The California Association of Realtors (CAR) publishes the California Housing Market Forecast every December to help people plan for the upcoming year. According to CAR data, property prices in California declined in December, but the most recent figures for January indicate that prices are once again finding support. The high costs of repairing and recovering from the effects of floods, coastal erosion, landslides, falling trees, business closures and other disasters are still a problem with homes. Buyers can't afford high property prices in California despite solid cumulative demand.
As a result, many people have moved to places where housing is much more affordable. Fewer buyers are expected in the next three to six months due to increasing unemployment and decreasing business profits (the technology industry continues to suffer a severe blow). The increase in consumer confidence goes against persistent price increases and the likely inability of the Federal Reserve to lower interest rates. But will this discourage California consumers? There is always a high demand for goods and services in California.
In particular, larger counties such as San Diego County would feel the effects of rising mortgage rates and property prices more strongly than the state average price. Although the housing market is evolving and the Zillow Home Value Index is changing in many places, many other experts are advocating a slower rise in property prices than what we've seen since the COVID-19 pandemic. Large cities such as Miami, Houston, Phoenix and Las Vegas continued to record price increases in November. Condo prices fell sharply in NAPA (-31.9%), the San Francisco Bay Area (-3.4%), Santa Barbara (-22%), Fresno (-17%) and San Mateo (-7.9%), while prices rose in Monterrey (+16.9%), Solano (+21.7%) and San Bernardino (+14.5%).
The company expects significant falls in sales of new homes (22% less than last year), sales of existing homes (17% less than last year) and real estate GDP (8.9% less than last year). While apartment rental prices are falling in the Bay Area as vacancy rates rise, other housing markets in the state are thriving. However, California markets may be an outlier, as prices in San Francisco could fall by 10 to 15%. Active stock prices grew most strongly in Southern California, the Bay Area and the Central Valley, almost double what they were 12 months ago.
Given the closing costs associated with buying a home, which can be up to 5 percent of the purchase price, it usually doesn't make sense to buy a home if you're not going to live there long enough to recoup those costs. Housing ads continue to plummet, meaning that price pressures could be intense as stimulus money arrives and the recovery begins. The change in the sales mix is another variable that continues to push up average prices, as sales growth for higher-priced properties continued to exceed their more affordable counterparts. With active homebuyers and supply still tight, the current home price trend will not be reversed.
Poor affordability means that buyers can't afford home prices in the Golden State. Many of the country's most attractive housing markets are slowing their appreciation, even though 16 states defied the national trend and recorded double-digit price increases. California real estate agents and home buyers could celebrate a 1.1% increase in sales from November to December. Crestview-Fort Walton Beach-Destin, Florida; Salem, Oregon; Merced, CA and Urban Honolulu, Hawaii are also at very high risk of experiencing price drops. The question remains: will California home prices drop in 2023? It's difficult to predict with certainty what will happen with home prices over the next few years due to so many variables at play.
However, it's safe to say that there will be some fluctuations due to economic conditions and other factors that could affect home values. It's important for potential buyers to do their research before making any decisions about buying or selling a home in California or any other state. It's also important for buyers to consider their long-term plans when deciding whether or not it makes sense for them to purchase a home at this time.
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