Meanwhile, interest rates for 30-year fixed-rate mortgages dropped to a record low 2.6 percent from as high as 6.5 percent in 2006 and 2007, Wei said.
“We have never seen that before,” Wei said. “So that’s why people were rushing into the market.”
Low interest rates often drive housing market shifts, according to Investopedia.
The real estate group published a report Monday finding that home sales soared as expected in March and April compared to last year, when the pandemic shutdown in the spring triggered a drop in housing sales, according to the association. So far this year, monthly home sales increased for three consecutive months.
Prices increased all over California.
- The median price of an existing single-family detached home in the Los Angeles area rose to $725,000 in April, an increase of $45,000 from a month earlier. The L.A. area’s median home price was $550,000 just a year ago.
- The San Francisco Bay Area saw its median home price jump to a staggering $1.328 million in April from $1.225 million in March.
- Orange County saw its median home price increase to $1.1 million in April from $1.025 million in March. It was $861,000 in April 2020.
San Bernardino County bucked the trend by showing a decrease in median home price to $405,000 in April from $412,000 in March.
Statewide, April home sales increased 2.6 percent in April to 458,170 from 446,410 in March, the association said. That was a 65.1 percent increase over the 277,440 homes sold a year earlier on an annualized basis.
The metrics are bad news for low-income Californians and even for middle-class residents who are looking to buy a home.
“Not only do skyrocketing home prices threaten already-low homeownership levels and make it harder for those who don’t already have a home to purchase one, it also brings to question the sustainability of this market cycle,” said Jordan Levine, the association’s vice president and chief economist.
Statewide housing affordability reached its lowest level since mid-2018, the association reported last week. The percentage of home buyers who can afford to purchase a median-priced existing single-family home in California in the first quarter of 2021 dropped to 27 percent from 35 percent in the first quarter of 2020, the association said.
Wei predicted that home pricing could remain high for the rest of 2021 because of a shortage of housing. And the state likely won’t see a big enough jump in housing development to fill the gap, Wei said.
As the economy reopens, lower-priced housing may start to come back onto the housing market, Wei said. But interest rates may also go up.
“At some point, interest rates are going to start rising, especially since the economy is going to start picking up,” he said. “The pace of growth is going to probably be a little slower in May or Juen.”
The California Association of Realtors has more than 200,000 members and is headquartered in Los Angeles. Read its full report here.
City News Service contributed to this report.