This is the second in a two-part series that explains how to buy a home…
Over the past couple of years, you’ve probably seen many news stories about how competitive the California real estate market was. Starting in the second half of 2020, the housing market ramped up like never before, forcing buyers to compete for limited inventory. Those trends continued throughout 2021 and into the first part of 2022.
But now, as we approach start of 2023, the real estate market is looking very different from the one in the rearview mirror. Inventory growth, slower sales, and other factors could make 2023 a good year to buy a home in California.
Why 2023 Could Be a Good Year to Buy in California
California home buyers have been through a lot over the past 18 months or so. Fast-rising home prices and sinking inventory created a series of obstacles for buyers, in cities all across the Golden State. The fast-paced real estate market forced buyers into bidding wars and multiple-offer scenarios, while reducing their bargaining power at the same time.
But things began to change halfway through 2022. The real estate market cooled down, inventory levels begin to rise, and sellers began to reduce their asking prices. A “deceleration,” as economists call it.
All of this bodes well for those who are planning to buy a home in California in 2023. It could be a much better year to buy a house in the Golden State, and here are three reasons why.
1. Housing market inventory has risen since last year.
Housing market supply remains low from a historical standpoint. But we’ve made some gains over the past few months. Today, as we approach the end of 2022, there are more homes on the market when compared to a year ago.
This is good news for California home buyers in 2023. After all, a lack of inventory was one of the biggest challenges for buyers during 2021 and early 2022. More than any other factor, the housing supply crunch fueled the bidding wars and frenzied market conditions mentioned above.
But this is another area where we’re starting to see positive changes.
According to an October 2022 report from the California Association of Realtors (C.A.R.), the statewide “Unsold Inventory Index” was at 2.9 months in September. That was up from 1.9 months of inventory a year ago — a step in the right direction from a buyer’s standpoint.
The bottom line here is that home buyers in California should have more properties to choose from in 2023, compared to the past two years. This could increase the chance of finding a suitable property within your price range. It could also pave the way to a more relaxed house-hunting experience, which we will talk about next.
2. House hunting should be less stressful and less competitive.
The housing market of 2021 evolved into the real estate equivalent of a foot race. Home buyers had to scramble and submit offers on the spot, just to be in the running.
Back then, sellers would often receive a dozen or more offers within the first day of listing the property. As a result, buyers usually didn’t have enough time to carefully consider their purchases or evaluate the asking price.
But with the fewer and slower home sales we’re seeing today, 2023 could be a much better time to buy a house in California. Home buyers should be able to take more time when considering their options. Overall, the house-hunting process should be a lot less stressful and less competitive.
This means buyers can more carefully weigh the pros and cons of different properties, evaluate sale prices, and negotiate with sellers. They won’t feel as rushed as those who purchased last year or the year before.
According to the October C.A.R. report cited earlier: “Existing, single-family home sales totaled 305,680 in September on a seasonally adjusted annualized rate, down 2.5 percent from August and down 30.2 percent from September 2021.”
The decline in sales is mainly because there are fewer buyers in the market, due to higher costs. So, for those home buyers who do plan to make a purchase in 2023, they can look forward to a calmer real estate scene.
3. A chance for long-term equity growth.
Financial and housing analysts often say that you can’t “time the market.” And that’s probably true. There’s really no way to know what home prices will do over the near future.
But the market does move through some fairly predictable cycles. Right now, we are coming out of a period of rapid price growth bolstered by strong demand. The supply-and-demand situation has changed, putting downward pressure on prices. In fact, home prices are currently leveling off or dipping slightly in many cities across California.
Over the long-term, home values in California tend to rise steadily, with occasional dips here and there. You can see this in the chart shown above.
Those who buy a home in California in 2023 might be able to come in at the “bottom” of the market, where prices are concerned. This means that they could enjoy many years of positive equity growth, as house values trend upward again.
Here’s the bottom line to all of this. In many respects, 2023 could be a good year for buying a home in California. In fact, we could very well transition into a buyer’s market situation over the coming months, especially if inventory continues to rise.