Southern California Housing Market: Prices, Trends, Forecast 2023 (2024)

FAQs

Will 2023 be a good year to buy a house in California? ›

They expect home prices to improve in Q3 & Q4 this year, over in 2023 they expect the medium home will delince 5.6% compared to 2022, to $776,600 in 2023 ($822,300 in 2022). They had predicted a median 2023 price of $758,600 forecast last October.

Based on the current market conditions, C.A.R. has revised its 2023 Housing Market Forecast. The forecast now projects a decline in existing single-family home sales, estimating 279,900 units to be sold in 2023, an 18.2 percent decrease compared to the 342,000 units sold in 2022.

Homebuyer.com data analysis indicates that, for first-time home buyers, June 2023 is a good time to buy a house relative to later in the year. This article provides an unbiased look at current mortgage rates, housing market conditions, and market sentiment.

Rising Home Prices

In April 2023, the median listing home price in Los Angeles County stood at $930,000, marking a 3.4% increase compared to the previous year. This upward trend in home prices indicates a growing demand for properties and reflects the desirability of the region's real estate market.

Despite what some may think, 2023 is still a good year to invest in real estate, thanks to advantages like long-term appreciation, steady rental income, and the opportunity to hedge against inflation. Mortgage rates are expected to decline, but the housing market is likely to remain competitive due to low supply.

With mortgage rates declining faster than expected, home prices are likely to remain mostly flat throughout 2024. This will be good news for buyers who have been waiting on the sidelines for a good time to enter the market.

It's also worth noting that while foreclosure rates are up year-over-year, experts do not expect to see a wave of foreclosures in 2023, even where home values are depreciating, as many homeowners have substantial equity due to progressive home price appreciation in recent years.

Each year, California sees about a 2% increase in rental prices, and real estate experts expect to see this trend continue into 2023. The average rent price for a one-bedroom apartment in Southern California is 18% higher than it was last year. The trend will likely continue but not at that level.

Is it a good time to buy a house in the current California market? It's always a good time to buy a house in California, according to the Oldhams. California homes have steadily appreciated over time. Historical data shows the average rate of appreciation in California came in at 6.77% annually over a 39-year period.

So far in 2023, the Fed raised rates 0.25 percentage points twice. If they hike rates at the May meeting, it is likely to be another 0.25% jump, meaning interest rates will have increased by 0.75% in 2023, up to 5.25%.

Will home interest rates go down in 2023? ›

“We expect that 30-year mortgage rates will end 2023 at 5.2%,” the organization noted in its forecast commentary. It since has walked back its forecast slightly but still sees rates dipping below 6%, to 5.6%, by the end of the year.

The median home price will rise to $385,800, an increase of only 0.3% from this year's level ($384,500), while home sales will fall 6.8% compared to 2022's level (5.13 million).

The Los Angeles Rent Forecast for 2023

Although the rapid growth is slowing, experts think prices in the area will still continue to rise. A forecast from the University of Southern California (USC) estimated 2.4% in rental increases for LA county in 2023, slightly less than the projected national average.

Los Angeles is a Sellers Housing Market, which means prices tend to be higher and homes sell faster.

While there's no consensus on what rents will do exactly in 2023 — go up a little, go down a little, or stay flat, according to three forecasts — what's clear is they are expected to return to more normal growth patterns, instead of the unsustainable, record rates seen in 2021 and 2022.

Is House Flipping Profitable in 2023? Yes! If you get the basics right, flipping homes in California is easier in 2023 than flipping homes in 2021's competitive market. You Make Money When You Buy Your Flip: Stick to the home flipper's 70% rule.

Possible Depreciation

Appreciation is an important fact to consider when you're trying to determine whether a home is an investment. If the appreciation rate is high enough, then the added value you'll earn from the home will make the investment worth it within a certain period of time.

These organizations predict that mortgage rates will decline through the first quarter of 2024. Fannie Mae, Mortgage Bankers Association and National Association of Realtors expect mortgage rates to drop through the first quarter of 2024, by half a percentage point to about nine-tenths of a percentage point.

“Returning to mortgage rates of 3% or 4% is not going to happen, in my view,” says Yun, who points out that historically rates have been higher. The low rates of 2020 and 2021 were “unique” and those that got them were “lucky,” he says.

What will my house be worth in 2030? ›

The Average US Home Could be Worth $382,000 by 2030

House prices in the US have risen by 48.55% in the last ten years (from $173k to $257k) and if they continue to grow at this rate for another decade, the average US home will be worth $382k by 2030.

Last year, rising mortgage interest rates chilled the previously hot Southern California housing market. Buyers backed off, sales plunged and, for the first time in a decade, home prices underwent a sustained slide. By one measure, prices in the six-county region fell 13% from the peak last spring.

Despite the fact that there are some troubling trends in the housing market, we're likely not going to see a crash in 2023 or 2024. While house prices are likely to drop, demand for housing caused by America's ongoing housing shortage is likely to keep prices relatively stable.

The imbalance between supply and demand; resulted from of strong economic growth creating hundreds of thousands of new jobs (which increases demand for housing) and the insufficient construction of new housing units to provide enough supply to meet the demand.

For rent-controlled units, the annual allowable increase amount effective March 1, 2023 through February 29, 2024 is 3.6%. This amount is based on 60% of the increase in the Consumer Price Index for All Urban Consumers in the Bay Area, which was 6% as posted in November 2022 by the Bureau of Labor Statistics.

Rent Control Laws

According to the AB-1482 from the California Tenant Protection Act), any rent increase is capped at 5% plus inflation or 10% of the lowest price paid in the last 12 months. These laws started in January 2020, and it's expected to last until January 2030. You can read more about this measure here.

Under the provisions of the TPA, landlords are allowed to increase rents each year by 5% plus the applicable average increase in the cost of living in order to allow for inflation. There is a maximum increase of 10% allowed in any given year, thus the Act's provision is often referred to as a “rent cap.”

This means the best time to sell a home in the Golden State would be around January and March, especially for homes in Los Angeles, San Francisco, or San Diego. In comparison to the rest of the country, the best time to sell a home is typically during the spring, specifically in mid-April, according to Jones.

Winter is usually the cheapest time of year to purchase a home. Sellers are often motivated, which automatically translates into an advantage to you. Most people suspend their listings from around Thanksgiving to the New Year because they assume buyers are scarce.

To keep a house payment below 30% of your income after putting 20% down, a person would need to earn roughly $16,693 per month or $200,316 per year – just to buy a median-priced home in California.

What is the interest rate forecast for 2023 and 2024? ›

Both estimates are largely in line with fresh projections from officials in March. The Fed penciled in a 5-5.25 percent peak interest rate for 2023, after which officials see rates falling to 4.25-4.5 percent by the end of 2024.

'I believe by the end of 2023 we will see rates start to fall with a target of between 2.5 to 3 per cent in 2024. 'I believe if the base rate can get back to circa 2.5 per cent, then we will see rates hovering around that mark with a return to products that have not been seen in the mortgage industry for some time.'

After falling in 2023 and 2024, home prices are predicted to plateau in 2025 before rising again at just above the rate of inflation. However, due to the spike in home values from 2020 through 2022 due to record-low mortgage rates, median sales prices will take at least until 2027 to regain the highs of mid-2022.

In my opinion, real estate is one intelligent option to consider in 2023, as it often has excellent returns, tax advantages and provides diversification even in the face of a challenging economic climate. Real estate also has the potential to compound your investment.

UCSD model predicts 12% decline in San Diego home prices by the end of 2023. SAN DIEGO — A study from UC San Diego is predicting there will be a 12% drop in the future of the housing market in San Diego.

Beginning April 1, 2023, fully-covered rental units subject to the RSTPO and mobilehome spaces subject to the MRSMOPO will be restricted to a maximum of 3% rent increases through December 31, 2023. Luxury units will be restricted to a 5% rent increase through December 31, 2023.

For example, in states like California, Hawaii, and Maryland, rent prices experienced a real-dollar decrease between 1990 and 2000.

Effective August 1, 2022 to July 31, 2023, the maximum allowable increase is 10%. (The percentage may change every year. Annual rent increases are limited to no more than 5% plus the percentage change in the cost of living for the region in which the property is located, or 10% whichever is lower).

What is the best date to close on a house? ›

If you need to be occupying your home by a certain date to save on rent, it's a much better deal to close at the end of the previous month (for example, January 30) instead of the beginning of the current month (February 1).

Stock Market Supply and Demand

If the demand for the stock is more, i.e number of buyers of a stock than the number of sellers of a stock then the stock price goes up. And if the number of sellers is more than the buyers then the stock price goes down as the demand is less and supply is more.

What happens to my mortgage if the housing market crashes? A housing market crash won't affect your existing fixed-rate mortgage. However, if the value of your home drops below your purchase price, then you'll be making payments that are greater than the worth of your property.

Although home prices are expected to improve in the second half of the year, the California median home price is projected to decrease by 5.6 percent to $776,600 in 2023, down from the median price of $822,300 recorded in 2022.

According to data from real estate firm RealPage, average asking rent for a vacant L.A. County apartment during the first quarter of 2022 was up 17% from the same period a year earlier. But by the first three months of this year, rent growth had slowed, with prices rising 6% from 2022 levels.

Yes, Rents Will Rise

“There's always going to be a modest two percent annual increase,” explains Los Angeles-based real estate agent Ashley Temm. “But the average rent for a one-bedroom apartment in this city is up 18 percent from last year. I foresee that trend continuing.”

Mortgage rates could decrease next week (June 12-16, 2023) if the mortgage market takes a cautious approach to a possible recession. However, rates could rise if lenders account for the Federal Reserve taking measures to counteract inflation or if a global event brings economic uncertainty.

“We expect that 30-year mortgage rates will end 2023 at 5.2%,” the organization noted in its forecast commentary. It since has walked back its forecast slightly but still sees rates dipping below 6%, to 5.6%, by the end of the year.

So far in 2023, the Fed raised rates 0.25 percentage points twice. If they hike rates at the May meeting, it is likely to be another 0.25% jump, meaning interest rates will have increased by 0.75% in 2023, up to 5.25%.

"Possibly in 2024, but it will depend on the Fed's decisions about raising rates in the second half of the year," says Fleming. "And even if they do go down, it won't be back to the rates of yesteryear. 6% mortgage rates used to be normal, and that's more reasonable to expect too."

Is it smart to buy property in California? ›

California's Real Estate Market Today

As of mid-2022, California's real estate market is one of the strongest and most dynamic in the country. That alone should answer the question of is California real estate a good investment, but it's important to note that it's also a sweeping generalization.

Seventy-four percent of voters view housing affordability as a major issue, according to a February survey by the nonpartisan Public Policy Institute of California, and nearly 90% are worried that younger generations won't be able to afford a home in the state.

Moody Analytics expects rent price growth of 2.5% to 3% for 2023. Barring a recession or unforeseen events, rent prices are expected to grow annually by a range of 3% to 4% in 2024 and 2025, says LaSalvia. That's roughly the same rate that prices grew in the years leading up to the pandemic.

Housing in California is expensive due to high demand and low supply. With strong demand from millennials and retirees drawn to California's warm climate, the limited supply of housing has driven up property values.