As mortgage rates are up near 7 percent and home sales slow down across the country, many are wondering if the Golden State of California is still a seller’s market.
Real estate experts predict that California’s housing market will soften in 2023, with home prices expected to fall by 8.8 percent. However, they believe that this is only a modest adjustment before the market returns to normalization, and will not experience the same price crash as during the last financial crisis in 2008–09.
The California Association of Realtors (CAR) released its latest forecast on Oct. 12, predicting a 7.2 percent year-over-year decline in existing single-family home sales next year, bringing down the sales to 333,450 units.
The projected 2022 sales figure, 359,220 units, is 19.2 percent lower compared with the 444,520 homes sold in 2021.
Jordan Levine, vice president and chief economist of CAR, told The Epoch Times that the current sales pace remains “relatively low in the face of higher interest rates.”
“I think that the increase in interest rates, the economic uncertainty, all kind of combined to reduce buyer demand,” he said. “So we think we’re going to end this year, probably down 20 percent from where we were at the same time last year, and then probably in 2023 fall a little bit more.”
CAR estimates that the California median home price will retreat 8.8 percent, to $758,600 in 2023.
“A less-competitive housing market for homebuyers and a normalization in the mix of home sales will curb median price growth next year,” said the CAR report.
According to Levine, housing demand and home prices will soften throughout 2023, sales will take longer, and there will be more inventory and fewer homes selling above listing price.
Nonetheless, he stressed that such price reductions are a normal market reaction.
“But the thing I would advise buyers to keep in mind is it’s not 2008 all over again. We have much better fundamentals in the mortgage market. A lot of people have a lot of home equity, fixed-rate loans. And so even as we’re going through a challenging macroeconomic time, it’s not going to result in the same kind of price pressures that we had during the last financial crisis,” he said to The Epoch Times.
Mortgage Rates to Remain High
CAR’s 2023 forecast projects a dip in the U.S. gross domestic product of 0.5 percent in 2023.With California’s 2023 nonfarm job growth rate at 1.0 percent, the state’s unemployment rate will edge up to 4.7 percent in 2023, the report said.
To Buy or Not to Buy
“I think rates will probably peak sometime during the summer of next year before they start coming back, maybe into the 6 percent range,” Levine said.However, he advised buyers to make decisions from a long-term perspective.
“And in some ways, if you’re buying a home to live in it, raise your family, send them to school, you don’t care what happens over the next 12 to 18 months. It’s all about what’s going to happen with your wealth and the price of your property over the next 12 to 18 years.”
CAR President Otto Catrina holds similar views.
According to the CAR report, Catrina said, “As sellers adjust their expectations, well-priced homes are still selling quickly. And for buyers—more homes for sale, less competition, and fewer homes selling above asking price, all point to a more favorable market environment for those who were outbid or sat out during the past two years when the market was fiercely competitive.”
