Are We Past the ‘Bottom’ of the Housing Market in California?

From an investment standpoint, the best time to buy a home in California is often when house values fall to their lowest point of a particular cycle. This is commonly referred to as the “bottom” of the real estate market, and it usually precedes a long period of sustained home-price growth.

As of summer 2023, it seems that the housing market in California has hit bottom, from a price perspective. Home prices appear to have reached their lowest point of the nationwide post-COVID real estate cooldown. Going forward, house values across the Golden State will likely resume an upward trajectory.

What Is the ‘Bottom’ of the Market?

In a real estate context, the “bottom” of the market refers to the lowest point in a housing market cycle. It occurs when home prices have reached their lowest point, and just before they start rising again. In other words, it represents the end of a period of declining home prices, and the beginning of a recovery or “rebound” phase.

Buying a home in California at or near the bottom of the real estate market offers distinct advantages. For buyers, it presents an opportunity to purchase a property for a lower price, thereby increasing their buying power. At the bottom of the market, a home buyer might be able to afford a property that would be too expensive at other times.

Identifying the exact “bottom” of a real estate market can be challenging, since it usually becomes evident only in hindsight. Additionally, market conditions can vary significantly based on location and other factors, making the timing of the bottom differ between regions.

Many cities across the state appear to be rebounding from a relative bottom right now, with prices turning north again in recent months.

California Home Prices Rising in 2023

As you might already know, home prices across California declined through the second half of 2022 and into 2023. The Golden State wasn’t unique in this regard. Housing markets all across the country experienced declining home values as part of a broader cooling trend.

In all cases, the general cause was the same. Rising mortgage rates and higher home prices reduced demand among buyers, causing the real estate market to slow down considerably. In response to these trends, many sellers found they had to reduce their asking prices. This led to a general decline in home values in California and nationwide.

Now, as of summer 2023, home prices in California appear to be rebounding from the bottom of the housing market. Numerous reports published over the past few weeks have shown that house values are beginning to rise again. Tight inventory conditions have a lot to do with this, among other factors.

Earlier this month, the California Association of Realtors (C.A.R.) reported that the statewide median home price rose by 0.3% from May to June 2023.

That might not seem like a significant number. But when you consider that California home prices declined steadily during the first part of this year, that figure becomes noteworthy. It could mark a turning point, signifying that the bottom of the housing market is now behind us.

As of last month, the median home price in California was $838,260, according to C.A.R. Data provided by Zillow also show that prices have risen over the past three months or so.

Tight Supply Conditions Boosting Prices

So, why are home prices in California hitting the bottom and rebounding? What’s boosting house values across the Golden State?

For one thing, housing market supply levels have declined sharply since the start of 2023, erasing the supply gains made last year. In addition to making the real estate market more competitive (again), this trend is putting upward pressure on home prices statewide.

The C.A.R. report mentioned above cited low supply levels as one of the primary contributing factors in the recent price increase.

To quote their July 2023 report:

“California’s median home price exceeded $800,000 in June for the third straight month, edging up 0.3 percent from May’s $836,110 to $838,260 in June. The statewide median price continued to rise and reached the highest level in ten months. Tight housing supply and more high-end homes being sold relative to prior months continued to put upward pressure on prices.”

What Does All of This Mean for Buyers?

Home buyers in California should pay close attention to these trends. If the bottom of the market is truly behind us (as recent data seem to suggest), we could be entering another phase of rising prices. In that scenario, homes would become more expensive over the coming months, rather than more affordable.

Granted, home prices in California probably won’t skyrocket again anytime soon, like they did during the COVID years. Forecasts suggest that house values nationwide will resume rising at a more moderate pace through the rest of this year and into 2024.

Still, these trends could warrant a sense of urgency among home buyers in California, especially for those who are on a tight budget.

In Closing: Some Word of Wisdom

The real estate market can be unpredictable. It’s hard to know when prices will go up or down, or how long those trends will last.

Home prices tend to rise steadily over time, with the occasional downturn brought on by economic events. Because of this, buying a home in California is almost always a wise investment.

But you have to make sure it’s the right time for you, based on your financial situation and long-term goals. Buying a home when you’re financially and emotionally prepared to do so is a much better strategy than trying to “time the market.”