Q1 2023 Real Estate Report for Southern California
The Southern California real estate market is one of the most dynamic and desirable markets in the United States. Home to the largest cities in California, including Los Angeles, San Diego, and Orange County, the Southern California real estate market is renowned for its diverse range of properties, from luxurious beachfront homes to cozy suburban bungalows.
State of Housing Inventory Q1 2023
Due to a variety of factors over the last quarter, Southern California inventory has dropped 40% from January 2023 compared to January 2022 according to First Tuesday Journal. The combination of low interest rates and available inventory was a perfect storm the past couple years through the pandemic. Now that the pandemic has ended, interest rates are returning to normal, historical averages and the dramatic shift to working from home versus going into an office everyday has affected the market. The drive of remote work has actually flipped the market inventory from selling a property back to renting your property which has affected the available inventory on the market from a purely statistical standpoint. Remote work also contributed to the housing price spike of 24% over the last few years.
While this may sound very doom and gloom, it isn’t. If we examine available inventory in one Southern California territory, Rancho Sante Fe, you will see that there are quite a few positives. According to the California Association of Realtors housing market data overview from February 2023;
The medium price of an active listing is up 6.4%
The sale-to-list price is has not been dramatically affected by the interest rate increases from the Federal Government
The single family resident active listing increased over last year by 23.7%
Interest Rates
Another contributing factor to the Southern California inventory was the record low interest rates in the past years. It was an attractive time for those who were looking to sell and those looking to buy in Southern California. However, those families and individuals who purchased homes in 2020-2022 are staying put. This directly affects the available inventory.
The interest rates will always play a factor in the market. Interest rates as of Monday, April 17, 2023, current interest rates in California are 6.98% for a 30-year fixed mortgage and 6.20% for a 15-year fixed mortgage on average. Mortgage rates are dropping at the moment little by little. One silver lining has risen to the forefront; rates on jumbo mortgages have been below rates for conforming mortgages, so Californians who need to borrow more than $1 million can do so at favorable rates according to BankRates website.
"A brief interest rate reprieve and softer home prices during January created a window of opportunity for homebuyers to dip their toes into the home-buying waters, which helped boost home sales to the highest level in five months," said C.A.R. President Jennifer Branchini, a Bay Area REALTOR®. "A shift toward more home sales in the lower-price segments is expected to continue to further soften home prices. However, with the availability of homes remaining extremely tight and housing supply conditions not expected to improve any time soon, prices should find a bottom later this year as interest rates stabilize", found on PR Newswire from the California Association of Realtors.
California HOME RENTALS on the Rise
According to the most recent data from the United States Census Bureau, in 2020, approximately 48% of households in San Diego were renters. The medium gross rent between 2017-2021 in California was $1,698, according to the Census Bureau. With the combination of interest rates increasing, inventory reductions, and home buyers who decided to stay put and capitalize on working from home, renting your property could be quite beneficial in Southern California versus selling your home.
Renting your property in San Diego can be profitable due to a few different factors. Firstly, San Diego is a desirable location to live in, thanks to its beautiful beaches, warm weather, and thriving economy. This means that there is a consistent demand for rental properties, particularly among young professionals, students, and families. As a result, landlords in San Diego can charge competitive rental rates and often find that their properties are occupied for most of the year.
Another factor that contributes to the profitability of renting in San Diego is the relatively high property values in the area. This means that landlords can charge higher rental rates, as the value of the property is higher. Additionally, San Diego has a large military presence, which often results in a steady stream of renters looking for short-term leases. This can be particularly advantageous for landlords, as short-term rentals often command higher rates.
If you do decide to rent, we recommend you make sure you are familiar with all landlord and tenant laws regulated by the State of California.
ABOUT ECD
Everything Creative Designs has been in business since 2006, staged thousands of homes, and has a flexible team of professional interior designers and stage assists who can stage a 5000 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. Everything Creative Designs is your preferred partner when you want your rental houses to stand out from the crowd and attract your ideal renters.