California Housing Market Report – February 2023

This article was originally published by by Gord Collins on January 29, 2023

The state of California has been through a lot of recent. However, spring will arrive and with it comes an entirely new housing landscape.

Will the rising waters in the storage system cause a boom in tourism? Will the damage of the atmospheric river result in new investment? And will an economic soft landing bring the tech industry back in 2023?

So much bad news for the real estate sector, however, CAR’s December housing stats report for the state of California shows homes prices actually fell.

Yet January’s newest stats suggest a return to price support.  With the damage of flooding, coastal erosion, mudslides, trees falling, business closings, and more, we can only guess home prices would fall further given the costs of repair and recovery, at least in the first 6 months of this year.

The big picture view of economic growth in the fourth quarter is a positive one,” says Curt Long, NAFCU’s chief economist and VP of Research.

Q3 GDP was +3.2% from Q2 in California.  And BEA further reports that GDP grew 2.9% annualized in the fourth quarter of 2022, and that is better than prepandemic GDP levels.

With the FED stepping off the big rate hikes and inflation easing, we could see more construction and some increase in demand. Will the optimism result in more rental property construction?

California Buyers Still Can’t Afford Homes

The issue for California residential real estate remains the same. Poor affordability means that despite latent demand, buyers can’t afford the prices of homes in the Golden State. For that reason, many have left to find much cheaper homes in other states.  Unemployment will likely be on the rise along with lower business profitability (tech sector continues to lay off workers) which means fewer buyers are likely for 3 to 6 months.

The stronger consumer optimism is running against sticky inflation and a likelihood the FED can’t lower interest rates. But will that discourage buyers in California? Demand is always intense in CA. No other place offers what California has, and buyers today do seem to put lifestyle at the top of their list.

Tech layoffs in the Bay Area may result in more homes for sale and perhaps new rentals available.

Home sales in California rose 1.1% in December vs November, a welcome stat for Realtors and buyers. Home prices fell for the 4th consecutive month, down .4% from November to a new median price of $774,580. That price is also down 2.8% from last December.

Condo sales as shown below too, are well down with a big price drop too.

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