After two red-hot years for home sales, things are expected to cool off in California for 2023. According to the California Association of Realtors (CAR), existing single-family home sales are forecasted to decline by 7.2% in 2023. After nearly a decade of continued escalation in home prices, prices are also expected to fall by 8.8%.
Higher interest rates and the traditionally high real estate prices throughout the state have priced a lot of buyers out of the market, but homes continue to sell. Expect a more normalization of the real estate market in 2023, with homes selling for less and staying on the market longer.
Home Prices Are Declining
The National Association of Realtors says California is a “prime target for price declines” as part of a resetting of the real estate market, mirroring national trends. Even with a decrease, though, the median home price in California in 2023 is projected to be $758,600. That’s a major reason that real estate agents in California are among the highest-earning agents in the country as high prices equate to higher commissions.
According to Redfin, 98.6% of homes in California are selling for the list price, which is 4% lower than in previous years. By comparison, in 2022, 39% of homes sold above the asking price.
California’s Continued Population Growth
You may have seen reports about large numbers of people leaving California, and it's true. More than 7.5 million people have departed the state since 2010, but more people are still moving to California than leave almost every year, according to the U.S. Census Bureau. Although the population shrunk slightly in 2021, it's still the most populous state in the country. By mid-2023, the state’s population is forecast to reach a record 41.372 million.
There has been a shift in migration patterns, however. More people are leaving major metropolitan areas, especially those along the coast.
Once Hot Markets Are Cooling
Most real estate markets in California cities have cooled off considerably — even in desirable neighborhoods. For example, sales in many Southern California counties dipped significantly in the second half of 2022 compared to 2021’s hot market.
Los Angeles County, Orange Country, Riverside County, San Bernadino County, San Diego County, and Ventura County all saw a more than 33% decline in sales during the latter months of 2022 compared to the prior year amid rising prices.
Home prices in San Francisco, San Jose, San Diego, Oxnard, Los Angeles, Sacramento, and Stockton are also seeing some of the largest price reductions in the country. Rising interest rates, property taxes, and declining affordability make it difficult for many home buyers to meet purchase prices.
Slower California Real Estate Market in 2023
Experts are forecasting a slower real estate market in California for 2023 with fewer home sales. According to the CAR:
More homes are for sale.
There's less competition for real estate.
Fewer homes are selling above the asking price.
Homes are sitting on the market longer.
Even as home prices continued to escalate in 2022, home sales fell below pre-pandemic levels. Sales of homes priced at $500,000 or below hit their lowest levels, while the share of million-dollar homes reached a record high.
Become a Real Estate Agent in California in 2023
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Updated 01/06/23