SAN DIEGO (KGTV) — If you're looking to buy your California dream home, get ready for bidding wars and high prices.
California home prices continue to hit record highs.
According to the California Association of Realtors, December's statewide median home price was $717,930, up 2.7% from November and up 16.8% from December 2019.
"It's so competitive you can't think about it," said San Diego resident Jared Moore. "You just have to pull the trigger and be ready to go."
At the start of the pandemic, Moore and his family weren't looking to move. However, after working from home with two boys and most recreational activities closed, they felt trapped.
"We really wanted to just make sure our kids had a place for a backyard and play," Moore said.
As home prices shot up, their townhouse's value increased, and they bought a house in December.
"When I first looked at the home, I don't even know if I saw the upstairs of the house before I looked at Heather and said, hey, we just have to make an offer," Moore said.
According to the California Association of Realtors, "The surge in the coronavirus cases continues to play a role in the decrease in active listings as homeowners remain concerned about the worsening coronavirus pandemic situation. As a result, C.A.R.'s Unsold Inventory Index (UII) dropped to 1.3 months in December, matching the record-low set in spring 2004. The index indicates the number of months it would take to sell the supply of homes on the market at the current rate of sales."
"Currently, we're in the Wild West of real estate,” said Michelle Kolker with the Kolker Real Estate Group.
She pointed to the imbalance of supply and demand driving the prices. Add to that record-low interest rates and people's desire for space.
"People spent a lot of time at home, so what we're seeing in San Diego is a huge influx into suburbia or within suburbia to just having more space," Kolker said.
While home prices might look different across the state, for the most part the story and driving factors are the same.
In Bakersfield, there were only 385 homes for sale in January – about half of what it was a year ago.
"There's less than a month of inventory, and the median price home is at $303,000, which is higher than we've seen since the bubble in 2006," said Ronda Newport, a realtor at Watson Realty in Bakersfield. "So we've exceeded that as our highest price home."
Unemployment and Record Housing
Here's the thing, California's Employment Development Department (EDD) reported the unemployment rate increased from 8.1% in November to 9% in December.
At that time, the EDD said the number of unemployed Californians was 1,700,400 in December, an increase of 163,700 over the month and up by 945,700 compared to December of last year.
In 2020, the state saw record unemployment. At one point, it was 16.4 percent.
While unemployment rates reached a record high, we also saw housing prices across the state top record highs.
"This is not just happening with the housing market," said Anurag Mehrotra, an assistant professor within the Fowler College of Business at San Diego State University. "It's happening with equities, it's happening with bitcoins, it's happening with oil, it's happening across all commodities.”
Mehrotra said along with all the housing factors, there's a group of people with well-paying jobs who are not in jeopardy of being unemployed.
If you add to that stimulus funds and fewer ways for people to spend money, in some cases, there's a surplus.
Mehrotra explained there's a K-shape recovery going on.
"One leg of the K is upward, and the other is downward facing," Mehrotra said. "There's a group of people who are very badly hurt by this pandemic, and there's an equally large group that has actually benefited from this pandemic."
What Comes Next
Wouldn't it be great if there was a crystal ball and we could predict where housing prices will head?
Unfortunately that doesn't exist, so those in the real estate industry are using the available tools to get a read on the outlook.
"The facts are that rates are very low. They are projected to stay low but go up. As they go up, affordability will go down," Kolker said. "We should see more houses come on the market in what is typically the spring and summer selling season, and we just have a huge supply-and-demand issue."
In a January press release, the president of the California Association of Realtors said that despite a shutdown in the spring buying season, the market still was able to recover the substantial sales lost in the first half of the year and even top 2019 levels.
"With mortgage rates expected to stay near the lowest in history, demand for homeownership will continue to be strong, so home sales should remain elevated into the first half of 2021, as motivated buyers take advantage of the increased purchasing power," said C.A.R. President Dave Walsh, vice president and manager of the Compass San Jose office.