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California Housing Market: Prices, Trends, Forecast 2023

Will the California Housing Market Crash in 2023?

According to the latest data from the California Association of Realtors (CAR), the California housing market experienced a slight recovery in February 2023. The report shows a third consecutive month of improving sales, with favorable interest rates and softening home prices driving buyers to enter the market.

The statewide annualized sales figure of existing, single-family detached homes was 284,010 in February, up 17.6% from January but down 33.2% from the previous year. The median home price in February was $735,480, a decline of 2.1% from January and 4.8% from February 2022. Year-to-date statewide home sales were down 39.6% in February.

CAR President Jennifer Branchini noted that the recent shift towards more home sales in the lower-price segments is expected to continue and further soften home prices. However, with the availability of homes remaining extremely tight, and housing supply conditions not expected to improve any time soon, prices should find a bottom later this year as interest rates stabilize.

The lower mortgage rates in California have given homebuyers an opportunity to enter the housing market and purchase properties at more affordable prices. However, the housing supply remains limited, making it difficult for buyers to find available properties that meet their criteria. This has led to increased competition among buyers, driving up the prices of available homes.

On the other hand, sellers have been facing challenges in the market due to declining home prices. The market conditions have made it harder for them to sell their properties at the prices they desire, leading to a slowdown in the number of homes being put on the market.

Despite the challenges, industry experts predict that the California housing market will continue to stabilize in the coming months, with prices gradually finding their bottom later in the year. While interest rates are not expected to remain low for long, buyers are encouraged to take advantage of the current window of opportunity and enter the market before prices start to rise again.

Overall, the California housing market is in a state of flux, with both buyers and sellers navigating through uncertain market conditions. However, with the continued support of favorable interest rates and increased housing supply in the future, the market is expected to find its equilibrium, providing opportunities for both buyers and sellers alike.

California Regional Housing Market Trends

The California Association of Realtors (C.A.R.) recently released its housing marketreport for February 2023, which showed that the state's housing market experienced a decline in sales and median home prices. The report indicates that all regions in California, except the Central Valley, recorded sales declines of more than 30% from a year ago, with the Far North experiencing the most significant drop at -39.4%. Similarly, all counties monitored by C.A.R. had double-digit sales drops in February, with sales in 34 counties plummeting more than 30%.

California Sales Trends

The report shows that only four counties out of the 51 monitored by C.A.R. had a sales decline of less than 20% in February 2022. Mono County had the largest sales drop in February 2023 at -80.0%, followed by Lassen (-73.9%) and Glenn (-65.0%). The sales decline in some of these counties was partly attributed to the severe weather conditions experienced throughout California in the past few weeks.

The Central Coast and Southern California regions had sales drops of over 30%, with the Central Coast experiencing the most significant drop at -38.3%. The San Francisco Bay Area had a sales decline of -32.0%, and median home prices declined by double digits year-over-year, with prices sliding more than 13% in six Bay Area counties.

California Home Price Trends

At the regional level, median home prices dropped from a year ago in all major regions, with the San Francisco Bay Area declining the most and by double-digits year-over-year. With prices sliding more than 13 percent in six Bay Area counties, the Bay Area’s regional median price was down 19.2 percent from a year ago and the dip in February was the largest price decline since June 2009.

More than four out of five counties experienced year-over-year price declines in February, with 23 counties posting median price drops of more than 10%. Siskiyou had the sharpest decline of all counties at -38.8%, followed by Glenn (-28.5%) and Del Norte (-23.1%). Five counties recorded an increase in their median prices from a year ago, with Kings County recording the biggest price gain at an increase of 7.6% from a year ago.

  • San Francisco Bay Area had the highest year-over-year price decline of 19.2 percent, with the median price being $1,050,000.

  • Southern California had a year-over-year price decline of 2.0 percent, with the median price being $745,000.

  • The Central Coast had a year-over-year price decline of 6.2 percent, with the median price being $856,000.

  • The Central Valley had a year-over-year price drop of 3.4 percent, with the median price being $449,000.

  • The Far North had the highest year-over-year drop of 1.6 percent, with the median price being $369,000.

California Inventory Trends

Housing inventory in California slipped to the lowest level in four months, with the statewide unsold inventory index (UII) growing by 60% from the 2.0 months recorded in February 2022 to 3.2 months in February 2023. All price ranges posted an increase in UII from a year ago by 30% or more, with the sub-$500,000 range gaining the most at 45.9%.

Despite a smaller carryover of inventory due to an uptick in housing demand, 46 counties tracked by C.A.R. still recorded an increase in active listings from February 2022. Kings County posted the largest yearly growth of 127.4%, followed by Solano (104.8%) and Riverside (96.1%). However, five counties registered a decline in active listings from last year, with Del Norte (-32.4%) dropping the most year-over-year, followed by Mono (-20.7%) and Tuolumne (-15.9%).

Other Housing Market Trends

The California housing market has seen a significant shift in trends over the past year, with the median number of days it takes to sell a single-family home increasing to 28 days in February 2023 from just 9 days in February 2022. The sales-price-to-list-price ratio also decreased from 102.6% in February 2022 to 97.7% in February 2023.

However, the average price per square foot for an existing single-family home remains relatively high at $373, albeit down from $392 in February 2022. Additionally, the 30-year fixed-mortgage interest rate has risen substantially from 3.76% in February 2022 to 6.26% in February 2023, which could affect the affordability of housing for prospective buyers. Overall, the California housing market appears to be undergoing some changes, and it will be interesting to see how these trends evolve in the coming months.

California Housing Market Forecast 2023-2024

Here's the California Housing Forecast for 2023 released by the C.A.R. on October 12, 2022. A modest recession caused by an ongoing battle against inflation will keep interest rates elevated to suppress buyer demand and contribute to a weaker housing market in 2023, according to a housing and economic forecast released today by the CALIFORNIA ASSOCIATION OF REALTORS®. High inflationary pressures will keep mortgage rates high, reducing purchasing power and lowering property affordability for prospective purchasers in the coming year. As a result, housing demand and prices will fall throughout 2023.

  • Existing, single-family home sales are forecast to total 333,450 units in 2023, a decline of 7.2 percent from 2022’s projected pace of 359,220.

  • California’s median home price is forecast to decline 8.8 percent to $758,600 in 2023, following a projected 5.7 percent increase to $831,460 in 2022.

  • Housing affordability is expected to drop to 18 percent next year from a projected 19 percent in 2022.

According to C.A.R.'s “2023 California Housing Market Forecast,” existing single-family home sales will fall 7.2 percent next year to 333,450 units, down from 359,220 units in 2022. The forecast for 2022 is 19.2 percent lower than the 444,520 residences sold in 2021. The median home price in California is expected to drop 8.8 percent to $758,600 in 2023, after rising 5.7 percent to $831,460 in 2022 from $786,700 in 2021. Next year's median price rise will be slowed by a less competitive housing market for homebuyers and a stabilization in the mix of home sales.

According to C.A.R.'s 2022 projection, the U.S. gross domestic product of 0.5 percent in 2023, after a projected uptick of 0.9 percent in 2022. With California’s 2023 nonfarm job growth rate at 1.0 percent, up from a projected increase of 4.9 percent in 2022, the state’s unemployment rate will edge up to 4.7 percent in 2023 from 2022’s projected rate of 4.4 percent.

Stubbornly high inflation and growing economic concerns will keep the average for 30-year, fixed mortgage interest rates elevated at 6.6 percent in 2023, up from 5.2 percent in 2022 and from 3.0 percent in 2021 but will remain relatively low by historical standards.

Housing Market Forecast for California Metro Areas

Let us look at the price trends recorded by Zillow over the past year. Based on the data provided by Zillow, the average California home value is $718,687, which represents a 0.7% increase over the past year. Additionally, homes in California are going to pending in around 31 days. The median sale-to-list ratio for January 31, 2023, is 0.99, with 29.2% of sales going over the list price and 55.9% of sales going under the list price.

Looking at the California MSA forecast data provided by Zillow shows a mixed picture. While some areas are projected to experience a decline in home values, others are expected to see an increase. For instance, Los Angeles, San Francisco, Riverside, Sacramento, and San Jose are all projected to experience declines in home values over the next twelve months.

For instance, San Jose, CA, is expected to see the biggest drop in housing prices, with a forecasted decrease of -1.6% by March 31, 2023, and an even bigger decline of -3.2% and -3.6% by May 31, 2023, and February 29, 2024, respectively. San Francisco, Riverside, Sacramento, Oxnard, and Santa Rosa are also expected to experience declines of over 1% by the end of 2023.

However, not all regions in California are expected to experience a decline in housing prices. Some regions, such as Santa Maria, Hanford, and Eureka, are forecasted to experience an increase in housing prices, with Santa Maria expected to see the biggest increase of 1.9% by February 29, 2024.

In conclusion, the data shows a mixed forecast for the California housing market. While some regions are expected to see a decline in housing prices, others are forecasted to experience an increase. Nonetheless, the overall trend seems to be a decline in housing prices, which could be attributed to various factors such as an oversupply of homes, high-interest rates, and economic uncertainty.

It is important to note that these forecasts are just predictions, and there are various factors that could impact the actual outcome, such as changes in the economy, interest rates, and housing supply and demand. However, the forecast data suggests that it may be a good time for prospective home buyers to start shopping around in the areas projected to experience a decline in home values, while those looking to sell may want to focus on areas where home values are projected to increase. Overall, it is essential to conduct thorough research and consult with real estate professionals before making any real estate decisions.

California Housing Market – Weekly Trends – March 13 2023

Based on the data released on March 13, 2023, the California housing market is experiencing mixed trends. The recent takeover of Silicon Valley Bank by Federal Regulators has created economic uncertainty and spooked investors, causing them to flee to the safety of the bond market. This has caused yields and mortgage rates to fall after rising above 7% in recent weeks. However, labor market data suggests that the economy is still running hotter than the Fed would like it to, and the upcoming inflation report will play a large role in whatever action they decide to take later this month.

One of the key issues affecting the California housing market is the shortage of inventory. The pace of homes being listed for sale has slowed significantly, with the number of new listings being added to the MLS each week falling by double-digits this whole year. This has led to a shrinking of available inventory, which is preventing a rapid recovery in sales activity. However, the tight supply is also helping to prevent more significant price declines, though prices are expected to slide further from last year’s peak.

Despite the shortage of inventory, mortgage delinquencies in California remain very low. Although there was a modest uptick in the 4th quarter, mortgage delinquencies finished the year at just 2.5%, well below the historical average of 4.2% between 1972 and 2000. This, along with homeowner equity that remains near an all-time high level and most homeowners locked into the lowest rate mortgages of all time, should prevent a flood of inventory from hitting the market and precipitating much larger price declines.

The recent increase in mortgage interest rates has pushed borrowers to either rush to lock in rates or wait on the sidelines for rates to come back down. Despite the rising rates, mortgage applications inched up according to the latest weekly mortgage applications survey by the Mortgage Bankers Association (MBA).

Overall, while the California housing market is facing challenges due to economic uncertainty and a shortage of inventory, low mortgage delinquencies and a slight increase in mortgage applications indicate some stability. However, with concerns about current market conditions growing and the upcoming inflation report, it remains to be seen how the market will perform in the coming weeks and months.

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

The Fannie Mae Home Purchase Sentiment Index® (HPSI) decreased by 3.6 points from January, with four of the six components decreasing. The decline was driven by an uptick in the share of consumers reporting a bad time to sell a home and the share of those expressing concerns about losing their job in the next 12 months.

With home-selling sentiment now lower than it was pre-pandemic and homebuying sentiment remaining near its all-time low, consumers on both sides of the transaction are growing more cautious about the housing market.

The daily average for the week ending March 11, 2023, was 414 closed sales per day, 260 pending sales per day, and 213 new listings per day. The percentage of REALTORS® who believe sales will increase in the foreseeable future increased to 61.1%, an increase of 7.8% from the previous week's survey. Members indicate reduced demand, but a lack of listings keeps inventory reasonably tight.

According to C.A.R.'s, 19.2% of REALTORS® polled believe that prices will increase, an increase of 7.5% from the previous week's survey. The proportion of responders who think that listings will increase was 72.4%, an increase of 2.8% from the previous week.

The decision to buy a home in California ultimately depends on an individual's financial situation and personal preferences. However, recent trends in the housing market indicate that it may be a challenging time for buyers. The decrease in the Fannie Mae Home Purchase Sentiment Index® and the concerns about job security and selling a home may cause potential buyers to become more cautious.

Additionally, the low inventory of homes for sale and the high demand from buyers has created a competitive market, which could make it difficult to find a home at an affordable price. The recent uptick in mortgage rates could also make it more expensive to finance a home purchase.

Despite these challenges, some REALTORS® believe that sales will increase in the foreseeable future, and prices could go up. However, it's worth noting that the housing market is unpredictable and can change quickly.

In summary, while there may be challenges to buying a home in California right now, it's ultimately a personal decision that should be based on an individual's financial situation and personal preferences. Potential buyers should consult with a REALTOR® to assess their options and make an informed decision.

Housing Affordability Trends in California – 4th Quarter 2022

Housing costs have been on the rise in California, which has impacted affordability. According to C.A.R.'s Traditional Housing Affordability Index, the housing affordability in California for existing, single-family homes declined to 17% in the fourth quarter of 2022, pushing it slightly above the 15-year low recorded earlier in the year. This drop is due to the rapid rise in mortgage interest rates.

The statewide median price of a single-family home also dipped on a year-over-year basis for the first time in 11 years. The report suggests that home prices are expected to continue to decline due to high borrowing costs. The share of households that could afford to buy a median-priced condo/townhome in California also continued to slide, dropping to 26% in the fourth quarter of 2022 from 36% a year ago. However, nationwide housing affordability also slipped in the fourth quarter of 2022, with 38% of the nation's households able to afford a median-priced home.

In the fourth quarter of 2022, the effective composite interest rate for a 30-year, fixed-rate loan was 6.80 percent, significantly higher than the 5.72 percent in the previous quarter and the 3.28 percent in the same quarter of the previous year. Despite the drop in housing affordability, the California housing market has seen some positive developments.

For instance, the statewide median price of an existing single-family home in California dipped on a year-over-year basis in the fourth quarter of 2022 for the first time in 11 years. This could potentially benefit homebuyers who have been struggling with high home prices in the state.

However, the decline in home prices is also indicative of softening demand in the market, which is expected to continue in the upcoming quarter as rates remain elevated. As a result, the market is likely to experience downward pressure on housing demand, which could potentially affect sales and inventory levels.

C.A.R.’s HAI measures the percentage of all households that can afford to purchase a median-priced, single-family home in California. C.A.R. also reports affordability indices for regions and select counties within the state. The index is considered the most fundamental measure of housing well-being for homebuyers in the state.

  • Seventeen percent of California households could afford to purchase the $790,020 median-priced home in the fourth quarter of 2022, down from 18 percent in the third quarter of 2022 and down from 25 percent in the fourth quarter of 2021.

  • A minimum annual income of $201,200 was needed to make monthly payments of $5,030, including principal, interest, and taxes on a 30-year fixed-rate mortgage at a 6.80 percent interest rate.

  • More than one in four (26 percent) California home buyers were able to purchase the $610,000 median-priced condo or townhome.

  • A minimum annual income of $155,200 was required to make a monthly payment of $3,880.









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