California Housing Market: What’s Happening In 2023?

July 10, 2023

By Josh Patoka – As first seen on Forbes Advisor

The California real estate market is one of the most expensive in the U.S. that’s adjusting to higher mortgage rates and rising inflation. However, the Golden State housing market remains healthy in its various regions, including the tech-savvy Bay Area and multi-faceted Southern California.

Home prices vary across California, but markets may follow the same trends. Several metro areas are in the early stages of transitioning from a seller’s market to a neutral setting—though homes remain expensive for most buyers.

The majority of median sales prices across California decreased between 2022 and 2023. These are the recent median sold price readings from the California Association of Realtors (CAR) for existing single-family home real estate transactions.

Market RegionMedian Sold Price (May 2023)Median Sold Price (May 2022)Year-to-Year Price ChangeYear-to-Year Sales Change
California (statewide)$836,110$893,200-6.4%-23.6%
SF Bay Area$1,300,0001,465,000-11.3%-23.8%
Far North$380,000$425,000-10.6%-21.8%
Central Coast$1,000,000$995,0000.5%-17.3%
Central Valley$485,000$510,000-4.9%-20%
LA Metropolitan Area $765,000$805,000-5%-21.8%
Southern California $800,000$845,000-5.3%-22.3%

First-Time Homebuyer Affordability Index

Many first-time homebuyers are struggling to purchase a single-family home in many California counties.

For example, CAR reports that the Housing Affordability Index statewide was 36 in Q1 2023 compared to 58 nationwide. A lower number means housing is less affordable.

Some of the least affordable regions were the SF Bay Area and LA metro area, for indexes of 35 and 36, respectively.

In comparison, the Central Valley is one of the most affordable areas in the state, with scores of 50 in Sacramento and 51 in Fresno—two of the best places to live in California.

California Housing Market Forecast

CAR forecasts an overall reduction in existing home sales and median prices for 2023.

Fewer Homes for Sale

Single-family home resales dropped by 19.2% from 2021 to 2022. The association predicts 7.2% fewer homes will sell in 2023.

Lower Median Home Price

Patient buyers are more likely to be rewarded with lower closing prices. After the median price increased 5.7% year-over-year to $831,500 in 2022, CAR estimates the statewide median price will dip to $758,600 in 2023 for an 8.8% decline.

Real Estate Demand Likely to Remain Steady

While sellers in many counties are more likely to slash asking prices and see their homes remain longer on the market, buyer demand and prices should remain steady and will remain a seller’s market or a neutral market.

California Housing Supply

A key indicator is the current housing supply level. Redfin reports an average supply of two months in May 2023. According to Redfin, “months of supply indicates how long it would theoretically take for every home that’s currently on the market to sell based on the current rate of home-selling activity.”

While inventory is increasing, the highest reading within the last five years was in January 2019 with four months of supply.

For now, the relative lack of homes for sale is a favorable factor for sellers.

Remote Workers Will Influence Markets

Another pivotal factor for home prices in cheaper counties and rural areas is the increased popularity of remote work. Without the burden of daily commutes to work, people are able to live in more favorable locations.

To put this into perspective, the 2022 Consumer Survey from CAR finds that 42% of the 1,114 respondents anticipate working remotely full-time for the foreseeable future. Another 22% are able to work from home on a part-time basis, which allows them to live in locations that are not commuter-friendly.

Is It a Good Time to Buy a House in California?

If the California housing market predictions are accurate, 2023 will be a better year to buy a home in many counties. Prices are forecasted to be at some of the lowest levels since the pandemic real estate boom began, and inventory is increasing.

A significant pricing factor for many buyers is mortgage rates. The 30-year fixed mortgage rate climbed to a 20-year high in November 2022 and edged down slightly by the year’s end. More buyers must wait for home prices to drop to offset the extra interest costs and maintain an affordable monthly payment.

Is It a Good Time to Sell a House in California?

In most situations, it’s better for homeowners to sell now instead of waiting because median sales prices are trending lower in many counties and major cities.

While homes are remaining on the market longer and price reductions are becoming more common, inventory is still tight and a fair number of homes continue selling above asking price. As a result, you’re able to sell a home quickly.

It can also become more difficult to sell if home loan rates continue ticking higher as fewer borrowers can afford homes that are still priced at levels when mortgage rates were at historic lows in 2020 and 2021.

The California real estate market remains seller-friendly, but buyers are regaining bargaining power as the local markets rebalance as 2023 continues.

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