According to a recent report from the San Francisco Chronicle, the Bay Area real estate…
It Could Be Easier to Find and Buy a House in California in 2023
If you happen to follow real estate news, you probably already know that the housing market in California and nationwide has been cooling down lately. Higher prices and mortgage rates have reduced demand, while recent inventory gains have eased the supply crunch.
Now, recent reports suggest that it could be easier to find and buy a house in California during 2023, compared to the challenging conditions of the past. California home buyers are currently enjoying more negotiating leverage than they’ve had for quite some time, and that could stretch into next year as well.
Easier to Buy a House in California in 2023?
A recent survey conducted by Zillow offered some insight into the current thinking of housing analysts and economists in the U.S. Among other things, it revealed that most of them expect the housing market to favor buyers in 2023.
To quote the late-September Zillow report:
“…a [housing] market firmly in favor of buyers is expected next year, according to a majority of economists and housing experts polled in the latest Zillow Home Price Expectations Survey.”
Similarly, a 2023 housing market forecast issued by the California Association of Realtors said that buyers could enjoy less competition, more supply, and a “favorable market environment” next year.
While the inventory situation remains constrained, more and more homes have been coming onto the market in recent months. As of late 2022, buyers across California have more options to choose from when it comes to buying a house. This is a significant change from where we were just 18 months ago, when inventory had bottomed out at record-low levels.
Supply levels are still running a bit low from a historical standpoint, so buyers in some markets could continue to face house-hunting challenges in 2023. But overall, the situation has improved significantly from a home buyer’s perspective. So it could be a lot easier to find and buy a house in California, during 2023.
Higher Home Prices and Mortgage Rates
Mortgage rates and home prices have a lot to do with these cooling trends within the California real estate market. When the COVID pandemic began in the U.S., it led to a surge in relocation and home-buying activity. As a result, buyers had to compete fiercely with one another, driving up prices in the process.
Today, the median home value in California is around $769,000. That’s significantly higher than two years ago, when the median price was around $581,000. This has reduced the number of buyers in the market.
Mortgage rates have also followed an upward trajectory lately. During the first week of November, the average rate for a 30-year fixed mortgage loan was hovering around 7%. One year ago, 30-year mortgage rates were averaging around 3%. So they have more than doubled over the past year.
Higher housing costs could push us toward a California buyer’s market in 2023, by reducing demand. Granted, there are still plenty of buyers across the state who can afford to make a purchase. But the overall “buyer pool” has decreased steadily over the past year, due to rising costs.
The bottom line here is that buyers who plan to make a purchase in 2023 could encounter less competition, compared to those who bought during 2021 or early 2022. For many house hunters, this could make it easier to locate and purchase a home during 2023.
More Properties to Choose from in 2023?
According to a recent report from the California Association of Realtors (C.A.R.), buyers today have more properties to choose from. This is another way in which the real estate market has shifted in a more buyer-friendly direction during 2022.
According to the October C.A.R. report, inventory levels statewide have increased over the past year. We don’t know how long this growth trend will continue, but it has certainly shifted the market to favor buyers.
Supply growth tends to help buyers in three ways:
- It makes it easier to find a home, shortening the house-hunting timeframe.
- It eases competition and allows buyers to carefully consider each property.
- It gives buyers more bargaining power, for negotiating with sellers.
Today, sellers realize there are fewer buyers in the market and more properties to choose from. That means sellers have to work harder to attract offers and be more flexible when it comes to negotiating. All of which bodes well for house hunters.
Here’s the key takeaway. In 2023, house hunters statewide could find it much easier to find and buy a house in California. If supply levels continue to rise going forward, the real estate scene will become even more favorable for buyers. And that would be a significant change from the challenging conditions they experienced over the past two years.