California Real Estate Market Forecast

It might be more difficult to characterize and explain California’s dynamic yet troubled housing market than other states.

While the overall housing market here has its medians and averages, and has been injured by the FED interest rate hikes more than other states, the real story is seen when drilling down into its towns, cities, counties and zip codes.  We’re looking for those communities that will come back and be a great place to buy a home.

The diversity of the California real estate market sometimes defies analysis. Take the fact that days on market for homes for sale are low in some cities which have low active listings, yet prices are still being discounted. Urban zones don’t appear to be doing well, yet the surrounding suburbs may be where people want to buy and live. An in-state relocation has been happening in the post-pandemic period.

As an example, in San Francisco, home prices have swung wildly and unpredictably in 2023. Now in July, the rate of homes closing over list price is rising fast. A high FED rate makes it tough for Silicon Valley, yet on the downside, it will inflate prices similar to 2022 in the Bary Area.

The mix of ultrahigh prices (California homes are twice the median price of homes across the country), urban crime, high taxes, high-interest rates, cost of living and healthcare, resident exodus, forest fires, refusal of insurance companies to offer home insurance, development restrictions, and more make California difficult to forecast.

Wealthy buyers from around the world are buying because more homes are available at the multimillion-dollar dream home level. With the coming up trend in late 2024, the luxury market should see significant price rises.  Sales in the $750,000 to $1M segment have seen the biggest decline.

Dream Homes near the Ocean.
Dream Homes near the Ocean. Screenshot courtesy of Dream Homes Magazine©.

Beautiful California so Hard to Resist

California Governor Gavin Newsom and the Dems.
California Governor Gavin Newsom and the Dems. Screenshot courtesy of CalMatters.org.

Despite the disastrous situation in this state, buyers still climb over themselves to get at whatever properties are listed for sale. If not for mortgage issues, home prices would be higher still, and there are indications this housing market is beginning to turn the corner to recovery.

In fact, no one believes the housing market is in store for a 2008 style crash.  The banking system is better this time around and the US economy is is ready to spring back strongly. $5 trillion in money markets may not move to the stock market, but instead move to the real estate market. And as interest rates recede, the tech sector will move into high gear.

Still, a period of suppression and pain for buyers and sellers remains for the next 12 months, until mortgage rates drop. This is when a housing boom is more likely. In CA, one major hurdle remains — anti-development real estate laws. What is being done to free up this state?

Before we dig into the less than optimal conditions in the CA markets, let’s see what Zillow’s experts say about the road ahead for the US housing market. The most optimistic are predicting average price hikes in the 30% range while the pessimists see only a 6.8% hike over the next 4 year period. The negative outlooks though don’t make sense. The US is positioned for tremendous growth with the repatriation of manufacturing to the US, the Chips Act, and interest rates will decline in 2024. California is over its painful, lengthy rain drought and the Silicon Valley tech sector should come back in the next few years.

Zillow Home Price Forecasts.
Zillow Home Price Forecasts. Screenshot courtesy of Zillow.
San Diego homeless encampments threaten neighborhoods.
Image courtesy of Nick Johnson on Youtube.

An unspoken problem by many about the California housing market, is a severe lack of housing which spawns additional problems and costs in the form of rampant crime and homelessness.  It is no doubt reducing home prices, creating groundwater pollution (Santa Monica Beach), raising property taxes and creating significant social challenges in urban areas. It is a cause of people moving out of the state or moving inland.

A rising tide of pushback by Californians may help open up land for development and perhaps remove harmful taxes to get construction launched.

Active listings city by city.
Active listings city by city. Screenshot courtesy of the California Association of Realtors.

New Home Construction California 2023

Despite claims, this chart from FirstTuesday using US Census data clearly shows decreasing new house and multifamily construction this year.

California new homes Construction by 6 month periods.
California new homes Construction by 6 month periods. Screenshot courtesy of Firsttuesday.us.

This Chart from Compass, shows the downward trend in Bay Area home prices this year clearly.

Positives and Negatives Driving CA Home Prices

There’s so much happening in the Golden State that even housing experts and economists can easily get lost in the details and lose sight of its true direction. This post might provide a more clear view for buyers trying to time a purchase and sellers wanting to sell at the right time in 2024.

The state’s faltering economy, high cost of living, and crippling taxes have made more Californians leave the state for greener pastures. And with all of that, the state reported it has created more homes than at any time since 2008. Yet times have changed with new types of buyers with different needs in 2023 especially an affordable price.

Besides its incomparable climate and geodiversity, what separates the Golden State from New York, Florida, Texas, Arizona, Georgia, Massachusetts, etc. is its onerous housing regulations and anti-housing development sentiment. The state keeps finding ways to create laws to make it worse (e.g. mansion taxes, exit taxes, proposition 13).

The housing shortage in CA continues causing massive increases in price and making any homes for sale, anywhere in the state, a holy grail for Californians.  For buyers, almost nothing favors them in their quest to buy their dream home in California. Yet, if those who exited for Texas, Florida, Arizona, Oregon, Utah, etc. hadn’t left, this market would be unbearable.

Where are Californians Moving To?

This chart from the Orange County Register where Californians are relocating to: Texas, New Mexico, Florida and North Carolina. There’s still that question though, that if you’re in technology, can you leave the Bay Area? It’s still the major center for software technology? Or is Texas zero tax culture just too much to ignore?

Where Californians are relocating to.
Screenshot courtesy of OC Register and Census Bureau. Where Californians are relocating to.

CalMatters on the Real State of Real Estate in CA

Calmatters interstate migration report shows a strong, growing trend of out-migration to 2022.

Outmigration from California to other states.
Outmigration from California. Screenshot courtesy of Calmatters.
Housing Shortage in California: CalMatters.
Housing Shortage in California. Screenshot courtesy of Calmatters.

The June home resale report from CAR shows continued strength in home and condo prices, yet sliding sales. Sales are down due to prices, but also due to credit tightening and higher mortgage rates which are locking sellers into their homes.

Sellers Locked In, Buyers Locked Out

CAR’s sales chart shows it’s as bad as the great recession. Only 7 of 51 counties reported a growth in sales.

Home sales history chart. State of California.
Home sales history chart. State of California. Screenshot courtesy of CAR.

Prices in five counties surging more than 10% from May. The median home price in California dipped 2.4% on a year-over-year basis for the eighth consecutive month from $858,800 in June 2022, the third straight month it surpassed $800,000 (+0.3% from May’s $836,110 to $838,260 in June).

In its July 21st report C.A.R. Senior Vice President and Chief Economist Jordan Levine said “Buyer demand appears to have stabilized after rates doubled last year, though rates could still move higher in the coming months… As inflation finally subsides later this year, the market could see some improvement as rates and supply conditions start turning around.”

State of California Home Prices last 20 years.
State of California Home Prices last 20 years. Screenshot courtesy of CAR.
30 year fixed mortgage rate in US, last 50 years.
30 year fixed mortgage rate in US, last 50 years. Screenshot courtesy of FRED.

 

It’s a hint of madness in many levels of government who pride themselves on being progressive and innovative, when the miserable starkness of the truth in the 2023 real estate scene says otherwise.

Macroeconomic fundamentals still drive housing markets from San Diego to Los Angeles to the Bay area. And the anti-housing lobby supercharges prices further higher as more buyers seek to avoid the risk of renting. And many more rental properties are being purchased by buyers thus diminishing the rental market.

Most expect mortgage rates will subside in 2024, and we’re wondering how that will impact transactions and prices next year. Who would argue that home prices will surge past records set in 2022? This year’s shocking rise makes little sense, but we might dub 2024 “buyers gone wild!”

And is the market in California one where buyers search and buy where there is inventory, not necessarily where they want to live? Who want to go somewhere they don’t live like way inland? Well, buyers and renters are heading inland for something, anything to rent or buy. Yet even there, prices are rising fast.

More buyers seem to be mortgage rate agnostic, desensitized to the 7% mortgages, which are still much lower than other overheated sales years. Rates are about at average for the last 40 years.

And the FED suggests they’re going to keep rates high for a while, even if inflation does fall. They believe the US economy is healthy and wants to roar. They want to put the kibosh on that.

Let’s review the June California housing market report from CAR.

Median home prices by California region.
Median home prices by California region. Screenshot courtesy of CAR.

Single-family homes across the state rose .3% month to month in price while slipping 2.4% vs June of 2022. Sales eased down by 4.1% vs May, and down 10.7% vs 12 months ago. California condos and townhomes rose more, at +2.4% in June, with a .8% drop in sales volume.

In Metro Los Angeles, single-family home prices rose 1.1% over May 2023, while sales slipped by 6.1% vs May, and dropped 18.3% year over year.

Los Angeles County saw a shocking rise of 11.8% in home prices vs May and only saw a .7% drop in sales volume. Year over year in LA county, sales are down 19.1% vs 12 months ago. San Bernardino and Alameda counties where the only other major counties to post significant price gains. Some smaller counties including Madera (+8.8%), Lassen (+16.2%), Plumas (+9.9%), Siskiyou (+13.2%), Del Norte (+30.2%), and Mariposa (+17.6%) saw significant price rises.

San Franciso County saw prices drop 3.6% vs maysales drop 16.1%. Napa too fell 5% vs May while seeing sales rise 7.5% in June. Year over year, NAPA’s home sales have dropped 38.6%.

San Diego County house prices

California Realtors July Report: feeling optimistic about the week ahead:

Realtors report activity up in July with closing and listings but believe sales will keep falling.

Realtor outlook for July.
Realtor outlook for July. Screenshot courtesy of CAR.

Market Supply: New Listings

New listings remain suppressed, for a year now.

New home listings.
New home listings. Screenshot courtesy of CAR.
Active Listings by Region.
Active Listings by Region. Screenshot courtesy of CAR.

The average number of days it took to sell a California single-family almost doubled to 20 days in April 2023, from only 11 days in April 2022.

June 2023 California City by City Listing Prices
California City Metro Area Median Listing Price Median Listing Price YoY Active Listing Count YoY Median Days on Market
Price Reduced Share
San Jose-Sunnyvale-Santa Clara, Calif. $1,498,000 0.2% -44.1% 29 8.1%
Los Angeles-Long Beach-Anaheim, Calif. $1,172,000 17.7% -20.8% 39 8.7%
San Francisco-Oakland-Berkeley, Calif. $1,150,000 0.4% -30.0% 32 10.1%
San Diego-Chula Vista-Carlsbad, Calif. $1,095,000 15.4% -35.9% 31 10.7%
Sacramento-Roseville-Folsom, Calif. $679,000 5.6% -33.4% 33 12.4%
Riverside-San Bernardino-Ontario, Calif.

(Data Courtesy of NAR)

$580,000

 

-3.2%

 

-18.1%

 

44

 

11.9%

 

Sales and Prices in Major Cities

City of Los Angeles Home Prices

SFR sales dropped 21.4% in June YoY, while prices dropped in the city of LA by 9.6% to a new median price of $1.18 million. Active listing fell 20.3% to 1927 and DOM was 15 days. 20.9% of listings had a price reduction.

City of San Diego

Home prices have risen .6% from last June 2002, while home sales dropped 21.4% to just 431 units. There are 520 active listings which is 45.8% less than June 2022. Homes lasted a very low 8 days on market, while 25% of listing had a price reduction.

In San Diego County, Redfin reports listing prices rose 15.4% to $1,095,000. CAR reports the median sales price rose from $935,000 to $958,000.

City of San Franciso

200 homes sold in June, down 16.7% from June 2022. The Median SFH median price fell 16.1% in that time to $1.59 million. There are 286 active listings which is down 12% from one year ago. Days on market is at 30 days and 29.7% of listings sell at reduced prices.

City of Sacramento

In June, sales of existing homes fell 25.9% vs one year ago, and home prices slid 3.4% to $500,000. Homes in Sac remained on the market for just 12 days yet 25.7% of listings had as price discount.

City of Oakland

In Oakland, only 173 home sales occurred and the median price fell 13.7% year over year. 223 active, for sale listings remain, down 35.5% from one year ago. Homes are on the market only 13 days on average, and 26% are offered with a discounted price.

City of San Jose

In the city of San Jose, only 369 homes were sold in June, down 16.3% from last year. The median sales price was however up 1.6% to $1.6 million. Only 223 single family homes remain actively for sale on the MLS, and that is down 63% from one year ago. DOM is down to 8 days, and still 19.3% of homes are offered at a discounted price.

City of Huntington Beach

In the city of Hunting Beach, Orange County, 95 houses sold during June, a slight drop of 6.9% from one year ago. Home prices however jumped 8.5% to $1.41 million. DOM was 20 days while a high 27.6% were sold at a discounted price.

Mortgage Rates and Trends

The Fannie Mae Home Purchase Sentiment Index® (HPSI) rose .4 points in June to 66.0. The overall sentiment of buyers is negative, that it’s the wrong time to buy a home. In California, this might be higher.

Fannie Mae Buyer Sentiment Index chart.
Fannie Mae Buyer Sentiment Index chart. Screenshot courtesy of Fannie Mae.

Realtors will need better strategies on how to get homeowners to sell their homes.

California Home Price Growth 2017 to 2023 by County

Pandemic era boost in price has given Californian homeowners massive equity growth.

Home Price Growth in California Counties
California County Median Price June 2023 Median Price April 2023 Median Price May 2020 Median Price 2017
6 Year Price Change
Alameda County $1,305,000 $1,230,000 $955,000 $834,500 56.38%
Butte County $413,000 $469,000 $362,000 $329,500 25.34%
Contra Costa County $930,000 $900,000 $690,000 $570,750 62.94%
Fresno County $429,000 $413,000 $295,000 $265,000 61.89%
Kern County $380,000 $375,000 $270,000 $220,000 72.73%
Los Angeles County $832,000 $738,520 $546,930 $581,000 43.20%
Madera County $447,000 $420,000 $297,500 $240,500 85.86%
Marin County $1,700,000 $1,790,000 $1,500,000 $1,015,000 67.49%
Merced County $390,000 $365,120 $285,000 $275,000 41.82%
Monterey County $796,000 $952,500 $650,000 $582,000 36.77%
Napa County $840,000 $815,000 $672,500 $635,000 32.28%
Nevada County $574,000 $550,000 $410,000 $400,000 43.50%
Orange County $1,260,000 $1,225,000 $834,550 $708,500 77.84%
Placer County $680,000 $650,000 $515,000 $485,000 40.21%
Riverside County $628,000 $615,000 $434,480 $380,000 65.26%
Sacramento County $530,000 $515,000 $395,000 $355,000 49.30%
San Bernardino $470,000 $450,000 $320,000 $329,750 42.53%
San Diego County $960,000 $930,000 $655,000 $550,000 74.55%
San Francisco County $1,600,000 $1,587,500 $1,627,500 $1,325,000 20.75%
San Joaquin County $530,000 $520,000 $415,000 $386,500 37.13%
San Luis Obispo County $865,000 $925,000 $632,500 $599,000 44.41%
San Mateo County $2,040,000 $1,970,000 $1,650,000 $1,250,000 63.20%
Santa Barbara County $1,200,000 $1,080,500 $637,500 $545,000 120.18%
Santa Clara County $1,800,000 $1,800,000 $1,365,000 $1,000,000 80.00%
Santa Cruz County $1,200,000 $1,349,500 $850,000 $727,000 65.06%
Shasta County $385,000 $390,000 $297,000 $244,500 57.46%
Solano County $590,000 $580,000 $482,000 $415,000 42.17%
Sonoma County $850,000 $840,000 $675,000 $595,000 42.86%
Stanislaus County $460,000 $455,000 $350,000 $300,000 53.33%
Tulare County $375,000 $357,000 $255,250 $230,000 63.04%
Ventura County $930,000 $885,500 $681,250 $575,000 61.74%
Yolo County $620,000 $610,000 $443,000 $447,500 38.55%
Yuba County $445,000 $447,450 $320,000 $298,250 49.20%
Stats courtesy of CAR.

 

See more on the Los Angeles housing report, San Francisco housing market report, San Diego housing market report and the Sacramento housing report.

Forecast for California 2024 to 2027

Zillow’s panel of experts predict falling prices for the rest of 2023, yet see price growth picking back up, at an average clip of 3.5% per year through 2027.

 

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View more forecasts on the real estate housing market |, and the latest home prices and sales trends for numerous major metros in California including San Diego, Los Angeles, San Francisco, and Sacramento.  See stats on other cities, including Denver, Dallas, New York, Boston, Atlanta and in the Florida housing market in Miami and Tampa.  Visit linkedin if you’re seeking advanced level SEO and real estate marketing services.

Rising mortgage rates, inflation, reduced housing supply and high home prices threaten the markets, it appears 2002’s real estate scene will stay strong. Realtors may want to build their presence this year as house prices decline in 2023. Lower prices will bring plenty of homes onto the market and boost your opportunities.

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