California’s housing market is in a state of flux, marked by significant changes and challenges. While known for its diverse real estate landscape, several metropolitan areas are currently navigating a transition from a strong seller’s market to a more neutral, balanced state.
Here’s where we’ll dive deeper:
- California housing market affordability and trends
- Housing supply level and market impact
- Remote workers shifting the real estate landscape
- Challenges for homebuyers
- Predictions and what’s next
California housing market affordability and trends
One of the most noticeable trends in the California housing market is the shift in median sales prices. According to data from the California Association of Realtors (CAR), median prices for existing single-family homes decreased across many regions of California from 2022 to 2023. This shift has posed affordability challenges for first-time homebuyers in the state.
For instance, CAR’s Housing Affordability Index for Q1 2023 was at 36 statewide, compared to a national index of 58. A lower index value indicates decreased housing affordability. Some of the least affordable regions in California were the San Francisco Bay Area and the Los Angeles metropolitan area, with indexes of 35 and 36, respectively. In contrast, California’s Central Valley, including cities like Sacramento and Fresno, offers relatively more affordable housing options.
CAR predicts a further reduction in existing home sales and median prices for the year 2023. The number of single-family home resales dropped by 19.2% from 2021 to 2022, and the association forecasts 7.2% fewer home sales in 2023. This could mean that patient buyers may find themselves rewarded with lower closing prices.
Housing supply level and market impact
A key factor influencing the California housing market is the current housing supply level. According to Redfin, the average supply in May 2023 stood at two months. This statistic indicates how long it would theoretically take for all currently listed homes to sell based on the current rate of home-selling activity. While inventory is increasing, it remains relatively tight compared to recent years.
Remote workers shifting the real estate landscape
The rise of remote work is also having a notable impact on the housing market. With more individuals able to work from home, the importance of living in close proximity to work has diminished.
Findings from CAR’s 2022 Consumer Survey, 42% of respondents anticipate working remotely full-time, and another 22% can work from home part-time. This trend is reshaping housing preferences and influencing choices among prospective buyers. Particularly in our Tahoe region, the lifestyle demand for second homeowners or those now able to work-from-home permanently, is driving the affordability of our local market.
Challenges for homebuyers
For potential homebuyers, the changing landscape offers a unique opportunity. If predictions for the California housing market in 2023 hold true, it may be a favorable time to purchase a home. Prices are expected to reach some of the lowest levels since the pandemic-driven real estate boom began, and inventory is gradually increasing.
Securing a mortgage with favorable rates remains a critical factor in achieving affordability, as mortgage rates saw a peak in November 2022. Waiting for home prices to further decrease to offset increased interest costs may be a wise move for some buyers.
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In contrast, current homeowners who have considered selling may want to seize the opportunity now. Median sales prices are trending lower in various counties and major cities, with homes staying on the market for longer periods and price reductions becoming more common. While the market remains seller-friendly, the balance is shifting, giving buyers greater power as the year unfolds.
Predictions and what’s next
The California housing market is evolving in response to various economic and social factors. Buyers may find favorable opportunities in 2023, with potentially lower prices and increased inventory.
For sellers, it may be prudent to take advantage of the current market conditions before prices decline further. The shifting landscape promises changes and opportunities for both buyers and sellers in the coming year.
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