US NEWS
Are real estate prices going down in California in 2023 according the experts?
Increasing mortgage rates and a lack of buyers are pushing down house prices but it is not yet known how low they may go.
Along with New York, California is one of the most expensive US states for buying a home.
House prices nationally rose by 45 percent between January 2020 and June 2022, that’s 15 percent more than the run up to the last housing market bubble. In the same period, house prices in California rose 47%.
However, this looks set to change and prices are already on the way down.
What is happening to hous prices?
Home sales have fallen for 16 straight months year over year. This is the lowest level of sales since February 2008, during the banking crisis. In terms of house prices the median average has fallen by 2.5 percent. Prices are at similar levels to October 2017.
“With pending sales showing a 50 percent drop from a year ago, we can expect additional tempering in housing demand in the coming months, as we previously forecasted,” said CAR Vice President and Chief Economist Jordan Levine. “Home prices will also moderate further over the next several months as interest rates remain elevated in the near term and seasonal factors come into play.”
San Jose-Sunnyvale-Santa Clara is one area in which house prices are decreasing. In terms of the FHFA House Price Index prices are around the same as what they were in the summer of 2021. However this still marks a 20 percent increase since the beginning of the pandemic.
So what is causing this? The high interest rates are hurting prospective buyers. In December 2022 the average rate for the same type of mortgage had soared to 6.5%, according to data produced by Freddie Mac. While not high by historical standards, they are high in relation to prices. As mentioned prior the house price average is the same as five years ago but mortage rates are more than double. This is simply unaffordable for many.
The Los Angeles Times uses an example of a $760,000 house with a 20% deposit. If it was bought January 1, 2022 then the monthly mortgage payment would be around $3,500. On January 1, 2023 this is likely to rise to $4,500 due to changes in interest rates, a $1,000 increase.
“It’s noteworthy,” said Jordan Levine, chief economist at the California Association of Realtors. “Prices are going to go down.”