- Southern California’s real estate market continues to race ahead of last year’s performance in terms of both unit sales and prices. Building on the June’s momentum, sales of single-family homes increased by 26% and apartments by 30% on a month-to-month basis. Overall, this brings the total sales of single-family homes and apartments to 6% and 7% higher than last year, respectively.
- As pent-up demand during the early Covid period is released into the market, active inventories of both single-family homes and apartments are falling well-below last year’s level. With the exception of San Bernardino County, properties are remaining in the market much shorter on average, particularly for Los Angeles where the median days-on-market is only two weeks.
- Home prices continue to climb up after hitting a record-high in June with double digit increase since 2019 occuring in Riverside (10%), San Bernardino (12%), and San Diego (11%) counties. Apartment prices also increased by a whopping average of 17% in Riverside and 22% in San Bernardino since last year.
- Market activity remained strongest in the luxury market, which was less severely impacted by Covid. However, the non-luxury segment of the market also showed a robust recovery in the past month.
California may be one of a handful of states struggling to contain the number of confirmed coronavirus infections, but its real estate market doesn’t appear to be suffering from the effects. After beating the odds and posting record-high growth in June, realtors and home sellers can breathe another sigh of relief as the market continues to surge. A recent monthly report from the California Association of Realtors (C.A.R) shows that, like June, July represented a month of significant growth and recovery for the real estate market across California.
Throughout July, the economic ill-effects resulting from Covid seemed to have mostly dissipated as far as real estate is concerned. The market, according to the C.A.R report, appears well on its way to catching-up to pre-Covid levels of performance — perhaps heating up yet further. Several agents reported receiving multiple offers for their property listings, which, in some cases, led to a bidding war. This kind of competition between buyers can be reasonably seen as a sign that buyers are growing increasingly confident in the overall market.
The report points to several factors explaining this bulge in homes sales. For one, Jeanne Radsick, President of C.A.R. attributes the solid growth in July to a combination of “strong pent-up demand, record-low interest rates and a renewed interest in the value of homeownership.” Industry experts support Ms. Radsick’s reasoning, with president and CEO of Miller Samuel Inc Jonathan Miller stating, “There was a release of pent-up demand, and with surprising strength.” He went on to say a large part of the recovery has been driven by the luxury segment, which has been resilient in the face of Covid’s economic impacts.
But a more profound dive into the data is what’s needed to better understand Southern California real estate’s recovery trend. The data science team at Roomvu — a real estate marketing and analytics firm — created a detailed breakdown of market activity in July to assess market performance by county.
In the single-family home segment of the market, it’s in Orange County where the most significant growth occurred in July on a month-to-month basis — compared to June, there was a 40% increase in unit sales. Even the slowest-growing county in terms of single-family home sales posted healthy growth; sales in Los Angeles County grew by 16% in July. Sales of apartments and townhomes also grew significantly from June to July, with the highest growth occurring in Ventura County (45%) and the lowest in Los Angeles County (25%).
The good news doesn’t end with month-to-month growth numbers however — all Southern California counties with the exception of Los Angeles grew year-over-year. Most notably, Riverside, San Bernardino and San Diego counties posted double-digit increases compared to July 2019. These healthy performances across the board narrowed the gap in year-to-date sales to roughly 10% below last year’s numbers, compared to 15-20% in June.
Perhaps the clearest sign of a market recovery can be seen in the level of active inventory, which dropped across all counties as demand for properties continues to outpace new listings in the market. This was most noticeable in the detached home segment, where active inventories fell by roughly 33% since last year, and where most counties except for Ventura experienced a reduction in available inventory from three-month’s worth to two. Similarly, the market for apartment and townhomes also went through a reduction — albeit at a smaller one (15%) — translating into a half-month reduction in inventories from 3.25 to 2.75 months. The C.A.R report noted that this is the biggest drop in active listings since January 2013.
This market development should come as no surprise given the result of the recent poll by C.A.R to gauge buyer-and-seller enthusiasm. The July poll shows only a modest increase in sellers’ confidence to 54% from 52% reported last year, while buyers’ confidence surged from 23 to 33% year-over-year. (Confidence levels are measured by asking the respondent whether they think that now is a good time to buy or sell homes.)
Reflecting strong market demand, prices across Southern California continue to rise above the record-high set last month. For single-family homes, the increases are quite significant in the range of 5% to 12%, with Riverside, San Bernardino, and San Diego counties experiencing double-digit increases in prices compared to last year (Figure 6). For apartments, the increases are even more startling — ranging from 6% to 22%. Riverside and San Bernardino counties experienced 17% and 22% increases in average prices of apartments, respectively (Figure 7).
While surging demands and bidding wars are most responsible for the price increases, another factor at play may be buyers’ proclivity towards luxury properties. C.A.R reported that in July lower shares of home sales were generated from properties costing $500,000 or less. On average, these more affordable properties contributed to 44% of total sales in the market — in July, they only contributed to 40%.
These changes are consistent with a thought put-forth by Leslie Appleton-Young, Chief Economist of the C.A.R, that home buyers in the luxury segment are more resilient to the economic impacts of the pandemic. Consequently, these luxury buyers form the bulk of those still operating in the market. Appleton-Young commented that “stronger sales of higher-priced properties continue to propel the statewide median home price, as those who tend to purchase more expensive homes are less impacted by the economic recession.”