by Gord Collins

April 23, 2023 

Housing Market California

Hoping to buy a home or condo in California in 2023? While expectations may run higher, it appears prices and mortgage costs will be higher according to the latest sales report from CAR.

In April, single family home sales declined slightly across the state as a whole as interest rates climbed slightly and as home prices jumped 7.5% from the previous month.

That sales pace is down 1% according to the latest Data from the California Association of Realtors. Yet sales did jump very strongly over February’s levels in most of the major counties as depicted in the chart below.

Prices up 17% in the Bay Area

Year over year trends which CAR focuses on, show prices and sales are well down from this time last year. However, the February to March 2023 trend is strongly upward, and as you’ll see in the charts below, the visuals are surprising.

For instance, condo sales in San Francisco rose 77% month over month, and were up 85% in Marin.

California median house prices by region 2023 April. Screenshot courtesy of C.A.R.

Strong Price Growth in March

Strong price growth of 7.6% reflects the undying demand for houses in the Golden State. The share of homes sold above asking price is growing fast (35.8% in March). Sales price-to-list price ratio eased upward by 1.5% monthly. Overall price growth continues to cool despite the price rise in March.

“Despite a dip in March home sales, the competitiveness in the housing market continues to heat up, as homes are selling faster, and the sales-to-list-price ratio is improving, all the while when the number of homes available for sale continues to tighten,” said C.A.R. President Jennifer Branchini, a Bay Area REALTOR®.

California median house prices history chart to April 2023. Screenshot courtesy of C.A.R.

That price 7.6% price growth in single family detached was accompanied by a 4.1% increase in townhome/condo prices in March. For buyers however, the price of houses falling 7% and townhouse/condo price drop of 3% is a welcome enticement to consider purchasing. If houses and condos are investments to be rented, you might expect rent prices to climb too.

California condo prices history chart. Screenshot courtesy of C.A.R.

With the growth in rent prices in the major metros, buying a home represents a more affordable option for those wealthy enough to qualify for a mortgage. Mortgage payments continue their steep decline from last August’s ultrahigh levels however payments remain 21% above levels 12 months ago.

California mortgage payment trends. 7 year history. Screenshot courtesy of C.A.R.

Not an easy time for prospective buyers in California which lends support for renting and rental construction.

California Housing Sales chart. April History. Screenshot courtesy of C.A.R.

Single detached homes in the Bay Area rose a shocking 71% month over month, from $1,050,000 to $1,228,000 on average, while Bay Are condos rose 10.8% from $750,000 on average to $831,500. Sales were up an unbelievable 60% from the previous month.

Home prices in Southern California rose only 3.4% yet sales were up 38.3% from February. In Los Angeles Country, sales rose 39% month over month while in SD County sales rose 35% with a price decrease of 3.7%.

Housing Inventory Declines Again

Inventory took a steeper drop as fewer homes were listed as sales grew. Unsold inventory ticked down to an ultralow 1.6 months supply in the Bay Area while the central valley saw a steep decline to 2.0 months. If the Fed halts rate hikes and the economy does recover later this year, it may support much higher home prices.

Active listings grew at a slower pace, yet are up from March of 2022. Southern California enjoyed the highest growth of active listings, up 11.6% year over year. Housing supply declined in almost half the counties.

Time on market is plummeting although much higher than this time last year. Listing prices on $1 million homes is rocketing upward. Reduced price listings are declining.

California Housing Inventory chart. April History. Screenshot courtesy of C.A.R.

Housing Market in April

The latest report shows Realtors® expect both home prices will rise, but fewer of the belief that listings and sales will continue rising. Realtors closed more sales last week so the sales trend appears firm, and listings continue a downward trend. Only 18% of Realtors® reported having a listing.

April Realtor® Stats. Screenshot courtesy of CAR.

Can we can expect similar sales/price trends in other markets including the Atlanta Housing market, New Jersey Housing market, Nashville housing market, Denver Housing market, and Las Vegas housing market.

Will Home Prices Fall in 2023?

Buyers and even renters are curious about whether prices might fall, but as we saw above, and despite economists and analysts speaking of a 2023 recession and no recovery until 2024, there is low housing and rental supply, which translates to higher home prices and perhaps higher rent prices.

Is it a good time to buy a rental property in the Golden State in 2023?  Most Millennial-aged Californians will prefer to continue renting until there is more economic certainty and numbers to justify the buy decision.

The biggest factors for the housing market forecast:

• rising interest rates (25 basis points expected in May)
• home prices appear to be rising although not at the pace of 2022
• supply continues to weaken encouraging price to rise
• tech sector uncertainty will weaken demand
• China’s economy reopening which could stimulate California’s economy

Forecast for Next Year?

C.A.R. Vice President and Chief Economist Jordan Levine said “High inflationary pressures will keep mortgage rates elevated, which will reduce homebuyers’ purchasing power and depress housing affordability in the upcoming year. With borrowing costs remaining high in the next 12 months, a pull-back in sales and a downward adjustment in home prices are expected in 2023.”

Levine added, “Home prices will also moderate further over the next several months as interest rates remain elevated in the near term and seasonal factors come into play.”

CAR in its 2023 California Housing Market Forecast report, predicts a 7.2% drop existing single-family home sales in 2023.  It will fall to reach 333,450 sold unit units, down from their projected sales volume of 359,220 units this year, which is predicted to be 19.2% less than the 444,520 homes sold in 2021.

The median home price outlook is for a decline of 8.8% to $758,600 next year following a projected 5.7% growth this year to $831,460.

California Realtors Housing Forecast to 2023. Screenshot courtesy of California Association of Realtors.

The rental market however appears to be a different story from the home resales market. Rental property investors have a completely different opportunity to recover their costs (with well selected properties).

CAR Realtors Survey November

California Realtors polled in November were bleak about their prospects, but this month’s survey shows buyer cold feet down, Realtor optimism up, and seller activity is up.

Realtor Monthly Sentiment Survey March. Screenshot courtesy of CAR.

Hottest Cities in California

Those cities with the highest price growth reported by Redfin for March 2023:

March hottest cities in California. Screenshot courtesy of Redfin.

Cities with highest price growth. Screenshot courtesy of Redfin.

Californians Looking Elsewhere

California has the highest percentage of people looking to buy elsewhere.  California, New York, District of Columbia, Massachusetts, and Illinois were the top 5 states homebuyers searched to move from. The top 5 states homebuyers searched to move to were Florida, Texas, Arizona, Maryland, and South Carolina.

The combination of housing market downturn risk, rising interest rates, and inflation are making more Californian homeowners consider selling their property this fall. That selling intention is lessened by desires to get a comfortable price, having to make extreme relocation choices, and entering into a new, more expensive mortgage.

It’s perhaps the most difficult time for sellers to be able to sell their home.

Buyers in many states are still walking away from deals at a faster pace too given they can now walk away if they can’t get the right financing, don’t like inspection reports, and other reasons.  The desperate bidding war environment where they waived inspections, etc. has ended. According to Redfin, nationwide, buyers walked away from 15% of deals in August.

As layoffs in the corporate sector grow against fast rising mortgage rates, August and September’s housing market decline may worsen the October and December outlook.

 California Condo/Townhouse Prices Rise

Condo prices dropped steeply in NAPA (-31.9%), SF Bay Area (-3.4%), Santa Barbara (-22%), Fresno (-17%), and San Mateo (-7.9%) while prices rose in Monterey (+16.9%), Solano (+21.7%), and San Bernardino (+14.5%). This month’s stats don’t help to answer the much asked question in the past ten years about will prices drop?.

The forecast for landlords and the rental sector is a little better. Those rental managers who use a next generation  property management software are most likely to generate the best profitability in 2023. See more on the rental market forecast. Find the best rental properties in California.

September Housing Stats for Major Metros

The Los Angeles Metro Area in September suffered a 1% drop in price or $7,430 on average on the sale of a single family houses to $742,570.  Sales in Metro LA fell 12.% from September and are down 40.8% from 12 months ago.

The Central Coast region saw its average price rise 1.9% or $17,500 while sales fell 22% vs September and were down 38.8% from 12 months ago.

The San Francisco Bay Area saw prices rise .5% to $1,250,500 while sales declined 3.4% vs September — down 26% year over year.

In San Francisco itself, home prices rose $42,500 or .2.6% vs September while sales increased 7.4%.

Orange County saw house prices fall $35,000 or 3.1% to$1,165,000, which is up 4% from one year ago. San Bernardino County saw house prices fall 3.1% or $15,000 to a new median of $480,000.  Riverside home prices stayed even at about $600,000 while sales declined 19.2% vs last month.

In San Diego County, homes prices rose $4,000 to $899,000, a 1.6% jump while sales fell 15.6% in October.

In Sacramento County, existing home prices fell 1.4% or ($7,500) in October, while sales grew 4.7% fell 19.2%.

California Exodus Pushing Prices up Elsewhere?

California is being blamed for fast rising housing prices in other states such as Utah and Idaho. An exodus of people and businesses might sound threatening but it may be that this state’s housing market is invincible. People want to live or rent in California.

There’s always buyers for California properties in any of its cities. If high taxes, regulations, fires, floods, inflation and high prices can’t scare buyers away, what could?

Looking for the best cities to buy a rental property and need to learn more about property management services? Get more insight and tips on the rental market on the ManageCasa Blog.

Calls for an economic recession and flat 2023 sales year would have most experts seeing reduced sales and prices in California which is seeing businesses and residents flee to more tax and cost friendly states such as Texas and Florida.

Inflation came in at 8.2% in September.  If energy prices rise this fall, it’s easy to predict stronger Fed rate hikes to slow inflation further so they can meet their 2% inflation rate goals. Some are hoping the Fed will capitulate and pivot to avoid further hikes.

California Rent Prices

11 California cities ranked as most expensive for renters out of top 70 in the US according to a new report from Zumper. Here are the mid July California rent price stats provided by Zumper.com.

	1 Bedroom			2 Bedrooms
Rank	City	Price	M/M%	Y/Y%	Price	M/M%	Y/Y%
2	San Francisco, CA	$3,000	3.4%	7.5%	$3,950	-1.3%	7.0%
3	San Jose, CA	$2,570	3.6%	19.0%	$3,130	2.0%	15.9%
6	Los Angeles, CA	$2,360	0.0%	18.0%	$3,200	0.6%	16.4%
7	San Diego, CA	$2,320	-6.1%	20.8%	$2,910	-6.1%	14.6%
9	Santa Ana, CA	$2,110	3.4%	24.1%	$2,770	-3.5%	23.7%
10	Oakland, CA	$2,100	2.4%	5.0%	$2,800	1.1%	10.7%
14	Anaheim, CA	$1,860	-2.6%	12.0%	$2,470	-6.1%	22.3%
18	Long Beach, CA	$1,710	-1.7%	6.2%	$2,280	-5.0%	7.5%
24	Sacramento, CA	$1,600	0.0%	8.8%	$1,980	1.0%	7.6%
31	Fresno, CA	$1,520	6.3%	25.6%	$1,680	5.0%	15.1%
69	Bakersfield, CA	$1,060	-1.9%	9.3%	$1,380	0.7%	15.0%

CAR stats show lower income Californians were hurt by the pandemic and aren’t participating in the recovery as yet. See more on the 2022 rental market forecast and the US rental market report.

California Rent Prices

Most CA city’s rent prices declined during the month, although not as fast as other US cities. California cities took 6 out of the top 10 rankings for top prices in the US. Given housing prices are so high, buyers are into the rental market firmly now.

	1 Bedroom			2 Bedrooms
City	Price	M/M%	Y/Y%	Price	M/M%	Y/Y%
San Francisco, CA	$3,020	-2.6%	7.9%	$4,060	-2.6%	5.2%
San Jose, CA	$2,600	-6.1%	12.6%	$3,230	-2.1%	13.3%
San Diego, CA	$2,500	-4.6%	21.4%	$3,210	-6.1%	17.6%
Los Angeles, CA	$2,410	-2.4%	12.6%	$3,300	-0.9%	11.9%
Oakland, CA	$2,200	0.0%	10.0%	$2,770	-3.1%	4.5%
Santa Ana, CA	$2,150	-0.5%	20.8%	$2,770	-4.5%	9.1%
Anaheim, CA	$1,950	-2.5%	4.8%	$2,530	-3.8%	12.4%
Long Beach, CA	$1,800	0.0%	11.8%	$2,420	-3.2%	12.6%
Fresno, CA	$1,420	-4.1%	16.4%	$1,620	-5.8%	2.5%

Sales growth normally recedes in the fall months, but this fall season, the decline could be much steeper. Pending sales have been dropping even in the luxury home market. Pending sales of condos and townhomes have continued to drop.

California real estate is always a hot topic.  Find out more about rental property investment is wise and how  property management software is providing the foundation for profitable rental portfolios.

Read more on the San Francisco Market, San Diego market, and Los Angeles market.

Please note that CAR designates the Los Angeles Metropolitan Area as a 5- region that includes Los Angeles, Orange, Riverside , San Bernardino , and Ventura.  The Bay Area includes: Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, Solano, and Sonoma.  And the Inland Empire includes Riverside and San Bernardino counties.

Is it a Good Time to Buy a Home in California?

According to C.A.R.’s monthly Consumer Housing Sentiment Index, in April, 59% of consumers said it was a good time to sell, up from 55% the previous. Only about 25% feel it is a good time to buy a home, unchanged from last year.

Homeowners may be very cautious about relinquishing their valuable property when moving is difficult and costly, and homes are very hard to find.  Without certain places to go, listings don’t grow as expected.

It’s absolutely the biggest seller’s market ever across California. And perhaps more so for the pandemic destination cities within the state.

The top challenge to the housing market in CA now as the coming end of pandemic stimulus payments to homeowners, renters, and small businesses.  The end of the eviction moratorium could throw a large number of homes onto the market as owners can’t meet their mortgage obligations.  The state’s unemployment rate improved to 7.9% in May but remains one of the highest unemployment rates in the nation.

Relocating to New Cities for Safety, Room and Improved Lifestyle

CAR’s forecast report shows the reasons people are relocating and buying, See some of that info below.

Sales and especially prices for condos in NAPA have rocketed (condo prices, see below, shot up almost 30% and sales rose 33% over February number). Condo prices in Shasta were up 81% over February and in Monterrey, were up 48%.

Although apartment rent prices are heading downward in the Bay Area as vacancy rates climb, other housing markets in the state are thriving. The demand is for single-family houses.  It may be that when the pandemic is over, both the big cities and the rural regions will have evolved considerably.

Home listings continue to plummet which means price pressures could be intense as stimulus money arrives and the recovery begins.  New funds would certainly help save landlords and the rental market, and support suburban housing markets around San Diego, Los Angeles, and San Francisco. See more on the Bay Area rental market.

Will California’s Home Prices Continue to Rise into 2022?

A lot of buyers are asking whether home prices will rise or fall?  Renters are wondering if rent prices will fall? High demand, low mortgage rates, and low inventory will likely skew homes and condo prices higher.  The trend is here and the return of buyers is here.  A number of factors are contributing to California’s positive sales stats:

• desire to live away from the city in suburbs and rural regions and willingness top pay top dollar for homes
• record-low mortgage rates
• moving to regions (pandemic destination) that offer more room perhaps with an office or garden
• wealthy buyers have the funds ready

“Low rates and tight housing inventory are contributing factors to the statewide median price setting a new record high three months in a row from June to August. A change in the mix of sales is another variable that keeps pushing median prices higher, as sales growth of higher-priced properties continued to outpace their more affordable counterparts,” said C.A.R. Senior Vice President and Chief Economist Leslie Appleton-Young.

California Realtor’s Survey

The latest survey of Realtors shows fewer are withdrawing offer, more are listing new properties, and are not optimistic about sales or prices.

California Housing Market Forecast

C.A.R. Predicted More Home Sales and Higher Prices for 2021: Leslie Appleton-Young delivered her updated California housing market forecast for 2021.  She expected sales to continue to improve through 2021.

The prediction is based on growing buyer demand that’s pushed California’s median price above $700,000 and low inventories that will cause price increases. As know now, sales have declined.

California’s weekly showings index rose to 182.3% higher than it was in September of 2019.  Mortgage rates have dropped back down and purchase applications rose 24.2% on an annual basis last week.

As the graphic shows, affordability has jumped back up the top reason for relocating in California.

California Economic Forecast

Car predicts a J-shaped economic recovery extending over the next 12 months. Of course this trend will affect home prices in the coming 6 months.

A full copy of this story can be read at its source: https://managecasa.com/articles/california-housing-market-report/