The California Association of Realtors (CAR) publishes the California Housing Market Forecast every December to help people plan for the upcoming year. According to CAR's data, property prices in California declined in December. However, the most recent figures for January indicate that prices are once again finding support. The high costs of repairing and recovering from the effects of floods, coastal erosion, landslides, falling trees, business closures and other disasters are still a problem for homeowners.
Buyers are unable to afford high property prices in California despite strong cumulative demand. As a result, many people have moved to places where housing is much more affordable. Fewer buyers are expected in the next three to six months due to increasing unemployment and decreasing business profits (the technology industry continues to suffer a severe blow). The increase in consumer confidence is at odds with persistent price increases and the likely inability of the Federal Reserve to lower interest rates.
But will this discourage California consumers? There is still a high demand for goods and services in California. In particular, larger counties such as San Diego County would feel the effects of rising mortgage rates and property prices more strongly than the state average price. Although the housing market is evolving and the Zillow Home Value Index is changing in many places, many other experts are advocating a slower rise in property prices than what we've seen since the COVID-19 pandemic. All counties in the north will experience a decline in sales and prices due to the spill of atmospheric rain.
If rates don't rise “significantly” above 6% for an extended period and the economy avoids a recession, home prices in Southern California should remain virtually stable for the next few years, although some communities that experienced a drastic pandemic boom could suffer declines. Even though house prices have increased in many parts of California, home sales will continue to fall. Levine added: “Home prices will also moderate even more in the coming months, as interest rates remain high in the short term and seasonal factors come into play.” Apartment rental prices are falling in the Bay Area as vacancy rates rise, while other housing markets in the state are thriving. The San Francisco Bay Area experienced the biggest drop in housing prices, with 7.7% per month and 14.6% less than compared to the previous year.
Pending home sales increased as they normally do seasonally with the new year, however, the change in prices is evident in last month's statistics. The combination of risk of a downturn in the housing market, rising interest rates and inflation are causing more California homeowners to consider selling their properties this fall. Jordan Levine, chief economist at CAR, said that there is a 40% chance that home prices in Southern California will fall by at least 5% from peak to low compared to 25% chance in May. Home prices remain persistently high and although they are falling slightly (much more so in the Bay Area), the economic outlook (the effect of Federal Reserve interest rates) doesn't look so bad.
He and other experts said it's extremely unlikely that home prices will plummet as they did during the Great Recession. This updated report covers important statistics such as home prices, sales, and recent home sales trends from CAR, NAR, DOT, St Louis Fed, NAHB, Statista, Zillow and more.
