California housing market: Everything you need to know
As 2023 draws to a close, the housing market across the nation has seen its fair share of turbulence. With rates reaching their highest levels in over two decades, homeownership has become increasingly unattainable for many Americans. In California, a state known for its diversity and high living costs, the real estate landscape is equally diverse, with trends varying widely across major cities and regions.
California: The Land of Opportunity, with a Price Tag:
California, often hailed for its diverse population and dynamic cities, is also renowned for its high cost of living. Fueled by the tech boom in Silicon Valley, three of Bankrate’s top five most expensive places to buy a home call California home. While the price tag may seem steep, it’s a testament to the quality of life the state offers, with beachside cities like San Diego and the magnetic allure of Los Angeles.
Market Trends and Statistics:
Over the past year, homes in California have become even more expensive. According to data from the California Association of Realtors (CAR), the median price of existing single-family homes in August 2023 was $859,800, up from $834,740 in the same period in 2022 – a 3 percent increase. This figure is more than double the national median of $407,100, further accentuating the challenges of affordability in the state. In some areas, like Santa Cruz, prices have dipped by nearly 8 percent, while in Santa Barbara, they’ve surged by a remarkable 16.4 percent. Additionally, homes are selling faster, with the median time on the market dropping to 27 days in August, down from 32 days the previous year.
Closing costs in California, averaging 1 percent of the home’s sale price according to CoreLogic’s ClosingCorp, can be a significant consideration for both buyers and sellers. For a median-priced home at $859,800, this amounts to $8,598.
To Buy or to Sell? Navigating the Dilemma:
For Sellers:
Sellers currently hold the upper hand in California’s real estate market. High demand and limited supply (just 2 months’ worth, as per Redfin) tip the scales in their favor. However, the surge in mortgage rates (averaging 7.8 percent on a 30-year home loan) may pose challenges in finding buyers who can comfortably afford the purchase. Sellers should be prepared for potential negotiations and ensure they have a realistic understanding of their home’s value before listing it.
For Buyers:
Prospective buyers face a more complex decision-making process. Rising mortgage rates translate to higher monthly payments and reduced buying power, but they could also lead to a potential drop in home prices. To navigate this, buyers should determine their comfortable budget using resources like Bankrate’s home-affordability calculator, and consider getting preapproved for a mortgage to streamline the buying process.
Conclusion:
While predicting real estate markets is an exercise in uncertainty, experts foresee a robust yet slightly slower California housing market. There are no immediate signs of a crash, but rather a potential for steadiness as mortgage rates adjust. For those eyeing the Golden State’s real estate, a strategic approach and understanding of market dynamics will be key to making informed decisions in 2023.