Buying a home in California amid the pandemic has been transformed.

Apparently, a renewed interest in homeownership during COVID-19 has changed homebuyers’ housing choices, widened the imbalance between housing supply and demand in California, and created a more competitive housing market than ever before, according to the California Asociation of Realtors (C.A.R.) 2020 Annual Housing Market Survey.

Homebuying Behavior

A C.A.R. news release reports the pandemic has certainly changed consumers’ housing preferences and with remote working becoming the norm, buyers’ housing demand is slowly evolving.

Since the coronavirus outbreak, more than two of five Realtors (43.6 percent) saw a change in buyers’ preferences in the property type they want to purchase. Of those changes, 39 percent of Realtors who responded said their buyers are opting for a bigger home; 35 percent said buyers are opting for a property with more rooms; 37 percent said buyers are less concerned about the commute time to work; 37 percent said buyers are opting to live in a suburb rather than a city; 26 percent said buyers are opting to live in rural areas rather than cities or suburbs.

More people are buying a vacation or second homes this year as its share of total sales rose to the highest level in four years. The flexibility to work from home and the desire to move from metropolitan areas motivated homebuyers to relocate to resort communities in search of more space and a healthier lifestyle, the C.A.R. news release said.

Reasons for Buying

The top three reasons home buyers purchased a home remains the same as last year. A quarter (25 percent) of buyers bought because they were tired of renting, and one in five (20 percent) bought because they desired a larger home. Another one-fifth (19 percent) bought because they desired a better location, the news release added.

With the cost of borrowing at historic lows, buying a home makes more sense than renting for many first-time buyers. As such, more than half (54 percent) of all first-time buyers purchased a home because they were tired of renting. For repeat buyers, 25 percent said their primary reason for buying was a desire for a larger home, an increase from 21 percent last year.

Market Competition

Homes for sale received more multiple offers, and the average number of offers reached their highest levels since 2013. Nearly two-thirds (59.2 percent) of homes sold in 2020 received multiple offers at an average of 4.8 offers per home. In 2019, less than half (47.7 percent) of homes sold received multiple offers with an average of 3.9 offers on each home, the C.A.R. news release said.

Further illustrating the high level of competitiveness this year, a bigger share of properties was sold above their asking price in 2020. Over a third (35.5 percent) of homebuyers paid more than what home sellers asked for this year, compared to a quarter (26.7 percent) in 2019. In fact, this year’s level is the highest in seven years and is 16 percent higher than the long-run average.

While all price segments were more competitive than the prior year, market competition varied between price segments. Mid-priced range homes ($500,000 to $1 million) were the most sought after with 67.3 percent receiving multiple offers. They also received the most multiple offers (6 offers), were the most likely (37.3 percent) to receive an offer at or above the asking price, and sold the fastest (10 days), the C.A.R. news release added.

Good Time to Sell

Home listings flew off the shelves at a record pace in 2020, and more homes sold above the asking price. Results from C.A.R.’s 2020 Annual Housing Market Survey suggest that home sellers typically pocketed a net gain of $210,000 from their home sale — a 63.8 percent increase from the purchase price. Not surprisingly, the gain was greater the longer they owned their home. Sellers who lived in their home for less than five years typically earned a 16.5 percent profit from their sale, while those who lived in their house five or more years typically earned a 100 percent profit, the C.A.R news release said.

C.A.R. has conducted its Annual Housing Market Survey since 1981. The survey was sent via email to a random sample of 60,124 Realtors throughout California, asking them to provide information about their most recent sales transaction that closed escrow between April 2020 and August 2020.

The survey instrument was a questionnaire with both multiple-choice and open-ended questions. There were 3,103 valid survey responses, equivalent to a response rate of 5.2 percent. The margin of error for this survey was +/- 1.8 percent at a 95 percent confidence level, the news release added.

Source: California Association of Realtors (C.A.R.)