Q4 2023 Real Estate Report for Southern California

The Southern California real estate market is experiencing significant shifts as we enter the final quarter of 2023. The allure of homeownership remains strong, but rising interest rates, inventory shortages, and evolving market dynamics are shaping the landscape. Let's delve into the current state of the Southern California real estate market.

Housing Affordability

Mortgage rates have skyrocketed, reaching a staggering 20-year high. Since August 2021, the 30-year mortgage rate has more than doubled, surpassing 7%. This significant increase has thrown a wrench into the gears of the home-buying process, elevating monthly costs and affecting affordability.

According to C.A.R. Q2 California housing affordability report, to purchase a median-priced single-family home valued at $830,620, buyers needed an annual income of $208,000 and a 20% down payment. Meanwhile, condos and townhouses, with a median price tag of $640,000, required a minimum income of $160,400.

First-time homebuyers are grappling with affordability issues in many California counties. CAR's First-Time Buyer Housing Affordability Index for the state stood at 32 in Q2 2023, significantly lower than the national index of 55. A lower number indicates less housing affordability. Notably, regions like the San Francisco Bay Area and the Los Angeles metro area reported even lower index scores of 28 and 33, respectively, making it increasingly challenging for first-time buyers in these areas. In contrast, the Central Valley, with index scores of 46 in Sacramento and 47 in Fresno, and San Bernardino with 50 in Southern California, represents a more affordable option for aspiring homeowners.

Homes do remain expensive for most buyers, but median sales prices across the state have shown a decline from 2022 to 2023, this trend suggests that some relief may be on the horizon for prospective homebuyers.

Housing Supply and Demand

A key indicator of market dynamics is the current housing supply level. As of September 2023, Redfin reported an average supply of two months. In September 2023, California had 77,014 homes available for sale, showing a 23.6% decrease compared to the previous year. The number of newly listed homes was 27,236, which marked an 11.5% drop from the previous year.

This figure indicates how long it would theoretically take for all currently listed homes to sell based on the current rate of home-selling activity. While there has been a slight increase in inventory through the year, it's essential to note that the highest supply level within the last five years was four months, recorded in January 2019. This implies that the Southern California real estate market remains favorable for sellers, as demand continues to outstrip supply.

As reported in Forbes, another significant factor affecting home prices in more affordable counties and rural areas is the prevalent trend of remote work. Without the need for daily commutes, people have the flexibility to reside in more desirable locations. To illustrate, the 2022 Consumer Survey conducted by CAR found that 42% of the 1,114 respondents anticipate working remotely full-time for the foreseeable future, while an additional 22% have the option to work from home part-time, allowing them to choose locations without concern for commuting convenience.

No Housing Market Crash on the Horizon

Despite concerns, experts remain optimistic that the possibility of a housing market crash will not happen as previously thought earlier in the year before interest rates spikes occured. Several factors are contributing to this optimism. The absence of oversupply, stricter lending standards, and reduced lending risks make a crash less likely. 

We find reassurance in the words of Lawerence Yun, Chief Economist at the National Association of Realtors: “A crash happens with oversupply. It will not happen because there isn’t enough inventory” as cited on Bankrate. Typically, market crashes result from oversupply, a condition that is notably absent in the current scenario. Additionally, stricter lending standards have significantly reduced the risk of mortgage defaults.

Is It a Good Time to Buy or Sell?

The question that looms large in the minds of potential homebuyers and sellers is whether the current conditions favor them: for buyers, the California housing market suggests that it might be a better time to purchase a home. Prices are expected to be at some of the in lowest levels since the pandemic-induced real estate boom began. Additionally, an increase in inventory provides more choices for those in search of their dream home. However, prospective buyers should remain vigilant about mortgage rates. 

For sellers, the situation remains favorable, especially if they act promptly. Median sales prices are currently trending lower in many counties and major cities, making it an opportune time to sell. Although homes are spending more time on the market and price reductions are becoming more common, the tight inventory continues to drive competitive sales. All the more reason to ensure that your home is staged to perfection to attract the perfect buyer. 

Housing Market Forecast for 2024

Recent forecasts from the California Association of Realtors® (C.A.R.) provide a glimpse into the future of the California real estate market. The forecast points to a notable 22.9% increase in existing single-family home sales, reaching 327,100 units, up from the projected 266,200 in 2023. Alongside this, California's median home price is anticipated to climb by 6.2% to $860,300 in 2024, rebounding from the projected 1.5% decrease to $810,000 in 2023, which followed the 2022 median of $822,300. Housing affordability is also expected to remain steady, holding at 17% in 2024, mirroring the 2023 projection. These projections offer a positive outlook for both potential buyers and sellers in California's real estate market in the coming year.

ABOUT ECD 

Everything Creative Designs has been in business since 2006, staged over 6000 single-family homes, multi-family homes, rental properties, condominiums and more and has a flexible team of professional interior designers and stage assists who can stage a 6000+ square foot home from start to finish in one day. We have a fully stocked warehouse of interior design quality pieces. These curated collections are all hand picked with purpose and refreshed every year to remain on trend. We leverage technology to help streamline our process and offer our clients transparency every step of the way. Everything Creative Designs is your preferred partner when you want your property to stand out from the crowd and attract your ideal buyer. We invite you to check out our portfolio for ideas and inspiration.