Real estate can be a wild market. The ups and downs of the housing market—especially in a place like California—can make it seem like you’re not in control of anything. You’re just strapped into a roller coaster and have to ride it out. And buyers and sellers are feeling the same thing.
The last few years have been crazy!
There are so many factors that affect the housing market: The economy. Interest rates. The Federal Reserve. The job market. Political trends and elections. The list goes on…
But whatever you do, don’t throw up your hands and give up! If you arm yourself with knowledge and education—and actually apply it—you’ll be able to dominate whatever housing market trends are thrown your way.
What about California’s housing market in 2023? What’s the state of the market in the Golden State? What factors are shaping it in 2023?
We’re digging into California’s housing market to see how you can weather the storms and come out on top.
Let’s dive in!
The Importance of Staying on Top of Trends
Buyers and sellers rely on the expertise of real estate agents (you!) to decide when to purchase or sell a home. So you’ve got to be “in the know” when it comes to housing market trends.
While it might seem like a major headache to research this stuff, it’s important to establish yourself as an authority and expert on the housing market. People are trusting you. And with one of the biggest purchases (or sales) they will make in their lifetimes.
So if you’re short on time, we’re going to break down the California housing market in 2023 so you can get educated and then get back to the things you do best—buying and selling homes!
Buyers are wondering, “Is it a good time to buy a home in California in 2023?”
Sellers are asking, “Is 2023 a good year to sell a house in California?”
And everyone and their uncle is asking, “Why is California housing so expensive?”
Thankfully, we can take the guesswork out of the housing market by looking at a few stats published by reputable sources like CAR, Redfin and Zillow. Each of these sources publishes regular housing market updates for specific states and the entire nation. We’ll mostly focus on CAR’s monthly report for July 2023.
The State of California’s Housing Market in 2023
Before we dig into more of the details of the California housing market in 2023, let’s look at a quick summary.
- California’s housing market is one of the priciest real estate regions in America. This is in part due to higher mortgage interest rates and skyrocketing inflation.
- Overall, the market in California is relatively stable compared to last year.
- The median price of a home in California was $832,340 as of July 2023, up just barely (0.2%) from July 2022 ($830,870). And this number is down from the previous month—$838,260 in June 2023. So you can see the overall market is starting to settle a bit.
- It’s still a seller’s market because of high home prices—but some areas have become more of a neutral market. This means it’s not necessarily favorable for buyers or sellers, but is more balanced.
- Median sales prices in California went down by 9% comparing 2023 to 2022. So we’re already seeing somewhat of a cooling down of the market. But if you’re looking to buy in California, it’s still going to cost you!
Let’s look more closely at the numbers.
C.A.R.’s Housing Market Report
C.A.R. stands for California Association of Realtors and they release monthly and quarterly updates on the state’s housing market. Their data comes from surveying more than 90 associations of realtors and MLSs across the state, representing around 90% of the market.
The trends vary based on which region of California you’re looking at. But the overall housing market still follows the same basic trends.
Here is data from C.A.R. for July 2023 for existing single-family home (SFH) and condo or townhome transactions:
Factors Affecting California’s Housing Market
Now let’s take a look at a few of the factors that have affected California’s housing market this year.
(1) Higher Mortgage Interest Rates
One big factor affecting home prices in California has been rising mortgage interest rates.
To prevent a recession, the Federal Reserve Bank began raising interest rates recently. This caused the market to cool across the country and made buying a house simply unaffordable for many Americans.
Here’s how that works. When it costs more to borrow money—when the Federal Reserve raises interest rates—it causes mortgage interest rates to rise. Buying a home gets more expensive.
This is because the higher the mortgage interest rate is, the more expensive it is to buy a house. And the higher your monthly mortgage payment will be.
Americans who were once on the market for a house and ready to enjoy a 2.75% interest rate are now dealing with interest rates closer to 7%. Ouch!
The FED has also indicated that there will most likely be more interest rate hikes until leveling out in mid-2024.
(2) Inflation
Rising inflation is another major factor affecting home prices across California.
When it costs more to build houses, home prices go up. Labor costs and the rising price of things like lumber, doors, windows, siding, roofing, etc. are directly tied to home prices.
Until inflation cools down, don’t expect home prices to drop significantly.
(3) The Job Market
America’s tech industry is still largely based in Southern California and Silicon Valley. Tech giants like Meta (formerly Facebook), Google and Apple all have their main headquarters in California.
And these companies did massive layoffs beginning in 2022 and into 2023. Hundreds of thousands of tech workers were laid off throughout the industry. And these layoffs sent ripple effects into the job market and are causing people to delay buying or selling a home. If you don’t have a job, you’re not going to be buying a house.
Fewer people are buying homes right now, which sends shockwaves across the real estate market.
(4) Supply and Demand
One of the biggest factors for the housing market is basic supply and demand. The more houses that are available, the cheaper they become. On the other hand, the fewer houses on the market, the more expensive they become.
Right now, in California especially, there is very low housing and rental supply. This has kept prices higher than usual. It also leads to people having to pay higher rent prices.
For millennials looking to buy, many will probably continue to rent and wait for prices to come back down.
All of these factors have also caused many Californians to search for a home in other states. California has the highest percentage of people looking to sell and move. (California, New York, the District of Columbia, Massachusetts, and Illinois were the top states homebuyers were looking to move from.)
These are just a few of the things that have affected California’s housing market. Our goal isn’t to cover every single economic factor but just to give you a broad overview.
What Does the Future Hold?
No one has a crystal ball. But there are some experts who have weighed in on where the trends are headed into 2024.
The Vice President and Chief Economist of C.A.R., Jordan Levine, said,
“High inflationary pressures will keep mortgage rates elevated, which will reduce homebuyers’ purchasing power and depress housing affordability in the upcoming year. With borrowing costs remaining high in the next 12 months, a pull-back in sales and a downward adjustment in home prices are expected in 2023.”
In short, home sales will probably continue to drop, causing home prices to also fall somewhat.
Is 2023 a Good Time to Buy a House in California?
Even though California is still a seller’s market, depending on where people live, 2023 could be a good year to buy. Prices in some areas are coming down.
But with the 30-year fixed mortgage rates being very high still, some buyers will have to wait for the rates to come down a bit before they’re ready to buy.
Is 2023 a Good Time to Sell a House in California?
Since home prices are still very high, in a lot of areas, 2023 is a good time to sell. Home prices are starting to drop so the longer you wait, the less money you could make from the sale of your home. And the less you will have to work with when it comes time to buy a new home.
Homes are staying on the market somewhat longer, but home inventory in California is still relatively low and some homes continue to sell for above asking price. Chances are that sellers will be able to sell their homes quickly and still make good money.
However, as interest rates continue to tick up, it could become more difficult to find a buyer as time goes on.
Learn How to Weather Any Market
The best real estate agents take an active role in their business so they can weather any housing market trend. The last thing you want to do is take a passive approach and wait for the “storm” to blow over.
And no matter the market, when it comes to real estate, there is always a silver lining somewhere to be found. Every problem or crisis brings with it some kind of opportunity—if you know where to look and have the right mindset.
If you want to learn how to become an unstoppable real estate agent, check out my 3-day digital marketing mastery class. You’ll learn everything you need to know to become a top 1% real estate agent, sell more homes and free up more of your time.
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Don’t let market trends boss you around. Sign up for my mastery class today and take control of your real estate business.
