Four consecutive months of statewide home-price records may be at an end as the California housing market shows signs of cooling.

But the median house price for 2021 still will be up nearly 21% and sales will show an 8% jump over 2020 levels, thanks to the white-hot home-buying frenzy during the six months just concluded, California Association of Realtors economists said Wednesday, July 28, during their first mid-year housing forecast.

By year’s end, the 2021 median price of an existing single-family home is forecast to be $795,600, up 20.7% from the 2020 median. That’s a gain of $136,000 from last year – and a gain of almost $300,000 over the past five years.

The median is the midpoint of all sales, with half the homes selling for more and half selling for less.

This year’s house sales are forecast to reach 444,500 transactions, up 7.9% to the highest tally in 12 years.

“So, despite the fact that we should have some softening or some weakening in sales in the second half (of the year), we’re still doing okay,” CAR Deputy Chief Economist Oscar Wei said.

“We may not set another new record high,” Wei said, but “statewide home prices will continue to stay pretty high.”

Underpinning the buying frenzy during the first half of 2021 were record-low mortgage rates and a drop in the number of homes on the market, CAR economists said.

For sale listings were down by at least 40% during the first five months of the year, CAR figures show. But they are projected to increase over the summer and fall, when home buying typically slows and housing inventory typically rises. That will translate into “more normal” price and sales growth going forward.

“We do see the market as normalizing,” CAR Chief Economist Jordan Levine said.

Nonetheless, listings still will be down about 5% from year-ago levels by December, CAR predicted.

Levine said the COVID-19 pandemic was a key driver of the past year’s housing boom, dividing the job market into two segments.

Workers in restaurants, retail, leisure and hospitality sectors saw jobs drop from 42-77% during the pandemic. On the other hand, those in the information, health care, manufacturing and professional and technical segments of the economy saw job gains in the 45-86% range. The logistics sector saw employment nearly triple, thanks to the expanded reliance on online shopping.

Hence demand for new homes grew sharply for people in higher-income jobs who could work from home.

Demand grew for bigger houses, with the average size of a home jumping from a pre-pandemic average of 1,755 square feet to 1,859 square feet during the summer of 2020.

“Those high-income earners and that excess need for housing … all mixed together to create this surge in buyer demand,” Levine said. “Folks who were in those low-wage categories, who really were grappling with housing costs, weren’t necessarily the prime targets for homeownership.”

At the same time, average rates for a 30-year fixed mortgage fell to an all-time low of 2.65% in January and averaged 2.9% this year so far, according to Freddie Mac. CAR predicted the average rate for 2021 as a whole will be 3%.

First-time buyers accounted for much of this year’s buying frenzy. CAR figures show 38.4% of home buyers in 2020 were renters, the most in a decade. Levine noted, however, first-time buyers tended to be more affluent long-time renters with “remotable” jobs.

For example, a third of buyers last year had enough cash to pay a 20% down payment, compared with a fourth paying 20% down during the housing boom of 2006, a survey of Realtors showed. And just a 10th of home buyers purchased a home with no down payment, vs. 40% in 2006.

Some changes caused by the pandemic are here to stay, Levine said. Remote work and online shopping will continue to be higher than before the pandemic. But following a year in which home-buying demand surged in resorts and outlying suburbs, demand again is returning to California’s urban core.

“When you kind of look at it from a more zoomed-out perspective, on a regional basis, the two areas that are growing fastest right now in terms of closed transactions are the San Francisco Bay area and Southern California,” Levine said.