Predictions for the 2020 Real Estate Market in Southern California
This year every industry has been impacted by the 2020 Covid Pandemic. Experts anticipate that global economies will continue to shrink for the latter half of 2020. However, in some areas, the Real Estate Market is booming – notably rural areas and beach cities. Especially in Southern California. It’s a good time to take stock of what we can expect as 2020 finishes out its fourth quarter and understand how our real estate market has been impacted along the Laguna Coast.
Forbes consulted with entrepreneurs from the Forbes Real Estate Council, asking their opinions on the current state of the market. This is what they expect to see as this turbulent year comes to a close. Below are timely excerpts from the folks at Forbes on the top issues that impact the Real Estate Market. Here are their predictions for the 2020 Real Estate Market, with our focus on how we are impacted in Southern California.
Demand For Housing Will Remain Robust
Expect demand for housing to remain robust as millennials and baby boomers power through to keep the economy moving. Many homeowners will fall behind on their mortgages, creating distressed property sales. As developers assemble and develop new homes, old architecture and decaying mechanical systems in 1960s, 70s and 80s homes will be replaced by a new home revolution. – Gary Lanham, Gary Lanham Group
Refinance Demand Will Continue
We’ll likely see the flood of new refinance demand continue while ongoing Covid-19 fears will force mortgage originators to shift most of their process to being fully digital. This means that getting and closing on a mortgage will finally start to become more of an instant experience for consumers, mirroring other industries like groceries, prepared meals, transportation, and even medical care. – Max Simkoff, States Title
Substantial Increase In Foreclosures
There will be a substantial increase in foreclosures, short sales, and bank-owned properties. This will happen toward the end of the year and the beginning of next year as banks start foreclosing on delinquent mortgages. – Lex Levinrad, The Distressed Real Estate Institute
Remote Work Will Affect Home-Buying Decisions
The ability to work remotely will weigh heavily in home-buying decisions over the next six months. Remote work expands a lot of buyers’ geographic options and influences the features buyers are looking for. Unsurprisingly, home offices are becoming more important, but our research shows that people are also looking for a quiet location, an updated kitchen, a large backyard and an open floor plan. – David Doctorow, Move, Inc.
Mass Adoption Of Tech To Limit Human Interaction
Covid-19 is speeding up the mass adoption of technology in order to limit human interaction. We’ll see the real estate space increasingly implement tools like keyless entry systems, voice-activated appliances, etc. to minimize anything face-to-face or anything that requires physical touch. This also includes using automated messaging solutions to send emails noting amenities in-property, check-in instructions, and more. – Vered Schwarz, Guesty
Virtual Tours With Human Guidance
Virtual tours are here to stay. Although there’s clearly a shift in consumer behavior toward a more digital homebuying experience, the human element remains a critical piece. The vast majority of buyers, especially those in higher price ranges, want to see a home in person—with the guidance of a skilled agent—before they put in an offer. – Adam Contos, RE/MAX Holdings, Inc.
Capital Reallocation Between Real Estate Classes
We expect capital reallocation between real estate classes and a surge of capital deployment for multifamily and industrial assets. These classes have shown their resilience and weathered the storm of Covid-19 well, and should attract capital previously designated for retail and office. Couple this with the low-interest-rate environment and we’ll see a wave of deal activity the second half of this year. – Carlos Vaz, CONTI Organization
Class B Multifamily Properties Will Remain Solid
Class B multifamily properties will remain solid with stable cap rates as occupancy and around 95% of rent collections nationwide remained high during Covid-19. Class C properties and workforce housing naturally have more exposure to Covid-19 implications as many tenants work in the service industry. Hence, I expect Class C prices to slightly drop, especially those with delinquency issues. – Ellie Perlman, Blue Lake Capital LLC
More Opportunity To Acquire At A Discount
The end of 2020 will likely see certain sellers willing to accept a lower price for their assets. While some owners will hold on and weather the storm, others will no longer want nor have the flexibility to wait and will decide to liquidate their holdings. This means investors on the buy-side will have an opportunity to acquire assets at a discount from their current price. – Todd Sulzinger, Blue Elm Investments
Commercial Real Estate May See A Slowdown
While residential sales remain strong in many markets, mainly due to the still-pent-up demand for inventory, commercial real estate may see a slowdown. With more and more companies allowing or even insisting employees work remotely, a rise in commercial vacancy rates is a distinct possibility. – David Bolinger, The McDevitt Agency
Growing Interest In Suburban Or Rural Living
Right now, homeowners are adapting to a new lifestyle and realizing what doesn’t work in their current home. The global shift toward remote work—and lack of commute—may cause homebuyers to reconsider suburban and even rural living. They’ll also desire more square footage and outdoor space, which is more readily available and affordable in suburban and rural areas. – Jennifer Anderson, Anderson Coastal Group
More Interest In Properties With Fitness Amenities
With people spending most of their time at home, the value of on-site dining, fitness, and leisure options in multifamily properties has never been greater. As leases expire during the second half of the year and renters seek new apartments in which to live, work and stay entertained, people will be drawn to properties with amenities and easy access to outdoor activities like parks and beaches. – Salvador Garcia, MAS Development Group
The Pandemic and Low-Interest Rates have fueled the 2020 Real Estate Market
The biggest impact on the Southern California Real Estate Market has been the noteworthy exodus from high-density areas like New York, San Francisco, and Los Angeles to rural and coastal areas. With more professionals working remotely, many homebuyers and renters are looking at the advantages of living in smaller communities along the beach. With wide-open areas that offer an active lifestyle – after months of being cooped up during this year of quarantines – families are looking to beach towns that feel safer and more secluded like those along the Laguna Coast.
The pandemic and low mortgage rates have, consequently, fueled a buying spree that has led to a very competitive market in Southern California for home shoppers. Despite dismal predictions for the 2020 Real Estate Market earlier in the year, competition is up 25% from the beginning of 2020. With active listings continuing to decline significantly in every region of the state, Southern California real estate inventory has dropped 39 percent year over year.
Further, the California Association of Realtors (CAR) said the California housing market continued to improve as home sales prices climbed to their highest levels in more than a decade. Existing single-family homes sales were up 14.6 percent in August of 2020 over August 2019. Home prices are also up 14.5 percent over August of 2019.
Mortgages are still at all-time lows, with the 30 year fixed at 2.88% and 15 year fixed at 2.36% in October 2020, this should further fuel the Coastal real estate market. The white-hot summer activity, due to pent-up demand, should continue into fall and winter months, resulting in a banner year for Coastal Real Estate despite the economic turmoil earlier in 2020.
Ultimately predictions for the 2020 Real Estate Market began with much trepidation, but along Southern California’s Laguna Coast, Real Estate appears to be the industry that will pull the economy back from the brink. If you are interested in taking a look at properties in and around Laguna Beach or surrounding coastal communities, reach out to us at www.LagunaCoastRealEstate.com or call Cynthia Ayers at #949-494-0490. We look forward to helping find your dream home or investment property along South Orange county’s sunny shores!