As Orange County closes on what by most indications was a banner year for luxury home sales, brokers are looking ahead to what’s to come in 2021.
There’s no sign of a slowdown, with strong market fundamentals, low inventory and a new focus on OC likely to prompt another few years of rising sales volume, they predict.
“2020 was a surprising year, and that momentum is likely to carry over into 2021,” said John Cain of Pacific Sotheby’s.
December Gains
In 2019, the luxe market was slower than many anticipated following several years of gains, due to a cautious attitude from buyers and a misconception among sellers regarding the value of their homes.
Sales volume took a hit as a result.
That was expected to carry over into 2020, but an active start to the year set a positive tone that carried throughout the year despite the lull in activity during the first few months of the pandemic.
2020 is expected to show sales volume gains over prior years, bolstered by a strong final month in December, notes Villa Real Estate’s Steve High.
“I think we will start off 2021 much the way we started this year, which was incredibly strong,” said High.
Priced Right
Though sellers have benefitted from economic trends and low inventory, brokers caution them to maintain fair pricing.
“If they are too ambitious on pricing, some of those higher-priced homes might sit on the market for too long,” Cain said.
This was echoed by Kathryn White of Compass, who noted that despite the high pricing seen this year, “buyers are still price sensitive.”
Foreign Market Watch
A pullback from the foreign buyer pool that started several years ago hasn’t appeared to have a significant impact on local sales volume, especially in 2020.
An influx of Chinese buyers in coastal OC markets such as Irvine and Newport Beach helped drive pricing increases and a frenzied pace of sales from 2011 to 2015 in particular, according to brokers.
That’s tapered off in recent years, in part due to the Chinese government’s tightening control on outside investment and a weakening yuan. It was exacerbated this year as the coronavirus pandemic halted international travel.
Signs of improvement in this market could come alongside vaccine developments, and a more open-minded governmental policy.
“I think we could see a whole new wave of overseas buyers returning to markets like Newport Beach and Irvine,” High said.
Local buyers have largely stepped up to fill this gap, with many of the top home sales in 2020 involving local buyers, or those who already own properties in the area.
“Having local buyers continue to show demand in Orange County is a far more powerful vote of confidence for the local economy,” High said.
2021 Forecast
With two of the highest-ever home sales occurring this year in Orange County, White suggests this may be evidence that the region’s reputation as an undervalued market may be true.
“Sales such as the $61 million deal for [Crystal Cove’s] 15 Del Mar suggests we may have been undervalued compared to other markets, and is suggestive of future high sales to come,” White said.
The ongoing lack of homes for sale will continue to drive strong local pricing, notes White.
“Prices start to level off or depreciate when there is more supply than demand but that’s not the case, and I don’t see that changing anytime soon,” White said.
Low inventory coupled with low interest rates and an increasing buyer pool driven by buyers migrating to less dense, safer resort areas, and 2020’s luxury market success may carry over for the next few years.
“2020 was a surprising banner year, and the forecast is that will continue to be the case for 2021 and possibly 2022,” White said.
