why.

First off, the number of homes in forbearance is already down by 43% from its May peak. Even though it is true that the pace of the drop in the number of homes in the program has slowed, the trend is still headed in the right direction.

Yes, there are still 2.7 million homes in the program, but I believe that, as owners start to get back to work again, many will be able to either refinance their loans or work with their lenders to extend the term of their mortgages in order to make up missed payments and most will not end up in foreclosure.

I would also add many owners in the program – if they just can’t get back on track – will sell in order to keep the equity that they have built over the last few years and, in most areas, there will be enough buyer demand and they will be able to get out from under forbearance by selling and paying off the mortgage and missed payments that way.

Of course, we will see foreclosures rise this year, but I just don’t see the majority of owners in forbearance be forced into foreclosure and that will limit the downside risk to the housing market.

That said, I am a little more worried by condominium owners who are in forbearance as the supply of these homes is already on the rise and this is causing prices to soften relative to single-family homes.

This is not a phenomenon spread broadly across the country, but many markets are seeing condo price growth slow and some – here I am looking specifically at Queens in New York, Suffolk County in Boston, and in San Francisco County – are seeing real price declines and I do expect to see a greater share of condos end up in foreclosure, but a far smaller share of single-family housing will suffer the same fate.

And I must add that not all market areas are created equal. Today, total delinquency rates are very high in states like Mississippi, Louisiana, New York & Oklahoma, but here in the western US they are significantly lower.

Interestingly, when I looked at Windermere’s footprint, I am delighted to report that the States with the lowest rate of non-performing mortgage include Idaho, here in Washington State, Colorado, Oregon, and Montana.

So forecast number 8 – I do not anticipate a wave of foreclosures following the end of forbearance, and that the foreclosures that do occur will have a limited impact on the broader ownership housing market.

 

9. Mortgage Rates Will Rise – But Don’t Worry

Rates for 30-year conforming mortgages have broken below all-time lows 16 times since the pandemic started. Really remarkable with the average 30-year rate at the time of recording this video standing at 2.65% and rates down by over a full percentage point over the past year and that, naturally, has allowed prices to continue rising at above-average rates, but going forward I just don’t see them dropping much more, and I believe that we have, at least for now, reached a floor when it comes to rates.

Without getting too academic, the reason I say this is that mortgage rates track the interest rate on 10-year treasuries – or at least they should – but that relationship broke back in February – because of the pandemic. However, treasury yields have started to rise again, and that relationship is now back in line which tells me that rates are unlikely to drop much further – all things being equal.

Prediction number 9 – mortgage rates are unlikely to drop much more, but don’t anticipate them rising too much with this year averaging around 3.1%. Still very competitive.

 

10. US Home Sales Will Rise Significantly, but Price Growth Will Moderate

Finally, I just have to talk about home sales and prices even if I did cover this in my last forecast. Given all the factors I have already talked already, we will see more demand from buyers this year, and I also expect to see listings actually increase as people look to relocate, and this will lead sales in 2021 to rise to a level we haven’t seen since 2006!

And big players in the housing market as far as buyers are concerned will be renters turning into home buyers and I would add that we could see first-time buyers make up an even bigger share of the market if the Biden Administrations goal to introduce a new first-time buyer tax credit gets enacted – but that is certainly not a given.

Overall, existing home sales will rise by 7.7% in 2021 to around 6.2 million units.

As for prices, well I see them increasing again this year but, as I just mentioned, mortgage rates will start to move modestly higher and this will be a bit of a headwind to price growth, and affordability constraints will also start to slow appreciation in expensive housing markets. This year I am looking for average prices to rise by a relatively modest 4.1%.

My final forecast – home sales will rise significantly this year, but price growth will moderate.

 

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Q4 2020 Southern California Real Estate Market Update

The following analysis of the Southern California real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere agent.

 

REGIONAL ECONOMIC OVERVIEW

Last summer’s recovery in the regional employment market that followed losses due to COVID-19 has tapered off because of the rapid increase in new infections. Although the region has recovered 1.25 million of the jobs that were lost, total employment is still down 763,000 jobs from the peak last February. With the slowdown in job growth and additional job losses in November, the current unemployment rate is 8.8%. For perspective, this is down from 12.3% at the end of the third quarter, but still significantly higher than the 4% rate last February.

The latest data available (for November) showed the lowest unemployment rates were in Orange County (6.4%) and San Diego County (6.6%). The highest rate was, unsurprisingly, in Los Angeles County, where it was 10.6%. I suggested in the third quarter Gardner Report that the pace of job growth was going to slow, and that proved accurate. Though I expect to see jobs return this year, most of the improvement will occur in the second half of the year when, hopefully, a vaccine is freely available.

SOUTHERN CALIFORNIA HOME SALES

❱ Regardless of the slow economic recovery, the housing market continues to perform well, with 50,114 homes selling in the final quarter of 2020. This is an increase of 21.9% year-over-year.

❱ Pending home sales (an indicator of future closings) were 21.3% lower than in the third quarter, but I attribute this to seasonality and inventory constraints.

❱ Fourth quarter sales rose significantly in all counties relative to a year ago, with very impressive gains in Orange and Riverside counties. That said, all markets saw the number of home sales increase by double digits.

❱ There was an average of only 19,203 homes for sale in the final quarter of the year. This is 35% lower than a year ago and 17.3% lower than in the third quarter of the year.

SOUTHERN CALIFORNIA HOME PRICES

❱ Year-over-year, the average home price in the region was $831,880. This was 13.4% higher than a year ago and 2.4% higher than in the third quarter of 2020.

❱ Mortgage rates have remained at historic lows, which has allowed prices to rise at well-above-average rates. Given that home prices have been rising at a far faster pace than incomes, affordability concerns continue to grow.

❱ The region saw double-digit price growth across all counties contained in this report, with further significant increases in the relatively affordable Riverside County.

❱ Mortgage rates appear to have reached a floor and are unlikely to drop much further. Given that I do not expect to see significant income growth this year, it is likely that the pace of home-price appreciation will start to slow.

DAYS ON MARKET

❱ In the final quarter of the year, the average time it took to sell a home in the region was 27 days, which is 19 fewer days than a year ago, and 6 fewer than in the third quarter of 2020.

❱ All markets contained in this report saw the time it took to sell a home drop compared to the fourth quarter of 2019.

❱ Homes in San Diego County continue to sell at a faster rate than other markets in the region. In the fourth quarter, it took an average of only 19 days to sell a home there. This is 12 fewer days than it took a year ago.

❱ The decline in market time is due to limited inventory levels and significant demand.

CONCLUSIONS

This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.

Home sales and prices are significantly higher, and demand for housing is very much in place. Naturally, this favors home sellers who are still in control of the market. I do expect to see some improvement in listing activity this year, which, in concert with modestly rising interest rates, will likely start to take some of the steam out of the market. However, any moderation in the market has yet to appear.

Even given the possible headwinds mentioned above, I am moving the needle a little more in favor of sellers as solid demand is still in place.

 

ABOUT MATTHEW GARDNER

As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.

In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.


Windermere Living Magazine - Winter 2020

Windermere Living Winter Edition Now Available!

The latest issue of Windermere Living is now available. Check out your featured listings and cozy culinary creations, tips for a museum inspired gallery wall, how to shop for your home virtually, and more!