Norada Real Estate Investments

Housing Market Forecast 2024 & 2025: Predictions for Next 5 Years

by

Housing Market Predictions for Next 5 Years

Are you curious about what the next 5 years hold for the U.S. housing market? Recent reports suggest that the housing market downturn could wipe $2.3 trillion in value, with experts predicting prices could still tumble another 10%. Rising mortgage rates, a lack of affordable housing, and the COVID-19 pandemic have all contributed to this decline, which could have far-reaching implications for the industry. In this article, we'll dive into the housing market predictions for the next 5 years and what they could mean for buyers and sellers.

The housing market is a crucial component of the US economy, and predicting its future trends and fluctuations can be difficult, especially as external factors can influence the market. Some economists are more hopeful, but even those who predicted price increases through 2023 are changing their tune. The US housing market is expected to continue to cool off in 2023 after a 40% boom during the Covid-19 pandemic, according to the National Association of Realtors (NAR).

Housing Market Predictions for Next 5 Years

Rising interest rates will increase the cost of mortgages for new buyers, but prices are unlikely to fall as they did during the 2008 market crash, as lending standards have become more robust. The market was driven higher during the Covid-19 pandemic by record low borrowing rates, encouraging purchases by first-time buyers, and a lack of supply because of underbuilding. Analysts and economists have different opinions on whether prices will be flat or collapse in the next five years. However, they agree that the housing market will experience a slowdown in the coming years.

ALSO READ: Will There Be a Drop in Home Prices in 2023?

The US housing market is driven by the supply of properties on the market and interest rates, which are used to set mortgage rates. In 2021, the median US existing home price climbed by 16.9% to $346,900, with sales of 6.12 million reaching their highest level since 2006. The market was driven by record-low interest rates, strong growth in prices and rentals for single-family homes, low foreclosure rates, and the 15-year high in sales.

However, the pandemic-driven boom came to an end in 2022, with pending home sales falling for the sixth consecutive month in November, down by 4% from October. The FHFA house price index remained unchanged at 392.70 points in October, well below the June peak of 397.58, but above the August dip of 392.

ALSO READ: Latest U.S. Housing Market Trends

Analysts and economists expect the US housing market to cool in 2023 but differ on whether prices will be flat by 2022 or collapse. The US Federal Reserve has signaled its intention to raise interest rates, which will likely lead to a slowdown in the housing market. However, prices are unlikely to fall as they did during the 2008 market crash, as lending standards have become more robust.

In the next five years, the US housing market is predicted to experience a slowdown, with prices either flat or experiencing a modest decline. According to a report by Zillow, home values are projected to increase by 5.5% over the next year, slower than the 16.9% increase seen in 2021. Zillow predicts that home values will increase by 3.5% in 2023, 3.4% in 2024, 3.3% in 2025, and 3.2% in 2026. The report also notes that the number of homes for sale will continue to be low, putting upward pressure on prices.

Looking further into the next five years, the US housing market is forecasted to see a slowdown in price growth, with some experts predicting a plateau in home prices while others foresee a moderate decline. The predicted slowdown is due to a combination of factors such as rising interest rates, an increase in the supply of homes, a decrease in demand, and affordability challenges for buyers.

Rising interest rates are expected to make it more expensive for buyers to borrow money to purchase homes. Mortgage rates have been at record lows for several years, but many economists predict that they will begin to rise in the coming years. Higher interest rates will decrease the buying power of potential buyers and lead to a decrease in demand, which will put downward pressure on prices.

Another factor contributing to the predicted slowdown in the housing market is an increase in the supply of homes. The lack of supply was one of the factors that drove the recent boom in home prices, but the situation is expected to change as new home construction increases. In addition, some homeowners who were hesitant to sell during the pandemic are expected to put their homes on the market in the coming years, increasing the inventory of homes for sale.

The overall affordability of homes is also expected to play a role in the future of the housing market. With home prices at record highs, many buyers are struggling to afford homes, particularly first-time homebuyers. This affordability challenge, combined with rising interest rates, could lead to a decline in demand and therefore a decline in prices.

Despite the predicted slowdown, it is important to note that many experts do not expect a crash in the US housing market similar to the one seen in 2008. Lending standards have become more robust, which should help prevent widespread defaults and foreclosures. In addition, the current economic climate is much different than it was in 2008, with a strong labor market and a more stable financial sector.

While the US housing market is expected to see a slowdown in price growth over the next five years, experts do not expect a crash similar to the one seen in 2008. Factors such as rising interest rates, an increase in the supply of homes, and affordability challenges for buyers are expected to contribute to the slowdown, but the overall health of the economy and lending standards should help prevent a catastrophic collapse.

Housing Market Predictions: Real Estate Forecast Next 5 Years

There is an abundance of speculation regarding the forecast of the housing market in 2023. However, what about the real estate forecasts for 2024, 2025, and so on? Although, it is quite difficult to forecast the housing market for the next five years here is an insight into what most experts predict can happen.

The COVID-19 pandemic has had a significant impact on the real estate and land use sectors. These effects will continue to impact the demand and supply of regional housing markets over the next five years. Emerging technologies, changing demographics, the state of local job markets, and the rise of remote work are some of the trends expected to shape the housing market in the future.

The U.S. News Housing Market Index provides a data-driven overview of the housing market nationwide and serves as one of the authoritative sources for the information presented in this article. While it is possible for median home prices to fall by 5% in 2024, if mortgage rates decline faster than predicted, home prices could remain mostly flat through the end of 2024.

However, if real incomes rise faster than inflation, the combination of extra purchasing power plus lower mortgage rates could boost affordability, home sales, and prices. If real incomes rise from 2025 through 2027, home prices will likely rise again by approximately 1% to 2% above the current inflation rate. However, it will likely take some time to reach the home value heights of mid-2022.

Housing Market Predictions for 2024

The year 2024 is expected to bring more stability to the housing market after a few years of uncertainty. With mortgage rates declining faster than expected, home prices are likely to remain mostly flat throughout 2024. This will be good news for buyers who have been waiting on the sidelines for a good time to enter the market.

According to the U.S. News Housing Market Index, the national housing shortage will continue through the end of the 2020s, making it a seller's market in many regions. The National Association of Home Builders predicts that the national housing shortage will last through the end of the 2020s. Due to the estimated pent-up demand for housing, which ranges from 1.5 million to nearly 3.8 million homes, it will take time for the nation's builders to find suitable land, skilled labor, and materials to create a much-needed supply.

The rising cost and consequences of climate change will also impact the housing market in 2024. Homebuyers and builders will have to factor in the costs of building homes that are resilient to climate change and extreme weather events. The total cost of homeownership will become a key metric, taking into account not only the purchase price and mortgage rates but also property taxes, maintenance costs, insurance premiums, and other expenses.

Housing Market Predictions for 2025

In 2025, the housing market is expected to start picking up again, with home prices rising by approximately 1% to 2% above the current inflation rate. This increase will be due to a combination of factors such as the rise in real incomes, lower mortgage rates, and increased affordability. However, it may take some time to reach the home value heights of mid-2022.

More buyers are expected to join with friends and family members to purchase homes, as intergenerational households, grown children “boomeranging” homes, and families created from friendships increasingly pool multiple income sources to purchase homes and avoid the uncertainty of housing costs as renters.

The ways homes are built are also expected to change in 2025. Emerging technologies such as 3D printing, factory-built structural components, and software that minimizes the waste of materials are likely to become more common in the construction industry. These methods are expected to improve building quality while speeding up construction timelines.

Housing Market Predictions for 2026

In 2026, the housing market is expected to continue its upward trend, with home prices rising at a moderate pace. The pent-up demand for housing is expected to be supplied between 2025 and 2030, according to the National Association of Home Builders. However, the changing demographics by 2030 will result in lower demand for new housing, which could lead to a slowdown in construction activity.

The trend of more buyers joining with friends and family members to purchase homes is expected to continue in 2026, as the rising cost of housing and the desire for more space and privacy drives people to pool their resources. This trend is likely to result in more multi-generational households and co-living arrangements.

The total cost of homeownership is expected to become an even more important metric in 2026, as buyers and builders factor in the cost of climate change and other external factors. The rising cost of insurance and building materials, along with the need to adapt to a changing climate, will make it essential for homeowners to consider the total cost of homeownership when making purchasing decisions.

Housing Market Predictions for 2027

Predicting the housing market for 2027 is a challenging task as it depends on various factors such as economic growth, interest rates, population growth, and government policies. However, based on the current trends and projections, it is possible to make some predictions. One potential trend that could affect the housing market in 2027 is the continued urbanization of populations.

This means that more people are moving from rural areas to urban areas, which will create a higher demand for housing in cities. As a result, there may be more construction of apartment buildings and townhouses to accommodate this growing population. Another factor that could influence the housing market is the continued rise of technology. With advancements in technology, people are becoming more mobile and can work from anywhere in the world.

This could lead to an increase in remote working, which may cause more people to relocate to suburban and rural areas. This, in turn, could lead to an increase in demand for single-family homes in these areas. In addition to these trends, it is also important to consider economic factors such as interest rates, inflation, and job growth.

Interest rates are a crucial factor in the housing market, as they affect the cost of borrowing money for a mortgage. If interest rates remain low, this could encourage more people to buy homes, leading to a rise in demand and prices. However, if interest rates rise too quickly, this could make it more difficult for people to afford a mortgage, leading to a decline in demand and prices.

Finally, government policies could also impact the housing market in 2027. For example, changes to zoning laws or building codes could affect the supply of housing, leading to changes in prices. Similarly, changes to tax laws could also impact the affordability of homes, leading to changes in demand.

In conclusion, the next few years are likely to bring significant changes to the housing market, with a combination of factors such as changing demographics, emerging technologies, and the impact of climate change driving demand and supply. The National Association of Home Builders predicts that the national housing shortage will last through the end of the 2020s, and the cost of ownership will become a key metric for buyers.

Despite the uncertainty caused by the pandemic and other external factors, the housing market is expected to remain strong, with opportunities for both buyers and sellers. It is important for all stakeholders to keep a close eye on the latest trends and developments in the market to make informed decisions.

These predictions and guesses provided are based on current trends and historical data. However, they are still subject to numerous variables and factors that may impact the housing market in unforeseen ways. Therefore, please note that these predictions and guesses are for informational purposes only and should not be considered financial or investment advice. Any decision made based on this information is solely at your own risk.

Will it Become a Buyer's Real Estate Market?

The US housing market has seen skyrocketing home prices for the past two years, with a shortage of inventory, low-interest rates, and high demand fueling the market. However, according to the latest Zillow Home Price Expectations Survey, this trend is expected to shift in the coming years. The report surveyed 107 housing market experts and economists from August 16–27, 2022. In this section, we will explore the predictions for when a buyer's market is expected to arrive and what the housing market will look like in the years to come.

2023: Expect a Shift in Favor of Buyers

According to the survey, the majority of panelists (56%) expect a significant shift in favor of buyers within the next year, making 2023 the year of the buyer. This shift is due to several factors, including sky-high mortgage costs, which are driving down competition among home shoppers. This shift is expected to exert additional pressure on the rental market, as priced-out potential homebuyers turn to rent.

However, the report also found that metros in the South and Midwest are the least likely to see price declines over the next year. In contrast, vacation market areas are most likely to see price declines. The panelists also predicted that rent growth and inflation should outpace stocks and home price appreciation over the next year.

2024: Further Decrease in Home Prices

While 56% of panelists predict a buyer's market in 2023, another 24% predict that the housing market shift would come in 2024. This prediction shows that the trend of a buyer's market will continue to strengthen over the next few years. Inexpensive Midwest markets, such as Columbus, Indianapolis, and Minneapolis, are expected to see the least decline in home prices over the next 12 months. Fast-growing markets in the South, such as Atlanta, Nashville, and Charlotte, are also expected to retain their heat. However, markets that saw some of the largest growth over the course of the pandemic, including Boise, Austin, and Raleigh, are projected to cool the fastest.

2025: Further Consolidation of the Buyer's Market

As per the survey, 13% of the panelists expect the market to favor home buyers in 2025. This further solidifies the buyer's market trend, which has been building up since 2023. Suburban and exurban areas are predicted by the panel to retain their heat over the next 12 months, while vacation areas and urban areas were considered the most likely to see price declines.

Overall, the report suggests that the US housing market will undergo a significant shift in the coming years, with home prices declining and a shift towards a buyer's market. This change is a result of several factors, including rising mortgage rates, a shortage of inventory, and sky-high prices that have pushed many prospective buyers to the sidelines.

Although this shift is expected to benefit buyers, high and rising rents could cut further into their ability to save up for a down payment, making it harder for some to transition from renting to owning. As the housing market continues to evolve, it will be important to monitor these trends to understand the implications for the broader economy.

References

  • https://www.zillow.com/research/daily-market-pulse-26666/
  • https://www.zillow.com/research/zhpe-q3-2022-buyers-market-31481/
  • https://capital.com/housing-market-predictions-for-next-5-years
  • https://realestate.usnews.com/real-estate/housing-market-index/articles/housing-market-predictions-for-the-next-5-years
  • https://www.nar.realtor/newsroom/nars-lawrence-yun-predicts-us-home-prices-wont-experience-major-decline-could-possibly-rise-slightly#

Mortgage Interest Rates Forecast & Predictions 2023

by

Will Mortgage Rates Rise in 2023?

The US housing market has been on a rollercoaster ride for the past few years, and 2023 looks to be no different. As reported by Freddie Mac, mortgage rates have continued to rise for the fifth consecutive week, and the 30-year fixed-rate mortgage averaged 6.73% in the week ending March 9, up from 6.65% the week before. This is the highest rate we've seen since November 2022 when the rate peaked at 7.08%. However, this current rate is still below the historical average.

The rising mortgage rates are primarily due to the Federal Reserve's suggestion that they will continue to increase rates to combat stubborn inflation. Inflation seemed to be cooling coming into 2023, but strong employment numbers and a rising Consumer Price Index have revealed that inflation remains stubbornly high. Federal Reserve Chairman Jerome Powell stated in testimony to Congress that the central bank will likely raise interest rates higher than previously forecast to fight inflation. This suggests that a half-point rate hike is back on the table at the Fed's next rate-setting meeting scheduled for March 21-22.

The housing market has already begun to feel the effects of the rising mortgage rates. Although mortgage applications rose slightly last week after three weeks of declines, according to the Mortgage Bankers Association, activity remains muted. Home buyer sentiment returned to record lows in February, according to a survey from Fannie Mae, with the most notable drops in sentiment being in those associated with job security and home-selling conditions. Additionally, the US housing market is currently short 6.5 million homes, making it challenging for would-be homebuyers to find affordable homes.

However, all hope is not lost for sellers. Recent sales data shows that the share of first-time homebuyers is up compared to one year ago. This means that sellers with starter homes may still see robust demand and retain some bargaining power. Furthermore, the lasting presence of hybrid working models offers home buyers more flexibility in where they choose to live. Some buyers may move further away from work if they aren't commuting every day, making homes with easy access to public transportation systems more attractive to home buyers and enhancing bargaining power for sellers.

Hence, it looks like mortgage rates will continue to rise in 2023 as the Federal Reserve continues its battle to cool the US economy and combat stubborn inflation. This means that the housing market may continue to feel the effects of rising mortgage rates, with activity remaining muted for the time being. However, sellers can still find opportunities, particularly with first-time homebuyers and those looking for homes with easy access to public transportation systems. It's essential to keep a close eye on the latest developments from the Federal Reserve to make well-informed decisions.

ALSO READ: How To Invest in Mortgage Estate Notes?

Mortgage Rate Predictions 2023

Mortgage experts see rates decreasing over the coming months as the economy slows. Lawrence Yun, the chief economist of the National Association of Realtors, said he expects rates to fall to 5.5 percent by mid-2023. Fannie Mae sees the average rate of a 30-year fixed getting to 6.8% in 2023. Meanwhile, the prediction from Freddie Mac is 6.4%.

According to an updated prediction from the Mortgage Bankers Association as well, mortgage rates are also anticipated to fall in 2023, MBA economists also predicted that the United States would enter a recession in the first half of next year, owing to tighter financial conditions, reduced business investment, and slower growth globally. According to their mortgage rate prediction, this will raise the unemployment rate from 3.5% to 5.5% by the end of 2023.

“Next year will be particularly challenging for the US and global economies,” said Mike Fratantoni, chief economist and senior vice president for research and industry technology. “The sharp increase in interest rates this year – a consequence of the Federal Reserve’s efforts to slow inflation, will lead to an equally sharp slowdown in the economy, matching the downturn that is happening right now in the housing market.”

However, the good news for homeowners is that mortgage rates are projected to fall next year, according to Fratantoni. According to MBA, mortgage rates will conclude in 2023 at roughly 5.4%. According to Freddie Mac, the average rate for a 30-year fixed-rate mortgage is currently 6.94%. Fratantoni warned that mortgage rates will remain volatile in the coming months because the Fed is projected to continue raising interest rates this year.

According to the forecast, the Fed's continuous attempts to contain inflation will eventually limit homebuyer demand for mortgages in 2023. Mortgage origination volume is expected to decline to $2.05 trillion in 2023 from the $2.26 trillion expected in 2022, according to MBA. The forecast calls for purchase mortgages to drop by 3% next year, while refinance volume is anticipated to decline by 24%. The slowdown in housing activity and higher mortgage rates will cut the pace of home price growth, according to MBA. The forecast projects national home prices to be roughly flat in 2023 and 2024.

Mortgage Interest Rate Weekly Trends 2023

The mortgage industry is currently experiencing fluctuations in interest rates due to the Federal Reserve's efforts to curb inflation, which started in mid-2021. The benchmark fixed rate on 30-year mortgages is at 6.3 percent, down from last month's levels, according to Bankrate's national survey of large lenders. The Federal Reserve raised rates at its February meeting, which was its eighth consecutive increase, albeit by just a quarter-point. Mortgage interest rates doubled in 2022, peaking at 7 percent in November.

However, inflation has finally started to slow, and mortgage rates could continue to decrease. Some experts predict that fixed mortgage rates might dip back into the 5 percent range in 2023. The Federal Reserve's actions primarily impact adjustable-rate mortgages (ARMs) and home equity products. Still, it also has some influence on fixed mortgage rates through its effect on 10-year Treasury yields, which drive fixed mortgage movement.

Despite the Fed's policies not directly affecting fixed mortgage rates, it might indirectly result in lower long-term rates, including mortgage rates. As the Fed raises short-term interest rates, bond investors will be less concerned about inflation, increasing the risk of a recession, which leads to them investing in bonds.

In this environment, it's crucial to compare mortgage rates before choosing a lender. Conducting an online search can help you save thousands of dollars by finding lenders offering lower rates and more competitive fees.

3-month trend 30-Year Fixed Interest Rates 15-Year Fixed Interest Rates 10-Year Fixed Interest Rates 5/1 ARM Interest Rates
3/10/2023 7.13% 6.34% 6.38% 5.88%
3/3/2023 7.06% 6.28% 6.45% 5.81%
2/24/2023 6.95% 6.23% 6.43% 5.67%
2/17/2023 6.77% 6.12% 6.06% 5.53%
2/10/2023 6.55% 5.84% 5.85% 5.46%
2/3/2023 6.36% 5.66% 5.65% 5.43%
1/27/2023 6.43% 5.65% 5.63% 5.42%
1/20/2023 6.36% 5.63% 5.72% 5.41%
1/13/2023 6.46% 5.85% 6.01% 5.50%
1/6/2023 6.52% 6.06% 6.22% 5.50%
12/30/2022 6.59% 5.95% 5.89% 5.45%
12/23/2022 6.47% 5.83% 5.74% 5.45%
12/16/2022 6.60% 6.00% 6.11% 5.46%
12/9/2022 6.52% 5.91% 5.99% 5.45%
12/2/2022 6.67% 6.04% 6.07% 5.48%
11/25/2022 6.81% 6.16% 6.26% 5.51%
11/18/2022 6.84% 6.22% 6.35% 5.54%
11/11/2022 7.24% 6.46% 6.56% 5.62%
11/4/2022 7.23% 6.45% 6.67% 5.53%
10/28/2022 7.20% 6.43% 6.67% 5.55%
10/21/2022 7.20% 6.43% 6.59% 5.44%
10/14/2022 7.08% 6.28% 6.33% 5.37%

(Source: Bankrate.com)

Sources

  • https://www.mba.org/
  • https://www.bankrate.com/mortgages/rate-trends/
  • https://www.bankrate.com/mortgages/mortgage-rates/
  • https://www.forbes.com/advisor/mortgages/mortgage-interest-rates-forecast/
  • https://themortgagereports.com/32667/mortgage-rates-forecast-fha-va-usda-conventional
  • https://edition.cnn.com/2023/03/09/homes/mortgage-rates-march-9/index.html

San Diego Housing Market: Prices, Trends, Forecast 2023

by

San Diego Housing Market
Data: C.A.R.'s January Resale Report

The San Diego Real Estate Market is Slowing 

According to the data provided by the California Association of Realtors (CAR), the San Diego housing market experienced an increase in the median sold price of existing single-family homes in February 2023 compared to both the previous month. The median sold price for existing single-family homes in San Diego was $875,000 in February 2023, which is a 6.1% increase from January 2023 and a 1.5% decrease from February 2022. This suggests that the housing market in San Diego is currently experiencing a price growth trend.

Furthermore, the sales of existing single-family homes in San Diego increased by 11.5% compared to the previous month and decreased by 32.6% compared to the same month last year. Southern California as a whole had a lower median sold price for existing single-family homes in February 2023, which was $745,000. However, the region experienced a 0.9% increase in median sold price compared to the previous month, indicating that the overall housing market in Southern California is also seeing a price growth trend.

It's important to consider the potential effects of interest rates on the market. When interest rates are high, it can be more difficult for people to buy homes, which can lead to a decrease in demand for housing. This decrease in demand can then lead to a decrease in the median sold prices of homes in the area. Moreover, high-interest rates can also lead to higher mortgage payments, which can make it more difficult for people to afford homes. This can then further decrease demand for housing and cause a slowdown in the housing market.

As the San Diego housing market settles into a steady rhythm, it seems that the frenzied pace of price increases and home sales will continue to slow. While the market may not be as white-hot as it was during the pandemic, it's unlikely that we'll see any drastic drops in prices in 2023. The underlying forces of supply and demand still favor a pricey market like San Diego, and though the rate of growth may be decelerating, home prices continue to climb.

There are several factors that contribute to the hot housing market in San Diego. San Diego has a strong and diverse economy, anchored by industries such as healthcare, defense, and technology. The strong job market in the region helps to attract new residents and supports the demand for housing. San Diego is a popular destination for retirees, and its population is growing, which is a driver for housing demand.

Additionally, the increasing population of millennials in the area is also driving demand for housing. San Diego has a limited supply of housing, which can drive up prices. The housing market is considered to be a “seller's market” with high demand and a limited supply of homes. San Diego has a Mediterranean climate, with mild winters and warm summers, which attracts many people who are looking for a place to live with comfortable weather. This demand for housing helps to drive up housing prices in the region.

Because mortgage financing has gotten more expensive as the Federal Reserve raises interest rates, record home price increases may not last much longer. Despite a still-strong housing market, rising mortgage rates are plainly making it more difficult to buy in a market that already has some of the highest prices in the country. Higher interest rates are rapidly driving buyers out of the San Diego housing market.

The San Diego condo/townhome market has seen a moderate increase in median sold prices, according to C.A.R.'s condo report. In February 2023, the median sold price was $615,000, which is a 4.8% month-over-month increase from January 2023 and a 0.0% year-over-year increase from February 2022. However, it is important to note the year-over-year change in the single-family home market was -1.5%.

On the other hand, the sales activity for condos and townhomes in San Diego has seen a sharp decline compared to the previous year. In February 2023, sales were down 35.5% compared to February 2022. This may be due to a variety of factors, including high-interest rates, changing buyer preferences, and market conditions.

Overall, while the condo/townhome market in San Diego has seen a modest increase in prices from the previous month, the significant decline in sales activity may indicate a shift in the market. It will be interesting to monitor this trend in the coming months to see if it continues or if there are any changes in the market dynamics.

Looking at the unsold inventory index for condos, which is the number of months it would take to sell all the homes on the market if no new properties were listed, San Diego has a relatively low index of 2.1 months, indicating a seller's market where there are more buyers than available properties. However, the index has decreased slightly from Jan 2023 when it was 2.6 months.

Compared to Feb 2022, the index has increased from 1.3 months, indicating a slower market. In terms of median time on the market, San Diego condos are selling relatively quickly with a median of 14.0 days. However, the median time has increased from Jan 2023 when it was 22.0 days, and from Feb 2022 when it was just 6.0 days. 

In conclusion, the San Diego condo/townhome market has shown a moderate increase in median sold prices from the previous month, but a significant decline in sales activity compared to the previous year. This may be due to several factors including high-interest rates and changing market dynamics.

Despite the low unsold inventory index indicating a seller's market, the median time on the market has increased from the previous year. As the market dynamics continue to evolve, it will be important for buyers and sellers to stay informed about current trends and work closely with a real estate agent to make informed decisions. While the market is showing some signs of slowing down, the continued popularity of San Diego as a desirable place to live may lead to continued demand for condos and townhomes in the area.

The following San Diego housing market trends are based on single-family, condo, and townhome properties listed for sale on Realtor.com. Land, multi-unit, and other property types are excluded. San Diego County, California is a highly sought-after location for home buyers and sellers alike. With a beautiful coastal location, thriving job market, and endless amenities, it's no surprise that San Diego County's real estate market is booming.

As of February 2023, the median listing home price in San Diego County, CA was $875,000, up 9.4% year-over-year. The median listing home price per square foot was $553, and the median home sold price was $785,000. This data suggests that home values are continuing to rise in San Diego County, which is good news for sellers. However, buyers may face steeper competition and potentially higher prices in this seller's market.

The median days on market for homes in San Diego County was 53 days in February 2023. This means that, on average, homes sold after just over a month on the market. However, it's important to note that the trend for median days on market has gone down since last month and slightly up since last year, indicating that homes may be selling faster than they were previously.

Therefore, San Diego County, CA is a thriving real estate market with rising home values, a competitive seller's market, and plenty of options for buyers and renters alike. Whether you're looking to buy or sell, understanding the current market conditions and trends is essential for making informed decisions.

Overall, the housing market in San Diego County and San Diego City is currently favoring sellers due to high demand and low inventory, but the increasing trend for median days on market suggests a potential shift in the future. For buyers, it may be beneficial to act quickly and be prepared to pay close to the asking price to secure a home in these competitive markets.

Is It a Good Time to Buy a House in San Diego?

The Buyer's Guide by C.A.R. provides a comprehensive snapshot of the local real estate market in San Diego County, California. The guide is aimed at realtors and their clients who are interested in purchasing a property in the area. The guide provides information on the median price of homes in the area, the number of homes available for sale, the current interest rates, and the monthly payment options for different down payment percentages.

Based on the data provided by C.A.R., the San Diego housing market is showing a mix of positive and negative trends for buyers. As of February 2023, the median price of a 1-bedroom home in San Diego County is $472,000, with a monthly payment of $2,870 and a down payment of $94,000. This is a relatively affordable option for buyers who are looking for a smaller home.

However, the median price of a 4+ bedroom home is $1.4 million, with a monthly payment of $8,511 and a down payment of $280,000. This is a significant investment for buyers who are looking for a larger home, and it may be challenging for some to afford. Moreover, the number of homes for sale in San Diego County is relatively low, with only 431 2-bedroom homes and 607 3-bedroom homes for sale as of February 2023. This limited inventory may make it more difficult for buyers to find the home that they are looking for.

The current interest rate is 6.26%, which is higher than last year's rate of 3.76% and slightly lower than last month's rate of 6.27%. In terms of interest rates, the current rate of 6.26% is higher than the rate from last year and slightly lower than last month's rate. High-interest rates can make it more challenging for buyers to obtain a mortgage and may lead to higher monthly payments, making it more difficult for some buyers to afford a home.

Overall, whether it is a good time to buy a house in San Diego depends on individual circumstances and preferences. While there are some affordable options for buyers, the high median price of larger homes and the limited inventory may make it challenging for some buyers to find the home that they are looking for. Moreover, high-interest rates may lead to higher monthly payments, which can make it more challenging for some buyers to afford a home. It is advisable for buyers to work closely with a real estate agent to stay informed about current market trends and make informed decisions.

San Diego Housing Market Forecast 2023-2024

Let us look at the price trends recorded by Zillow (a real estate database company) over the past few years. The typical value of homes in San Diego County is currently $830,918. It indicates that 50 percent of all housing stock in the area is worth more than $830,918 and 50 percent is worth less (adjusting for seasonal fluctuations).

San Diego County's home values have gone up 2.0% over the past year — ZILLOW HOME VALUE INDEX. ZHVI represents the whole housing stock and not just the homes that list or sell in a given month. San Diego County also comprises the San Diego-Chula Vista-Carlsbad, CA Metropolitan Statistical Area, which is the 17th most populous metropolitan statistical area. The San Diego-Carlsbad, CA Metropolitan Statistical Area is conterminous with San Diego County in Southern California.

According to Zillow, the typical value of homes in the San Diego-Carlsbad Metro is $830,924. The rate of appreciation will be much less than what we have seen in the last year when the mortgage rates were lower than 3.5%. The forecast for 2023 is that the higher mortgage rates will continue to dampen the demand and decrease home prices.

  • San Diego-Carlsbad Metro home values have gone up 2.0% over the past year.
  • Zillow predicts a home price decline of 0.5% between February 2023 to February 2024 in this metro region.

San Diego Real Estate Appreciation Rates

San Diego is in the top 20% nationally for real estate appreciation. NeighborhoodScout.com's data also shows that in the past ten years, San Diego real estate appreciated by 124.96%. This amounts to an annual real estate appreciation of 8.45%. During the twelve months (2021 Q2 – 2022 Q2), San Diego's appreciation rate has been around 15.83%, slightly above the national average. From 2022 Q1 to 2022 Q2, the appreciation rate has been 3.98%, which annualizes to a rate of 16.89%. Overall, there exists a limited supply of homes in San Diego, and buyers are forced to compete often resulting in higher prices and/or quicker sales that tend to benefit sellers.

In a balanced real estate market, it would take about five to six months for the supply to dwindle to zero. In terms of months of supply, San Diego can become a buyer’s real estate market if the supply increases to more than five months of inventory. This housing market is normally skewed to sellers due to a persistent imbalance in supply and demand. This is also true across much of Southern California.

San Diego Housing Market Forecast
Courtesy of Zillow.com

San Diego Area Housing Market Report

According to the Greater San Diego Association of REALTORS®, the Greater San Diego housing market has been experiencing a slowdown in buyer demand, resulting in a decline in home sales and an increase in inventory.  The Federal Reserve's continued effort to curb inflation has resulted in the eighth interest rate hike since March of last year. Mortgage interest rates have dipped slightly from their peak last fall, which led to an increase in pending sales by 8.1% month-to-month. However, affordability constraints have limited overall homebuyer activity.

In the Greater San Diego area, closed sales decreased by 32.9% for detached homes and 36.1% for attached homes. Pending sales decreased by 30.9% for detached homes and 27.5% for attached homes. Inventory decreased by 1.8% for detached homes but increased by 4.1% for attached homes. The median sales price was down by 1.1% to $900,000 for detached homes and 1.6% to $616,000 for attached homes. Days on market increased by 87.0% for detached homes and 105.3% for attached homes. Supply increased by 37.5% for detached homes and 66.7% for attached homes.

The slowdown in buyer demand has resulted in a slowing of home price growth nationwide, although prices remain up from a year ago. Sellers have been cutting prices and offering sales incentives to attract buyers who are struggling with affordability challenges. The slight decline in mortgage rates earlier this year convinced some buyers to come off the sidelines, but with rates ticking up again in recent weeks, buyers are once again pulling back, causing sales activity to remain down heading into spring.

Overall, the Greater San Diego housing market is experiencing a slowdown due to affordability constraints and higher interest rates. The increase in inventory and longer days on market may provide opportunities for buyers who have been struggling to enter the market. However, sellers may need to adjust their pricing strategies to attract buyers in this current market.

The San Diego real estate market has been ranked among the ten most expensive real estate markets in the country, though it ranks below several other West Coast cities. This creates massive demand for San Diego rental properties by those who simply cannot afford to buy homes. The rental market will continue to grow as the city grows an estimated 500,000 population by 2050, adding tens of thousands each year. The median rent in San Diego is $2700. The rent you’d receive on single-family San Diego rental properties would, of course, be much higher.

If you find a good bargain and make it family-friendly, you could charge well over $3000 a month. If you can convert San Diego rental properties into smaller units, you’d receive around $2200 a month for a one or two-bedroom apartment. The cash-on-cash returns for properties in the San Diego housing market is around 2.5% for traditional rental properties and nearly 2% if you rent on Airbnb. The fact that the city isn’t too dependent on tourism means you could rent properties on the beach to newcomers, locals, and students if tourism is slow.

Before the pandemic, the average rent for an apartment in San Diego had been growing at 4% year-over-year (source: RentCafe). About 40% of the apartments can be rented for less than $2000, and 60% of the apartments can be rented for more than $2,000 per month. This shows that rent prices are very high in San Diego.

Homeowners vs Renters Statistics: According to the most recent 2020 American Community Survey census data, San Diego County has a renter percentage of 46.7% which is the second most renter percentage of all the counties in the greater San Diego County region. The homeowner percentage is 53.3%. The monthly cost of ownership for property owners in San Deigo is around $2,073.

The median gross rent is $1,658, which is the third most expensive among all other counties in the greater San Diego County region. Comparing rental rates to the United States average of $1,062, San Diego County is 56.1% larger. Also, compared to the state of California ($1,503), San Diego County is 10.3% larger.

San Diego Rent Market Trends & Prices

As of March 2023, the average rent for a 1-bedroom apartment in San Diego, CA is $2,395. This is a 2% increase compared to the previous year. Over the past month, the average rent for a studio apartment in San Diego increased by 4% to $1,975. The average rent for a 1-bedroom apartment increased by 2% to $2,395, and the average rent for a 2-bedroom apartment remained flat.

  • Two-bedroom apartment rents average $3,095 which is a 0% increase from last year.
  • Three-bedroom apartment rents average $3,895 which is a 1% decrease from last year.
  • Four-bedroom apartment rents average $4,700 which is a 5% increase from last year.

FAQs About San Diego Housing Market

$875,000

$472,000

$695,000

$900,000

$1.40M

$615,000

Some of the information contained in this article was pulled from third-party sites mentioned under references. Although the information is believed to be reliable, Norada Real Estate Investments makes no representations, warranties, or guarantees, either express or implied, as to whether the information presented is accurate, reliable, or current. All information presented should be independently verified through the references given below. As a general policy, Norada Real Estate Investments makes no claims or assertions about the future housing market conditions across the US.

References

  • https://www.car.org/
  • https://www.car.org/marketdata/data/countysalesactivity
  • https://www.sdar.com/press-releases.html
  • https://www.zillow.com/SanDiego-ca/home-values
  • https://www.neighborhoodscout.com/ca/san-diego/real-estate
  • https://www.realtor.com/realestateandhomes-search/San-Diego_CA/overview
  • https://www.sandiegorealestatehunter.com/blog/san-diego-real-estate-market-forecast
  • http://www.homebuyinginstitute.com/news/san-diego-more-moderate-forecast
  • https://www.zillow.com/research/2020-hot-markets-south-26293/
  • https://journal.firsttuesday.us/san-diego-housing-indicators-2/29246/
  • https://www.rentcafe.com/average-rent-market-trends/us/ca/san-diego

If The Housing Market Crashes What Happens To Interest Rates?

by

There is a lot of speculation in the media that the slowing housing market is an indication that the market is headed for a housing crash. People who recall the subprime mortgage crisis are concerned that the recent spike in home prices followed by a pause signals the bursting of another housing bubble. But is the housing market truly in a bubble?

During a housing market crash, the value of a home decreases. You will find sellers that are eager to reduce their asking prices. Sellers may be more motivated to bargain on price or make concessions to buyers. Due to the crash, there may also be short sales and foreclosures, offering you the opportunity to acquire a deal. Many homebuyers may feel that obtaining a mortgage is too risky.

Recessions are temporary pauses in an otherwise booming economy, but they have an impact on the housing market and interest rates. This break, however, may be an excellent moment to purchase or refinance a property. Discuss with your lender how recessions affect interest rates, how you might reduce your mortgage rate, and how to mitigate your homebuying risk. Now, it's more likely that home prices will not crash, and will continue to rise, although at a slower pace.

There is a lower likelihood that a borrower would default on a mortgage. New laws and lessons learned from the 2008 financial crisis have resulted in tougher lending criteria in today's housing market compared to the previous one. Mortgage approval rates today are lower than they were in the pre-crisis era, which suggests that borrowers are less likely to default on their loans. Before the previous housing crash, it was popular for lenders to issue so-called “no-doc loans,” which did not require borrowers to submit proof of their income.

A minimum credit score and a minimum down payment are often required for government-backed loans. According to regulations, lenders must now check a borrower's capacity to repay the loan, among other conditions. Lending standards have tightened and new mortgage credit scores are substantially higher on average now than they were in the early 2000s.

It is also important to keep in mind that a recession will not have a significant impact on home prices if the supply and demand for housing fall at about the same time. Interest rates are one factor that may make a difference. Reduced mortgage rates and consequently lower house costs can bring properties that were previously out of reach within reach. You stand a better chance of your application being approved if you've got good credit.

What Happens to Interest Rates if the Housing Market Crashes?

In a recession, people do not spend, money does not move freely across the economy. They decide against spending and instead save for a better price the next day. Or they save money and do not spend it because they believe they should have precautionary savings. This is true for any industry, including real estate or the housing market.

The Federal Reserve may alter interest rates soon in an effort to minimize economic damage. Occasionally, this helps stabilize markets and boost consumer confidence, resulting in increased expenditure. The adjusted interest rate is used by lenders to determine their interest rates for loans and mortgages in any way possible.

Loans aren't in high demand during a recession since individuals are reluctant to spend money and want to preserve it. Mortgages come in a variety of forms, and each has its advantages and disadvantages, regardless of the economic climate. It's up to you to decide how much risk you're willing to take, but your lender may provide guidance.

The Great Recession left an everlasting imprint on future housing markets. During that period of economic downturn, a greater number of homeowners had mortgages that were upside-down, which means that they owed more on their property than it was worth. As a result of the turmoil that was caused by unemployment and the high levels of consumer debt, lenders were obliged to evaluate in a more strict manner.

The graph below depicts the average 30-year fixed-rate mortgage based on Freddie Mac data obtained from FRED at the Federal Reserve Bank of St. Louis. The shaded areas represent U.S. recessions. The most recent recession, which ran from February to April of 2020, was the COVID-19 pandemic.

Freddie Mac's weekly survey indicates that during this brief period, the 30-year fixed mortgage rate declined from 3.45 percent to 3.23 percent. Thereafter, rates continued to decline, reaching record lows in January 2021. Throughout the Great Recession, which lasted from December 2007 to June 2009, 30-year fixed mortgage rates fluctuated between 6.10 and 5.42 percent.

Mortgage Rates During Past Recessions

The Great Recession was sparked by the mortgage crisis, which led the global financial system to collapse. From March 2001 to November 2001, during the early 2000s recession, mortgage rates decreased from 6.95 percent to 6.66 percent. From July 1990 to March 1991, during the recession of the early 1990s, mortgage rates declined from around 10 percent to 9.5 percent.

In the early 1990s recession, which was from July 1981 to November 1982, interest rates fell from 16.83 percent to 13.82 percent. From January 1980 to July 1980, rates decreased rather slowly, from 12.88 percent to 12.19 percent. In every instance, mortgage rates decreased during a recession. Obviously, the reduction varied from as little as 0.22 percent to as much as around 3 percent.

The lone exception was the 1973-1975 recession, which was caused by the 1973 oil crisis and saw rates rise from 8.58 to 8.89 percent. That was a time of so-called stagflation, which, according to some analysts, is reoccurring but remains to be seen. Homeowners, potential house purchasers, and the mortgage sector will all be hoping for the latter, a large fall in mortgage rates.

Many economists equate the 1980s to the present day, so it's feasible that we'll finally see significant respite. How much farther will mortgage rates rise before a recession, if one occurs at all, is the question. Will the 30-year fixed rate continue to rise to 7 or 8 percent by the end of 2022 or the beginning of 2023, then decrease to 6 percent?

If this is the case, any fall associated with a recession would simply return rates to their current elevated level. In other words, brace for the worst while the Fed does its utmost to combat inflation and hope for a swift recovery. In either case, you may wish to bid farewell to mortgage rates between 3 and 4 percent, at least for the foreseeable future.

What Happens to My Mortgage if the Housing Market Crashes?

The 2008 housing crash imposed an enormous financial burden on US households. As house prices fell by 30 percent nationwide, roughly 1 in 4 homeowners was pushed underwater, eventually leading to 7 million foreclosures. After a housing bubble burst, property values in the United States plunged, precipitating a mortgage crisis. Between 2007 and 2010, the United States subprime mortgage crisis was a transnational financial crisis that led to the 2007–2008 global financial crisis.

It was precipitated by a sharp decrease in US house values following the bursting of a housing bubble, which resulted in mortgage delinquencies, foreclosures, and the depreciation of housing-related assets.  The Great Recession was preceded by declines in home investment, which were followed by declines in consumer expenditure and subsequently business investment. In regions with a mix of high family debt and higher property price decreases, spending cuts were more pronounced.

The housing bubble that preceded the crisis was financed with mortgage-backed securities (MBSes) and collateralized debt obligations (CDOs), which initially provided higher interest rates (i.e., greater returns) than government securities as well as favorable risk ratings from rating agencies. Several large financial institutions collapsed in September 2008, resulting in a huge interruption in the supply of credit to businesses and individuals, as well as the commencement of a severe worldwide recession.

When property values in the United States fell precipitously after peaking in mid-2006, it became more difficult for borrowers to restructure their loans. Mortgage delinquencies skyrocketed as adjustable-rate mortgages began to reset at higher interest rates (resulting in higher monthly payments). Securities backed by mortgages, notably subprime mortgages, were extensively owned by financial firms throughout the world and lost the majority of their value.

Global investors also curtailed their purchases of mortgage-backed debt and other assets as the private financial system's ability and willingness to support lending declined. Concerns over the health of US credit and financial markets led to credit tightening globally and a slowing of economic development in the US and Europe.

Here's Why This Housing Slowdown Is Unlike Any Other

There aren’t as many risky loans or mortgage delinquencies, although high home prices are forcing many people out of the market. But if the Great Recession was triggered by a 2007-08 housing market crash, is today's market in a similar predicament? No, that's the simplest response. Today, the housing market in the United States is in much better shape. This is in part due to the stricter lending laws that were implemented as a result of the financial crisis. With these new guidelines, today's borrowers are in a far better position.

The average borrower's FICO credit score is a record high 751 for the 53.5 million first-lien home mortgages in the United States today. In 2010, it was 699, two years after the collapse of the banking industry. Considerably this is reflected in the credit quality as lenders have become much more rigorous about lending. As a result of pandemic-fueled demand, home prices have risen over the previous two years. Now homeowners have historic levels of equity in their homes.

According to Black Knight, a provider of mortgage technology and analytics, the so-called tappable equity, which is the amount of cash a borrower may withdraw from their house while still leaving 20% equity on paper, set a new high of $11 trillion this year. That's a 34% rise over the same period last year. Leverage, or the ratio of a homeowner's debt to the value of his or her house, has declined precipitously at the same time.

This is the lowest level of mortgage debt in US history, at less than 43 percent of home prices. When a borrower has more debt than the value of their house, they have negative equity. When compared to 2011, when over one-fourth of all borrowers were underwater, this is an improvement. Only 2.5% of borrowers have equity in their houses less than 10%. If property values do decline, this will give a significant amount of protection.

Just 3 percent of mortgages are past due, which is a record low for mortgage delinquencies. There are still fewer past-due mortgages now than before the epidemic, despite the dramatic rise in delinquencies during the first year. There are still 645,000 borrowers in mortgage forbearance programs connected to the pandemic that has helped millions of people recover.

Even though the pandemic-related forbearance programs have been exhausted by some 300,000 debtors, they are still overdue. Even though mortgage delinquencies are still at historically low levels, recent loan originations have seen a rise in the number of defaults.

The most pressing issue in the housing market right now is home affordability, which is at an all-time low in most regions. While inventory is increasing, it is still less than half of what it was before the pandemic. Rising inventory may ultimately chill house price rise, but the double-digit rate has shown to be extremely resilient thus far. As rising home costs begin to strain some buyers' finances, those who remain in the market should expect less competitive circumstances later in the year.

Home Values May Decline Regardless of a Recession

The housing market is based on a supply and demand cycle. A buyer's market exists when there is a big inventory of properties for sale, and property prices tend to decline. When inventory is low, however, residences are in high demand and the market shifts to a seller's market. It takes time to develop new dwellings and replenish supplies.

Housing prices will begin to fall if inventory grows and demand is fulfilled. Another reason that property prices have lately slowed is that individuals can no longer afford them. Income levels have not kept pace with house costs, and many first-time buyers who are still saddled with college loans cannot afford the extra weight of a mortgage.

The current housing inflation storm is driving buyers out of the market, contributing to the protracted period of extremely limited inventory—but sellers are still hesitant to lower prices. Waiting may be the best option for purchasers with time, regardless of whether there is a recession. According to Realtor.com, the number of houses for sale increased by the most in June 2022 on record. Active listings increased 18.7 percent year on year, but property prices remain persistently high.

In June, the national median listing price for active properties increased 16.9 percent from the previous month to $450,000. So far, property prices are up 31.4 percent from June 2020. It may take some time for values to fall because sellers are still trying to obtain top money for their property. Sellers are attempting to price their houses in line with recent comparables that closed in 2021—when mortgage rates were still at record lows and inventory was scarce.

However, many purchasers are waiting to see what happens in the autumn housing market, when there will be more inventory as well as greater competition. There is a lack of consensus on whether or not now is a good moment to purchase a house. In contrast to the most recent housing crash, which occurred during the financial crisis of 2008, we are currently experiencing growing inflation while job levels continue to be solid. The majority of economists were surprised by how quickly jobs were added in June.

The jobs market has been seen as the bulwark against a recession, and June’s numbers show that the employment pillar remains strong. Job growth accelerated at a much faster pace than expected in June, indicating that the main pillar of the U.S. economy remains strong despite pockets of weakness. Nonfarm payrolls increased 372,000 in the month, better than the 250,000 Dow Jones estimate and continuing what has been a strong year for job growth, according to data from the Bureau of Labor Statistics.

“The strong 372,000 gain in non-farm payrolls in June appears to make a mockery of claims the economy is heading into, let alone already in, a recession,” said Andrew Hunter, senior U.S. economist at Capital Economics.

The years that you anticipate living in the house is another factor that might play a role in determining whether or not you should buy it right away. Those who do not intend to remain in the house for at least five years after the purchase may end up losing money if the housing market experiences a crash after the purchase and they decide to sell. On the other side, attempting to time the market incorrectly might result in you missing out on the opportunity to purchase your ideal house.

You may be priced out of the market if interest rates continue to climb and home prices do not fall by an amount that is sufficient to compensate for high mortgage expenses. Buyers are in a better position to take advantage of the increasing availability of houses now that sellers are asking for more reasonable prices for their properties. If there is a downturn in the economy, mortgage interest rates will very certainly fall to about 4 percent or even lower. If it does, it could be a good time to hold off and save some money, especially for first-time homeowners.

Sources

  • https://www.forbes.com/advisor/mortgages/real-estate/housing-market-recession/
  • https://www.thetruthaboutmortgage.com/mortgage-rates-vs-recessions/
  • https://www.chase.com/personal/mortgage/education/financing-a-home/effects-of-recessions-on-mortgages
  • https://www.cnbc.com/2022/06/20/heres-why-this-housing-downturn-is-nothing-like-the-last-one.html

California Housing Market: Prices, Trends, Forecast 2023

by

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.

California Housing Market
Infographic Courtesy of CAR

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.

ALSO READ: Will the US Housing Market Crash?

California Regional Housing Market Trends

The California Association of Realtors (C.A.R.) recently released its housing market report 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.

California Housing Market Forecast 2023
Courtesy of Car.org

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 Home Values Forecast
Source: Zillow

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.

California Housing Market weekly trends
Source: CAR

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.

California Housing Affordability Index
Source: Housing Affordability Index By C.A.R.

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.

Sources:

  • https://www.car.org/
  • https://www.car.org/aboutus/mediacenter/newsreleases
  • https://www.car.org/marketdata/data/countysalesactivity
  • https://www.car.org/marketdata/marketforecast
  • https://www.car.org/marketdata/marketminute
  • https://www.car.org/marketdata/interactive/housingmarketoverview
  • https://www.zillow.com/ca/home-values

Blog Posts

Contact

Norada Real Estate Investments 30251 Golden Lantern, Suite E-261 Laguna Niguel, CA 92677

(949) 218-6668
(800) 611-3060
BBB