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Are you thinking about buying a home in California in 2021? Wondering what kind of real estate and mortgage trends you might encounter next year? You’ve come to the right place. Below, we have rounded up three of the most important trends home buyers should know about next year.
Buying a Home in California: What to Expect in 2021
What can you expect when buying a house in California in 2021?
You’ll probably be able to get a really low mortgage rate, for one thing. But you might have to broaden your housing search due to tight supply conditions. And you might end up paying more for a home the longer you wait, due to rising prices. So time is of the essence.
Anyone planning to buy a home in California in 2021 needs to understand these three important trends. So let’s take a closer look at each one — starting with the good news.
1. You’ll probably be able to get a really low mortgage rate.
During the week this article was published (ending October 16), the average rate for a 30-year fixed mortgage loan dropped to 2.81%. That was the lowest average in 50 years, to date, a noteworthy development to say the least!
It bears repeating: Home buyers in California can currently take advantage of the lowest rates we’ve ever seen. And while mortgage rates could inch upward over the coming months, they are expected to remain low by historical standards.
Anyone buying a home in California in 2021 should be able to take advantage of low interest rates. According to a recent forecast from the economic and housing research team at Freddie Mac, 30-year mortgage rates are expected to hover within the 3% range for most of next year.
On October 14, 2020, Freddie Mac’s researchers wrote:
We forecast mortgage rates to remain flat over the next year. From the third quarter of 2020 through the end of 2021, we forecast mortgage rates remain unchanged at 3%.
Granted, they are talking about quarterly averages here. Home loan rates will continue to fluctuate from week to week, as they always do. But on average, their economists expect rates to hover around 3% during 2021. That would be good news for home buyers and refinancing homeowners, if it plays out that way.
Borrowers should also know that the popular 30-year fixed-rate mortgage is even more appealing these days, due to a trend that began earlier this year. Here’s more on those noteworthy trends.
2. You might have to broaden your housing search and compromise.
More than anything else, tight inventory conditions will be the driving factor for the California real estate market in 2021. This is another important trend buyers should know about.
If you are planning to buy a home in California in 2021, you will likely encounter tight supply conditions that could affect your house-hunting process in several ways.
In a mid-October housing market update and forecast, the California Association of Realtors stated the following:
While the economy is expected to improve and interest rates will stay near historical lows, housing supply constraints will continue to be an issue next year and may put a cap on sales growth in 2021.
This was one of the big real estate stories in 2020, and it will likely have a major influence next year as well. What does this mean for those who are planning to buy a home in California in 2021? For one thing, buyers should give themselves plenty of time to conduct a housing search.
Tight supply conditions, along with stiff competition from other buyers, could make it harder to find the right home at the right price. So give yourself plenty of time. The sooner you start researching your local real estate market, the better.
You might also have to revise your “wish list” to reflect the realities of the housing scene. In a constrained housing market with limited supply, it can be hard to get everything you want in a property. You might find that you have to compromise on the features, location, or other aspects of the home.
3. You might end up paying more, the longer you wait.
One of the major differences between buying a home in California this year versus 2021 is pricing. Home prices in most cities across the state have risen steadily since the beginning of 2020, despite the COVID-19 health crisis. In fact, we have seen double-digit annual gains in some parts of the state.
According to a September 2020 report from the California Association of Realtors, house values were climbing steadily in most regions.
To quote that report:
At the regional level, almost all major regions posted double-digit price increases from last year. San Francisco Bay Area had the highest median price increase, rising 18.7 percent from last year, followed by the Central Coast (16.4%), Southern California (12.9%), and Central Valley (12.2%).
Here’s the takeaway for anyone planning on buying a home in California in 2021. If you postpone your purchase until later in the year, you could end up paying more for a house. Home-price growth might slow down a bit next year, due to a number of factors. But the current outlook calls for rising values in most parts of the state.
Granted, the home-buying process is not something you want to rush into. It’s important to take time researching the market, establishing a budget, and other preliminary steps.
With that being said, there’s a strong case to be made for buying a home in California sooner rather than later. If prices continue to rise as they are predicted to do, buyers will have less purchasing power the longer they wait.