Southern California Housing Forecasts for 2021: San Diego, Riverside, Los Angeles

Key highlights from this report:

  • The Southern California housing market is highly competitive.
  • Recent forecasts suggest that prices will rise steadily during 2021.
  • Most Southern California cities saw big home-price gains in 2020.
  • An ongoing shortage of supply is the #1 reason for these trends.

Los Angeles at night
Image: Los Angeles skyline at night (Pixabay)

What a year it has been for the Southern California real estate market. Strong demand and limited supply have led to above-average price growth over the past year or so. And we could see more of the same throughout 2021.

Recent forecasts for the Southern California real estate market in 2021 suggest that home prices will rise steadily in most cities across the region. This is true for Riverside, San Diego, Los Angeles and Orange County. Home buyers in these markets can expect stiff competition in 2021.

Home Prices Rising Steadily in Most SoCal Cities

On January 7, the research team at published a housing market report that showed which metro areas have had the biggest increase in median list prices.

Their report provided data for the 50 largest metropolitan areas in the U.S., across several metrics. We sorted their data to show the top seven real estate markets where listing prices rose the most, year over year. Two of Southern California’s metro areas made the cut.

(Note: The “median list price” column shows the midpoint or midrange for real estate listing prices. It’s not the same as the median sale price at which properties actually sell. But it’s still a good indicator of how the market is moving.)

Top seven markets for price growth, December 2019 to December 2020:

Metro AreaList Prices YoYMedian List Price
Austin-Round Rock, Texas20.00%$420,000 
Riverside-San Bernardino-Ontario, Calif.17.20%$475,050 
New Orleans-Metairie, La.16.80%$325,050 
Rochester, N.Y.16.30%$232,500 
Cincinnati, Ohio-Ky.-Ind.15.40%$299,950 
Los Angeles-Long Beach-Anaheim, Calif.13.90%$999,050 
New York-Newark-Jersey City, N.Y.-N.J.-Pa.13.60%$626,550 

As you can see, two of Southern California’s major metro areas appear within the top six for price growth. They are Riverside-San Bernardino-Ontario (a.k.a., Inland Empire) and Los Angeles-Long Beach-Anaheim.

If we extended this list for a few more rows, the San Diego-Carlsbad metro area would also make an appearance.

Bottom line: The Southern California real estate market has experienced significant home-price growth over the past year or so, despite the coronavirus pandemic and economic downturn. And the latest forecasts / predictions for the Southern California housing market in 2021 suggest that we’ll see more of the same over the coming months.

Forecasts for Southern California Housing Markets

The real estate data company Zillow recently offered some strong predictions for Southern California housing markets like San Diego, Los Angeles and Riverside.

Their research team expects home prices in these areas to rise by double digits over the next year. This 12-month forecast was issued in January, which means it extends through the end of 2021.

Here are Zillow’s forecasts for several major Southern California real estate markets, as of mid-January 2021:

Los Angeles: +10.5%

Tight supply and steady demand from home buyers have boosted home values across the Los Angeles metro area. Prices rose steadily over the past year or so, despite the economic slowdown brought on by the pandemic.

At the end of 2020, homes listed for sale in the L.A. metro area spent a median of just nine days on the market before going under contract. That figure was well below the national median for the same time, indicating a competitive and fast-moving real estate market.

In January, Zillow’s housing analysts stated that: “Los Angeles home values have gone up 9.6% over the past year and Zillow predicts they will rise 10.5% in the next year.”

As of January 2021, the median home price in the county was $700,973.

Orange County: +10.0%

Orange County, home to more than 1.3 million people, has also experienced a steady increase in house values over the past year. The median home price rose by around 7% during 2020, according to the latest data.

Zillow’s housing analysts forecast that the Orange County real estate market could experience even bigger gains in 2021. They recently predicted that home values within the county could climb by around 10% over the next 12 months.

The median price point was $793,652, when this article was published.

Riverside County: +10.5%

Riverside County is part of the so-called “Inland Empire,” a region of California that also includes San Bernardino County. This whole region has seen a major influx of home buyers over the past few years, largely from the more expensive coastal markets like San Diego.

This rise in housing demand comes at a time when supply levels remain low. You can see where this is going. There’s a lot of demand from buyers, but not enough inventory to meet it. And that’s pushing prices north.

Related: 10 tight markets where buyers could struggle

As you can see in the table above, the Riverside-San Bernardino metro area experienced the second-largest increase in real estate list prices (among the nation’s 50 largest metros). And 2021 could be another big year for this area.

In a recent forecast for the Riverside County real estate market, Zillow’s team predicted that home values “will rise 10.5% in the next year.”

The median price was around $432,570, as of early January 2021.

San Diego County: +11.4%

The San Diego housing market received the strongest forecast from the real estate research team at Zillow (among this group of counties). In January 2021, the company predicted that home values in San Diego County would climb by 11.4% over the next year.

From the weather to the beaches to world-class attractions, there’s a lot to like about San Diego. As a result, this is one of those real estate markets that will always have strong demand from buyers.

Supply levels, on the other hand, are still hovering near historic lows. According to a December 2020 article from The San Diego Tribune:

“San Diego’s inventory of homes continues to be low because of potential sellers waiting out the pandemic before listing. Looking back longer term, a history of slowed home construction has meant fewer new homes available for purchase.”

The median price point in San Diego was $670,649, as of January 2021.

Tight Inventory Conditions a Problem for Buyers

The Southern California housing markets listed above — and practically every other city and town in this region — all have something in common. Tight supply conditions. There just aren’t enough homes listed for sale to satisfy the demand from buyers.

As of December 2020, nearly all of the major cities in Southern California had less than a two-month supply of homes for sale. That’s well below what is considered to be a “balanced real estate market,” and it makes things more challenging for buyers.

From a supply-and-demand perspective, sellers currently hold the upper hand in these constrained housing markets. In 2021, home buyers will have to compete fiercely for limited inventory — as they did last year.

This is also what’s driving the positive forecasts for Southern California real estate markets like San Diego, Riverside and Los Angeles. With limited inventory, home buyers find themselves making bigger and bigger offers.

Disclaimer: This article includes housing-related predictions issued by third parties not associated with the publisher. The Home Buying Institute makes no claims regarding future home prices or economic conditions.