Home prices jumped in Los Angeles, San Diego and San Francisco during August 2020. The largest jump occurred in the low tier, which has also experienced the largest gap between inventory and homebuyer demand. The statewide average for low-tier prices was 8% higher than a year earlier. Mid-tier prices were up 7% from a year earlier and high-tier prices were 6% higher than a year earlier.
Accurate home price reports run two months behind current events. Even when caught up, “sticky prices” tend to persist several months beyond the moment when home sales volume begins to slow. Starting in Q1 2020, economic volatility and shelter-in-place orders caused home sales volume to decline significantly. However, historically low interest rates have provided a boost for buyer purchasing power, which, along with competition for a dwindling inventory of homes for sale, have inflated home prices in 2020.
However, the overall trend for home prices in the next couple of years will be down, the result of historic job losses, plummeting sales volume and rising 90+ day mortgage delinquencies. Home prices are expected to bottom in 2022, to rise with the next jobs recovery. In the meantime, watch for interference from real estate speculators, which tend to distort home prices with momentum purchasing.
