How to Thrive in California's 2021 Real Estate Market

2021 was off to quite the competitive start for the California housing market! For many buyers, the high competition made purchasing a home quite challenging. Competing with cash buyers and those who would waive most or even all contingencies, many first-time home buyers were struggling in the beginning of the 2021 housing market. 

But, don’t fall into despair, good news is here! The real estate market in California has shifted. Things have begun to slow down a bit in certain price points, and the market seems to be cooling off. Though the market continues to be a seller’s market with limited inventory, you’ll find homes that are shockingly…sitting. Sometimes homes are sitting long enough to welcome price reductions or allow buyers to keep their contingencies in place while also negotiating things like repairs and credits. This usually isn’t something out-of-the-norm, but given the current market, which shifted in 2020, the fact that buyers have room for negotiation is a reality we haven’t seen since 2019.

The Prices of Houses in California

Now before you start thinking that you’re going to get a deal on any home found on the market, only homes of certain price points are seeing a shift. For example, California’s North Bay Area homes that are priced in the $550,000 area or less, are still experiencing a great deal of competitive offers. With the average price of homes in our area being more like $550,000, this is a quite common and competitive price point.

For homes $550,000 and under, buyers will most likely be competing with multiple offers and with competitive terms. California homes that are over the $600,000 price mark seem to be a different story. Now, of course this is all dependent on the area, the upgrades, curb appeal, etc., but many homes of the higher price points might not be seeing as many offers as before.

Once upon a time, most homes had more than 10-20 (or more) offers! Certain homes were getting offers of $100,000 or more over the asking price. But now, homes in these higher price points might only have one to five offers on the table, making the market much less competitive. Sometimes these homes don’t even have offers for several weeks! Given that the market has changed within the last year or so, this is a welcome change for buyers.

So, what’s going on? What does this mean for sellers? Or for buyers? 

2021 Real Estate Advice for Sellers in California

Now more than ever it’s vital for sellers to price homes accordingly. Although the inventory remains lower compared to the years prior, sellers who price their homes more appropriate to what the market in their area is calling for are seeing a better chance to have multiple offers, with more competitive terms. Those sellers who might choose to test the waters and price their homes more aggressively, could find themselves sitting and ultimately coming down on the price.

However, this is still an excellent market for sellers. Things are just balancing out a bit more in certain price points. It’s important for sellers to have a realistic conversation with their listing agent on what is going on in their local market so they can make the best decision for how they price and prepare their home to be sold.

Advice for Buyers in California’s Real Estate Market

For buyers, this is a great time to be successful in the market! Buyers are a bit fatigued. Since 2020, the real estate market in California has been wild. Many buyers are just over the stress, disappointment, and consumption of time taken from their lives. On top of this, we’re still adjusting to pandemic-related change. Nationwide travel and exploration is increasing, kids are going back to school, and life is slowly opening back up. Things are finally feeling more normal than they have felt since 2019. Given this, the real estate market is experiencing a bit of a lull. 

Could this mean we passed the peak of 2021? Possibly so! Time will certainly tell if this lull is here to stay or not. My advice to buyers is to get out there and continue the search. For first-time buyers this could be the perfect window of opportunity to take advantage of. The interest rates are still historically low, and the inventory seems to be picking up a little bit. It’s still a great time to invest and purchase a home. You won’t have to compete with as many other offers; and, you may just get lucky and negotiate for bigger wins.

The 2020 and 2021 real estate market in California has certainly been a roller coaster ride. We started in uncertain waters and headed straight for chaos in certain areas of the market. One thing however is certain, life is returning to normal—or the new version of normal—and 2021 is proving to be a much brighter year.