• calendar_month May 3, 2023
• folder Houseing Market

The real estate market is constantly evolving and changing with time. Keeping track of market trends and forecasts can be beneficial for both buyers and sellers. In this blog post, we will analyze the recent housing data in Southern California for March 2023. Home prices & sales are moderating across the Southern California housing market.

Southern California Median Sold Price of Existing Single-Family Homes:

According to the March 2023 home sales and price report by C.A.R., the median sold price of existing single-family homes in Southern California was $770,000. This is a 3.4% increase from the previous month, where the median sold price was $745,000. However, this is a 4.0% decrease from March 2022, where the median sold price was $802,500. The stats real estate market in Southern California is showing mixed results with some areas experiencing increases in median sold prices while others are experiencing decreases.

Los Angeles County:

In March 2023, the median sold price of existing single-family homes in Los Angeles was $718,370. This is a 1.2% decrease from the previous month, where the median sold price was $726,870. However, this is an 8.0% decrease from March 2022, where the median sold price was $781,050. Despite the decrease, the sales in Los Angeles have increased by 43.2% from the previous month and decreased by 30.2% from March 2022.

Orange County:

In March 2023, the median sold price of existing single-family homes in Orange County was $1,250,000. This is a 7.9% increase from the previous month, where the median sold price was $1,159,000. However, this is a 4.2% decrease from March 2022, where the median sold price was $1,305,000. Despite the decrease in median sold price, the sales in Orange have increased by 43.8% from the previous month and decreased by 30.0% from March 2022.

Riverside County:

In March 2023, the median sold price of existing single-family homes in Riverside was $612,000. This is a 2.9% increase from the previous month, where the median sold price was $595,000. However, this is a 1.3% decrease from March 2022, where the median sold price was $620,000. Despite the decrease in median sold price, the sales in Riverside have increased by 35.8% from the previous month and decreased by 37.6% from March 2022.

San Bernardino County:

In March 2023, the median sold price of existing single-family homes in San Bernardino was $475,000. This is a 1.8% increase from the previous month, where the median sold price was $466,500. However, this is no change from March 2022, where the median sold price was $475,000. Despite the stability in median sold price, the sales in San Bernardino have increased by 22.1% from the previous month and decreased by 43.4% from March 2022.

San Diego County:

In March 2023, the median sold price of existing single-family homes in San Diego was $915,000. This is a 4.6% increase from the previous month, where the median sold price was $875,000. However, this is a 3.7% decrease from March 2022, where the median sold price was $950,000. Despite the decrease in median sold price, the sales in San Diego have increased by 34.7% from the previous month and decreased by 29.4% from March 2022.

Southern California Housing Market Forecast 2023-2024

The housing market in the United States, and notably in Southern California, has been impacted as a direct result of rising mortgage rates. As a result of falling sales and rising inventory, a growing number of potential buyers and sellers are pondering whether or not home prices will fall in 2023. According to some experts, both national and Southern California prices will fall next year, owing in part to the increasingly expected recession.

As the recession comes closer, some industry analysts feel the scenario is becoming more realistic, and some of them have even modified their predictions to call for price cuts in 2023. These forecasts are a divergence from those made earlier this year when the vast majority of industry professionals believed that increased mortgage rates would only postpone price appreciation. That is, home prices would proceed to go up but at a more gradual pace compared to those seen in the preceding two years in Southern California.

A significant number of industry professionals maintain the view that a scenario involving slower development is the one that is most likely to occur. There are very few well-known analysts who anticipate price declines on par with those that were seen during the Great Recession if any at all. However, the rapidity with which the housing market is transforming is shown by the fact that many prominent analysts have already predicted that prices will fall in the Southern California real estate market, which is something that has not occurred for more than a decade.

Home prices are going to fall in California, according to Jordan Levine, chief economist for the California Association of Realtors. In response to falling demand, an increasing number of home sellers have reduced the prices at which their houses are placed for sale. If overall sales prices are to fall in the future, this is the first step that must be taken. Levine anticipates the California median sales price to rise 9.7% year on year in 2022, a substantial decrease from the over 20% growth projected in 2021.

Then in 2023, he expects the Federal Reserve’s actions to fight inflation will cause a mild recession, and the combination of job losses and higher rates will cause the statewide median price to fall 7.1% compared with this year, with similar declines in Southern California housing market specifically. Southern California home prices will either decline or should be largely flat over the next few years.

The job recovery trend is good, and the prospect of resuming all jobs lost due to the pandemic is becoming more tangible. Despite greater inventory levels and rising borrowing costs, the Southern California housing market is nevertheless operating strongly. However, the frenzied rate of activity during the last 18 months or so will reduce, but not to an alarming degree. The market remains favorable to house sellers, and they remain in control.

Will Home Prices Drop in Southern California Housing Market?

The following analysis of select counties of the Southern California real estate market for Q4 2022 is provided by Windermere Real Estate Chief Economist Matthew Gardner.

The Southern California real estate market has seen a slowdown in employment growth, with only 33,400 jobs added over the past three months. This is in contrast to the 347,700 jobs added between September 2021 and September 2022. Total employment in the region is still 305,300 below the pre-pandemic peak. The unemployment rate in the region in November was 4%, with the lowest rates in Orange County (3%) and San Diego County (3.3%).

In Q4 2022, 28,953 homes were sold in Southern California, which is 43.9% lower than the same period in the previous year and down 24.5% compared to Q3 2022. Pending home sales, which are an indicator of future closings, were down 30% from Q3, indicating that sales activity in Q1 2023 may also be down. Sales fell the most in Riverside County, with all markets experiencing significant pullbacks. The lower number of sales can be attributed to more listings in the market, which were up 83.5% year over year, and higher mortgage rates, which make homes less affordable.

Fourth-quarter home sale prices were 0.7% higher than the same period in the previous year but were 2.5% lower than in Q3 2022. Mortgage rates, which peaked in October, have impacted both the number of sales and prices. Median listing prices were down 4.9%, indicating that sellers have been adjusting their expectations, but they are expected to fall further before stability in the market is restored. Mortgage rates have started to pull back, and if this continues, the second half of 2023 is expected to be more active, resulting in rising sales and home prices.

Mortgage rates are primarily based on the prices and yields of bonds, and while bonds take cues from several places, they are always impacted by inflation and the economy at large. If inflation continues to fall, rates will continue to drop, and it is forecasted that mortgage rates will trend lower as we move through the year. However, rates will still be higher than what homebuyers have become accustomed to. Even as the cost of borrowing falls, home prices in expensive markets will probably fall a bit more to compensate for rates that will likely hold above 6% until early summer.

In Q4 2022, the average time it took to sell a home in the region was 37 days, which was 15 more than the same period the previous year and 11 more than in Q3 2022. Market time rose in all counties compared to Q3 2022, with homes in San Diego County continuing to sell at a faster rate than other markets in the region. However, more choices and higher mortgage rates appear to be sidelining some buyers. Whether they resume their search for a home in the spring may depend on the direction of mortgage rates and whether prices start to stabilize.

In conclusion, the Southern California real estate market has seen a slowdown in employment growth and a decline in home sales and prices in Q4 2022. However, there are indications that the second half of 2023 will be more active, resulting in rising sales and home prices. Mortgage rates are expected to trend lower as we move through the year, but rates will still be higher than what homebuyers have become accustomed to, and home prices in expensive markets will likely fall a bit more to compensate for the higher rates. It remains to be seen whether buyers will resume their search for a home in the spring, depending on the direction of mortgage rates and whether prices start to stabilize.

Source: C.A.R.