Some California Real Estate Market Predictions for 2023

Five key highlights from this article:

• Some new predictions for the California housing market came out this week.
• They were issued by the state’s Realtor association.
• This latest forecast predicts a slight dip in home prices in 2023.
• Sales volume is expected to dip as well, partly due to higher costs.
• Buyers could experience a more “favorable environment” next year.

On October 12, researchers from the California Association of REALTORS® (C.A.R.) published a series of California real estate market predictions for 2023. Their forecast has become an annual tradition, offering home buyers some ideas as to what the market might be like over the coming months.

The group’s latest predictions should come as no surprise, for those who’ve been keeping up with market trends lately.

California Real Estate Market Predictions for 2023

It’s no secret that the housing market has cooled down during 2022. This is true for California, as well as for the nation as a whole. Homes are taking longer to sell these days, and there appears to be less competition among buyers.

In some ways, this is great news for buyers who are still on the house hunt. After two years of overheated conditions, the California real estate market is finally moving in a more buyer-friendly direction.

The latest evidence can be found within a set of predictions issued by the California Association of Realtors. The statewide Realtor group expects home sales to slow down in 2023, compared to the previous year.

Specifically, C.A.R. predicted that existing single-family home sales would end up totaling 333,450 in 2023, a 7.2% decline from 2022’s projection of 359,220 sales.

And that’s to be expected. After nearly two years of frenzied activity, the California real estate market is settling down into a slower pace. There are several reasons for this. The two most obvious reasons are higher mortgage rates and home prices.

According to Freddie Mac, the average 30-year mortgage rate rose from 3% to nearly 7% over the past 12 months (as of October 2022). Meanwhile, the median home value in California rose above $750,000 earlier this year, for the first time ever. These trends have reduced buyer demand, leading to fewer sales.

House Values Expected to Cool

C.A.R. made another important prediction for the California real estate market in 2023. Their researchers believe that home prices across the state will dip slightly over the next year or so.

But that would likely be a short-term market “correction,” after which prices will probably turn north again. As we wrote in a recent blog post, home values in California tend to hold their value well over the long term. You can see this by looking at historical price charts.

If prices do level off or dip slightly, as expected, it could give wages a chance to catch up. Over the next few years, house values are expected to rise at more normal pace (historically speaking). That might ease some of the affordability issues that have create hurdles for some home buyers.

And speaking of things easing, the C.A.R. housing market forecast also suggested that it could be a lot easier to buy a house in California next year.

It Could Be Easier to Buy a Home in 2023

Here’s another (somewhat easy) prediction for the California real estate market. In 2023, buyers could have a much easier time finding and buying a house in the Golden State. Inventory growth, a slower pace, and other factors are nudging the housing market in a more buyer-friendly direction.

According to C.A.R. President Otto Catrina:

As sellers adjust their expectations, well-priced homes are still selling quickly. And for buyers: more homes for sale, less competition, and fewer homes selling above asking price, all point to a more favorable market environment for those who were outbid or sat out during the past two years when the market was fiercely competitive.

Fiercely competitive is an appropriate descriptor. During the second half of 2020, and all through 2021, home buyers in California’s major cities had to contend with a high level of competition. This was driven by a combination of rising demand and plummeting inventory — troubling conditions from a buyer’s perspective.

But much has changed since then.

As mentioned in the above quote, home buyers have a lot more going for them these days. There are more properties to choose from, along with a lower level of competition within the market. We’ve also seen signs that sellers are going above and beyond to attract offers. In some cases, that includes a contribution toward the buyer’s closing costs.

All of these trends are connected, and they’re all driving the California real estate market predictions for 2023. The bottom line is that the market has cooled considerably from the red-hot days of 2021, and that could give buyers more bargaining power and more properties to choose from.

Disclaimer: This article contains housing-related predictions from third-party sources not associated with our company. Such forecasts are the equivalent of an educated guess and should be viewed as such.