We're fast approaching the last month of 2020, and the Bay Area housing market has…
Highlights from this real estate report:
- A new study showed that some California home buyers are shying away from crowded cities.
- More and more buyers appear to be choosing quiet suburbs and rural areas.
- The COVID-19 pandemic and the rise of remote working are key factors.
Crowded cities. Crowded public transport. Crowded streets and shops and stores. For many California residents, that kind of lifestyle has lost some of its appeal.
The coronavirus (COVID-19) pandemic has a lot to do with this. A virus spreads more quickly in crowded areas, and more slowly in less-populated ones. We all know that.
Now, it seems that a lot of home buyers in California and nationwide are looking toward suburban and rural areas, where they have room to spread out and can more easily socially distance. Home prices tend to be lower in these low-density areas, as well.
The Rise of the Remote Worker
Twitter was one of several high-profile companies that have said they might allow employees to work from home remotely, even after the pandemic subsides.
Back in March, Twitter’s head of Human Resources, Jennifer Christie, told BuzzFeed News:
“People who were reticent to work remotely will find that they really thrive that way. Managers who didn’t think they could manage teams that were remote will have a different perspective. I do think we won’t go back [to a regular office culture].”
Of course, not all jobs have that kind of flexibility. Hands-on workers like those in manufacturing, food services and retail still have to commute in every day. But for a lot of tech, finance and other white-collar workers, working from home is a viable option.
And California has plenty of those workers. These “professional and business services,” as they are known, make up a huge chunk of the state’s total workforce. Those workers have greater flexibility, when it comes to working remotely.
Are California Home Buyers Shifting to Low-Density Areas?
It’s called “urban flight,” and it’s in the news a lot lately. The coronavirus (COVID-19) situation has lowered the appeal of city living and put a premium on suburban and rural life. And this will play a major role in California real estate market trends through 2020 and into 2021.
Lawrence Yun, chief economist for the National Association of Realtors, recently predicted that going forward “[p]eople will be much more cautious about living in high-density areas with so many people nearby.”
High-density means crowded, in economics lingo. Low-density, on the other hand, refers to outer suburban and rural areas with fewer residents per square mile. And that seems to be what a lot of California home buyers are looking for these days — a less crowded place to call home.
According to recent data published by Harris Poll, almost one-third of Americans are currently thinking of moving to less densely populated areas. The pandemic is the primary motivator for those folks. The increasing popularity of remote work makes it do-able.
How This Trend Could Affect House Values
If these current tends continue — and especially if they increase — we could see a shift in buyer demand and home prices alike.
If crowded, urban areas become less popular among home buyers, it could soften home prices in the surrounding housing markets. On the flip side, house values in the more suburban and rural areas of California could rise, in response to stronger demand.
It’s too early to make that kind of assessment. In fact, home prices in many of California’s housing markets are expected to level off in the coming months due to the economic downturn. But this could definitely be the start of a long-term trend that reshapes California’s local economies and housing markets.
We recently published a housing market forecast for Sacramento. In it, we talked about the steady and significant population growth in that area, and how it puts upward pressure on home prices. A lot of that population growth is the result of California home buyers leaving the pricier (and often more crowded) coastal markets for places like Sacramento.
Granted, Sacramento does have a “high-density” downtown area. But it also has plenty of outlying suburban and rural areas with a much lower population density. Plus, home prices are a lot cheaper in the Sacramento area, when compared to the Bay Area and SoCal. Home buyers appear to be weighing all of these factors.
Jordan Levine, an economist with the California Association of Realtors, recently told the Record Searchlight (a Redding, California newspaper) that a shift in home buyer demand could benefit some rural housing markets across the state.
“Having the option to not have a commute of an hour or two versus home ownership where homes are more affordable could well benefit rural areas,” Levine said.
Meanwhile, Mortgage Rates Remain Attractive
From a mortgage rate perspective, now is a great time to buy a home. Buyers relocating to suburban or rural areas of California can still benefit from near-record-low mortgage rates.
Earlier today, Freddie Mac reported that the average rate for a 30-year fixed mortgage loan held steady at 3.13% for the week of May 25. That’s based on their weekly, nationwide survey of the lending industry.
That’s an all-time record low, to date, going back 50 years or so. And California home buyers have taken notice. Purchase demand across the Golden State and nationwide has risen in recent weeks.
As Freddie Mac’s research team recently noted:
“The rebound in purchase demand partly reflects deferred sales as well as continued interest from prospective buyers looking to take advantage of the low mortgage rate environment.”
So whether you’re buying a home in an urban, suburban or rural area of California, you can benefit from today’s super-low interest rates.
Get a pre-approved: Do you need a mortgage loan to buy a home in California? We can help. Bridgepoint Funding serves the entire state and offers a range of mortgage products for all types of borrowers. Contact us today for a loan estimate or with any questions you have.