Hilgard Housing Market Outlook: Summer 2020
Going into the COVID-19 Pandemic, housing costs in the State of California were already out of control. Between 2013 and 2018, rents and home prices increased by 24% and 59% respectively with household incomes only increasing by 16%. High housing costs are not a theoretical problem as they in 2018 alone, led to approximately 190,000 more people moving away than moving to California and have left more than 150,000 people sleeping on the streets every night. There was some hope that because of a fall in economic activity during the COVID induced recession, housing would become more affordable to low and middle-income Californians, similar to what happened during the Great Recession. That has largely not occurred though and the California State Legislature’s inaction during this past session on housing production will likely result in more displacement and homelessness in the months and years ahead.
Single-Family Housing Market
To date, the single-family housing market throughout most of California has not been negatively affected by the COVID-19 pandemic. If anything, the stay at home orders and the rise of remote work has made the demand for bigger owner-occupied housing greater. Statewide, the median sales price of a single-family home in California has gone up 15.9% during the sevenmonth period between January and July of this year to reach $666,320. This is significantly higher than the $588,070 median sales price statewide during the month of April, during the middle of shelter in place and before many jobs returned.
While statewide, the single-family housing market remained hot during the first 7 months of 2020, regionally and by county there were differences to be found. First, there were a few small rural counties that actually saw home prices decline including Glenn (-18.3%), Lassen (-14.2%), Madera (-6.3%), and Siskiyou (-0.8%) counties. Second, in terms of the three largest Metros of the state, the Bay Area (23.1%) saw the greatest increase during the first 7 months of the year as the median sales prices went up from $853,000 to $1.05 million. Trailing the Bay Area was the LA Metro (9.6%), and the Inland Empire (9.1%) as prices reached $590,000 and $420,000 respectively in July. Thirdly, it should not be surprising that most of the fastest growing counties in terms of price growth are in Northern California as Mariposa County gained a whopping 59.8% to reach $425,000 in July and they are followed by Del Norte (46.3%), Nevada (36.2%), Santa Barbara (33.3%), and Contra Costa (27.9%) counties.
Apartment Rental Market
Similar to the single-family housing market, with the exception of the Bay Area, apartment rents have not gone down like many had hoped as a result of the COVID-19 Pandemic through the first 7 months of 2020. Similar to patterns happening before the pandemic started, the fastest growing rents are being found in the cheapest rental markets in the Central Valley. Among the metro areas studied for this analysis, Fresno (2.6%) had the fastest growing rate of growth through the first seven months of this year to reach $1,480 and they were followed closely by Stockton (2.4%), Bakersfield (2.2%), the Inland Empire (2.0%), and Sacramento (1.7%) metros to round out the top five. In terms of the slowest rent growths by metro, the San Francisco-Oakland and San Jose metro areas experienced absolute declines at -0.2% to reach $3,149 and $3,071 respectively in July and they were followed by the LA (0.5%) and San Diego (0.9%) metros.
Future Outlook
While there are a number of factors that could affect the future of California’s housing market such as the results of the November election, including Proposition 21(repeal of the Costa Hawkins Rental Act), our ability as a state and nation to control the Coronavirus (which many people think will be determined by the November presidential election), what changes, if any, the California Legislature makes next session to make it easier to add homes to the apartment and single-family market, we at Hilgard Analytics believe that the trends so far in 2020 will continue. If anything, the pandemic has made the need for a stable home, for both rentals and owner-occupied units, only greater and absent a sudden surge of supply, the demand to live in California will continue to exceed the supply of available housing units making rents and home prices go higher. We look forward to reevaluating this assessment after the result of the November election is clear.
About the Author:
Joshua Baum is a trained urban planner and proud Double Bruin after receiving undergraduate and graduate degrees from UCLA in political science and urban and regional planning, respectively. He is the Founding Partner of Hilgard Analytics, a firm focused on data research and communication strategies to serve the needs of public, private, and non-profit sector organizations working to solve planning and policy issues.
