Note: This story was originally posted by Joseph Pimentel on Spectrum News 1 on October 13, 2022.
ANAHEIM, Calif. — Home prices in California’s housing market, once one of the nation’s hottest during the coronavirus pandemic, is forecasted to drop 9% next year as interest rates continue to skyrocket and dark clouds of a possible recession loom overhead.
What You Need To Know
The median home price in California expects to dip 9% in 2023, according to the California Association of Realtors
The organization forecasts fewer home sales next year
After a housing frenzy at the beginning of the pandemic, higher mortgage rates are now curbing demand
According to Freddie Mac, the current average 30-year, fixed mortgage rate is 6.9%, its highest in 20 years
On Wednesday, the California Association of Realtors released its 2023 California Housing Market Forecast. The group forecasts the state’s median home price will decline 8.8% from $831,460 in 2022 to $758,600 in 2023.
The report also expects fewer home sales next year.
California, the report states, could see a 7.2% decline in single-family home sales to 333,450 units in 2023 from the projected sales figure of 359,220 in 2022.
CAR officials said the 2022 figure is 19.2% lower than the 444,520 homes sold in 2021.
“With the market shifting as home sales and prices are predicted to temper next year, buyers and sellers are adapting to the new realities of the market,” said Otto Catrina, California Association Realtors president and real estate agent based in the Bay Area, in a news release.
The sudden drop in home prices and sales runs counter to the happenings of the housing market since the beginning of the coronavirus pandemic.
Like shoppers on Black Friday, the onset of the pandemic created a buying frenzy.
A combination of historically low-interest mortgage rates, low housing inventory and remote work accelerated the demand for housing in a state that already faced a massive housing shortage.
The high demand created a fiercely competitive market, as buyers tried to one-up each other, causing a sudden rise in housing valuations.
According to CAR, the state’s median home price jumped from $592,000 in 2019 to $786,000 in 2021, a 32% increase. The association projects that the state’s median home price will rise to $831,000 by the end of this year, a 5.7% year-over-year rise.
But in the past several months, the Federal Reserve began raising interest rates to clamp down on historically high inflation. The high rates have spooked prospective homebuyers, while more sellers are entering the market.