2023 Real Estate Forecast: Market to Regain Normalcy

But even though mortgage rates and home prices are expected to moderate, home sales may still sag under persistent inventory shortages, housing economists predict.

While 2022 may be remembered as a year of housing volatility, 2023 likely will become a year of long-lost normalcy returning to the market, economists predicted Tuesday during the National Association of REALTORS®’ annual Real Estate Forecast Summit. Next year, mortgage rates are expected to stabilize while home sales and prices moderate after recent highs, according to NAR’s forecast. However, the details could be different from region to region.

Some housing markets may see an uptick in homebuying activity at the beginning of the year, especially if mortgage rates continue receding from a recent high of 7%. Housing inventory is expected to remain tight in 2023, with housing starts below historical averages and fewer homeowners willing to sell, said NAR Chief Economist Lawrence Yun. The ongoing housing supply challenges will prevent home prices from falling, though price appreciation will slow, he added. “I see many hopeful signs for early next year,” Yun said.

But first, the market has to close out 2022, a year when inflation soared to a 40-year high and rapidly rising mortgage rates put the brakes on what had been a pandemic-era

home buying frenzy. Existing-home sales are expected to end the year 16% down from the same time period in 2021, marking their lowest level since 2014, Yun said. Annual new-home sales likely will be down 17% for 2022, returning to pre-pandemic levels.

Yun predicts home sales to fall by 6.8% in 2023 compared to 2022, with the brunt of the slowdown to occur in the first quarter of the new year. Some of the softening can be attributed to homeowners who are unwilling to trade in a higher mortgage rate, as well as economic uncertainty. Meanwhile, home prices in 2023 are forecast to reach $385,800, an increase of 0.3% compared to 2022.

“After a big boom over the past two years, there will essentially be no change nationally” in home prices in 2023, Yun said. “Half of the country may experience small price gains, while the other half may see slight price declines.” He pointed to markets in California, like San Francisco, that may be the exception. The Bay Area could register double-digit price drops of 10% to 15% next year, Yun added.

“Mortgage rates are the lifeblood that drive home sales,” Yun said. For the last four weeks, rates have been dropping after reaching 7.08% in November. On Tuesday, the Consumer Price Index offered hope that inflation is further cooling, prompting the Federal Reserve to start slowing the hikes to its benchmark interest rate.

Yun said he believes mortgage rates may have already peaked. He points to an “abnormally high spread” between 30-year fixed-rate mortgages and the Treasury, which historically are more closely tied together. “As the mortgage market normalizes, it will be an opportunity for rates to decline even further,” Yun said, adding that he expects mortgage rates to settle at 5.7% by the end of next year.

Still, mortgage rates are more than double what they were a year ago, ramping up rapidly this fall and walloping housing affordability. But if inflation continues to slow and rates stabilize, that could bring more buyers back to the market and boost demand for housing, Yun said.

Other leading housing economists also gave their take during NAR’s Real Estate Forecast Summit about what’s in store for the real estate market in 2023.

Realtor.com®: Bullish on Home Prices

Realtor.com® Chief Economist Danielle Hale was upbeat about the prospects of property appreciation, projecting a 5.4% increase in existing-home prices for 2023. “We think price growth will be half of what it was in 2022, and we may see some months of year-over-year declines,” Hale said. “But overall, we believe prices will be higher. [Housing] shortage conditions are still going to be present in the market.”

She said she expects home shoppers to continue to grapple with housing affordability in the new year. Realtor.com® predicts mortgage rates to average 7.1% by the end of 2023—considerably higher than NAR’s prediction of 5.7%. Home buyers still will face sticker shock, Hale said, “but they will have more time to make a decision and more options.”

NAHB: Sharp Contraction in Construction

Danushka Nanayakkara-Skillington, assistant vice president of forecasting and analysis at the National Association of Home Builders, said she expects housing starts to drop by double digits in 2023. Then, “as the economy improves in 2024, the housing market will gradually come out of this slump that is expected from the next year,” she added. 

Builder confidence has fallen over the last 11 months as mortgage rates rose and buyer traffic slowed dramatically. Fifty-nine percent of builders have reported using incentives, like mortgage rate buydowns and price cuts, to try to win buyers back, Nanayakkara-Skillington said.

Labor shortages combined with lot shortages, higher material costs and lending issues for builders are all compounding factors preventing more construction. And while lumber prices have eased from record highs, construction costs remain 14% higher due to shortages in other supplies, like gypsum and steel. “All of these issues will keep homebuilding down,” Nanayakkara-Skillington said. “We don’t see these issues being resolved in the near future either.”

Bright MLS: The Great Reset

“We believe 2023 will bring lots of variability in how housing markets adjust,” Bright MLS Chief Economist Lisa Sturtevant said. “There will be a lot of resetting expectations for both buyers and sellers.”

Sturtevant predicted variations from market to market, with the greatest risk for price declines likely to occur in pandemic-era boomtowns—communities that saw some of the largest increases over the last two years. “In places where buyers bid up prices, they will have to reset—and in some places, they could see prices fall significantly from their peak,” she said. “Regardless, in almost every market, we believe prices will still remain above 2019 levels. So even if prices do come down, we should still be ahead of where we were prior to the pandemic.”

Sturtevant added that many consumers could take a wait-and-see approach as they digest higher mortgage rates and come to terms with the changing market. Bright MLS data shows 40% of sellers have adjusted their home price downward or offered concessions. “This period of acceptance will take some time,” she said. “Sellers have to process all of this, and that is underway now. It’ll take a little time—probably into the first quarter of next year—to fully digest it.”

CoreLogic: ‘A Crisis of Consumer Confidence’

“There is a different sentiment happening: I call it a crisis of consumer confidence,” said Selma Hepp, CoreLogic’s interim chief economist. “Sellers are contending with not wanting to reduce their prices. Buyers are seeing the headlines saying that prices will come down but are also finding their purchasing power has been diminished by higher mortgage rates. They’re wondering: ‘Should I even enter the market? I may end up with negative equity.’”

Annual home price growth is expected to slow to 8% by December—and then 0% by the spring of 2023, according to CoreLogic data. “We believe this will vary greatly across the country, and the rate of growth and decline will depend on the region,” Hepp said. For example, markets like San Francisco, Seattle, Las Vegas and Phoenix, all of which saw surging home prices during the pandemic, could experience the most pronounced price declines of up to 12%, she added. “Housing markets will continue to struggle with the loss of consumer confidence.”

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Is it a Good Time to Buy a House? Or Should I Wait Until 2023?

A looming recession, inflation, and rising mortgage rates have made plenty of homebuyers wary of entering the market. According to a recent National Housing Survey, only 20% of consumers believe it’s a good time to buy a home. Some potential buyers wonder if falling home prices are on the horizon - and whether it makes sense to wait.

There are benefits and drawbacks to buying a home while the market is in flux: here's what you need to know.

Mortgage Rates Are Up - But Perspective is Important

Mortgage rates rose rapidly this year as the Fed looked for ways to tamp down inflation. After reaching historic lows of under 3% last year, average 30-year rates are now closer to 6%. When the rates were low, buyers eager to take advantage of cheap borrowing flooded the market. Now that rates have risen, many buyers have backed off as they saw their estimated monthly mortgage payments jump by hundreds of dollars.

But there are a few reasons that rising interest rates aren’t as bad as they seem.

Of course, it’s going to sting to see mortgage rates rise from a record low of 2.7% to 6.4% where they are now (and perhaps higher as the year progresses). This dramatic jump means that homebuyers have to cope with a more limited budget, and larger, newer homes in desirable neighborhoods are further out of reach.

In context, though, mortgage rates today are low. In 1980, you would’ve been paying close to 15% for a 30-year mortgage, and in 1990, the rate hovered around 10%. The overall average since 1971 has been 7.77%, according to The Mortgage Reports. Perspective is key when it comes to evaluating the current mortgage rate. 

Second, rates are not set in stone the way home prices are. If you stay in your home for the entirety of the 30-year term, there’s a fair chance that mortgage rates will dip again. If they do, you always have the option of refinancing your loan in order to take advantage of the lower rate. Although refinancing does come with a processing fee, it can often save homeowners thousands of dollars overall. 

Homebuyers also have the option of doing an Adjustable Rate Mortgage. Though these got a bad rap during the last housing crisis, they can actually be a useful way to receive a lower rate - especially if you don't plan on living in your house for the entire 30-year term.

Third, mortgage rates and home prices tend to work like a balancing scale. When one goes up, the other goes down. With fewer people seeking to buy homes, competition eases - leading to fewer bidding wars that drive prices sky high, and more pressure on sellers to accept reasonable offers. 

Fourth, many homebuyers are asking: will rates fall again, allowing for cheaper borrowing in 2023? According to Business Insider, experts believe rates aren't likely to drop again until the end of 2023 or into 2024. And even then, you shouldn't bet on rates reaching those historic lows again.

Make no mistake: homeowners are definitely paying more in interest now and will have to adjust their budgets accordingly. Rising interest rates aren't easy to deal with. But when it comes to whether or not waiting to buy a home makes sense - waiting won't bring back the historically-low rates that were an anomaly.

"Even with interest rates constantly fluctuating, being able to buy a home is always a financially smart decision,"

Chart showing historical primary mortgage rates (via Freddie Mac)

A Market Shift = More Inventory

Sellers realize that the window for maximizing their profits is closing. As they watch listing after listing in their local area do price reductions to the tune of several thousand dollars, more and more sellers have been entering the market in an attempt to get in before the hot market dissipates completely. 

In June, Realtor noted that there was YoY inventory growth for the first time since mid-2019, with the market seeing a 6.3% increase in newly listed homes since last year. And according to the National Association of Realtors (NAR), "The inventory of unsold existing homes rose to 1.26 million by the end of June, or the equivalent of 3.0 months at the current monthly sales pace."

This is big news, because the incredibly low inventory of homes on market has been a major driver of rising prices. The increase in inventory gives buyers more options - and more leverage. Home value gains will be much more modest now that sellers are receiving one or two offers in many cases, not 20. 

It wasn't like this a year ago. Before, buyers would have very little to no say in negotiations, but now with the market shifting, buyers have some leverage on sellers who want to overprice their home.

National inventory is trending upward, and that's been true, while that bodes well for homebuyers today, one benefit of waiting until 2023 is the potential for an even greater shift in inventory, which could put more power in the hands of buyers.

Although inventory is slowly rising, it’s still far below the 6-month supply which indicates a balanced market (Washington DC's supply of housing inventory rose 20% in June YoY, for example, but that only took it from 1 month to 1.2 months' supply). Make no mistake, it will still be a seller’s market for the next several months, if not several years. 

Buyers today, though, should feel more comfortable and confident when it comes to asking for home inspection and financing contingencies - the likes of which were tough to come by in 2021’s crazy market conditions. 

In my local area I am seeing some changes. Some pockets of homes are staying on the market a little longer, with prices of homes going down - a year ago or during COVID times, they would have easily sold for asking price and been on the market less than a week.

Rising Inventory for 2022 (Realtor.com) 

Escaping Rising Rental Rates

If you're not buying a house, there's a good chance you're renting in the interim. Unfortunately, there is no hiding from rising housing costs. Even if you decide to rent instead of buy for another year or two, rental prices have skyrocketed around the country. On average rent rose 11% last year, and some metro areas experienced average rental increases of up to 40%. 

While buying a home might be a costly endeavor in the short term, in the long term it sets you up with predictable expenses and a hedge against inflation. Even though rent will continue to rise year by year, your mortgage payment will increase more gradually (the actual amount you pay to the lender is pre-determined if you have a set rate - but property taxes will go up in time). 

And of course, when you pay rent, you ultimately pay off your landlord's mortgage. When you pay for your home, that's equity toward your future. 

Let's say your current monthly rent is $1,200, and your estimated monthly mortgage payment is $1,500. If you do the math too quickly, it might seem like you "save" $300 per month by continuing to rent - and this can be tempting. But at the end of the rental year, you net $0 from all those payments.

On the other hand, if you buy your home? By the time a full year rolls around, you'll have already paid $18,000 toward your home loan balance - and you don't need to worry about your landlord hiking your rent by $500 because "that's the market value now."

Should I Wait to Buy a House Until 2023?

Many potential home buyers are asking themselves whether it’s a good idea to wait until 2023 to buy a home, or whether it's better to buy a home now. There are benefits and drawbacks to both approaches.

If you buy a home in 2023, you get more time to save for a down payment, which might help to lower your monthly payment once you get a mortgage. You may also benefit from a further increase in housing inventory, which means more choices and fewer bidding wars that drive up prices. And if you haven't quite figured out a 5-year plan (which is advisable when you buy property), waiting until 2023 buys you additional time to figure things out. Not everyone is in the right situation yet to buy a home - and that's okay! 

On the other hand, home prices are expected to continue rising - just at a less blistering pace. CoreLogic is predicting an increase of 5.6% in average home prices over the next year. If this holds true, a $400,000 home today will cost approximately $422,400 a year from now (which may negate any money you save while waiting).

Additionally, you miss out on the benefits of owning a home today (not having to answer to a landlord, building your equity, avoiding crushing lease increases).

Regardless of whether you plan to buy a home now or in 2023, don't bank on dramatic price reductions à la 2008. 

Homebuyers waiting for a market crash will be disappointed. Today's market is different from the Great Recession housing bubble, as supply and demand are the driving forces behind home prices - and lenders follow more stringent guidelines today for loan approvals, but now as we see a slow shift in the market, the competition for buying a home is going down."

Southern California Housing Market Forecast 2022 & 2023

September 21, 2022 

Home prices & sales are moderating across the Southern California housing market. In Southern After a two-year housing boom, the housing market in Southern California is finally moderating. In August 2022, the median house price in Southern California declined 1.6% from July. Still, the median was 4.6 percent more than it was a year ago, thanks to a brief reprieve in interest rates in July and mid of August.California, the median home price is not rising by double-digits anymore. That trend is over.

This year, mortgage rates have risen from the low 3 percent and topped 6%. Rising mortgage rates made houses even less affordable for many people in Southern California. It has significantly increased the monthly cost of a property and diminished the loan amounts available to borrowers. As fewer individuals are house hunting, houses are remaining on the market for longer, offering the remaining buyers greater alternatives.

According to the latest C.A.R. report, the sales of single-family homes in the Southern California housing market posted a decline of 28.8% from last year. However, sales grew 7.8% from the previous month. The Southern California median home price — the point at which half of the homes sold for more and half for less — is 795,000, 4.6% more than last August when it was $760,000. Sales of condos and townhomes also dropped from a year earlier.

According to the California Association of Realtors, home prices statewide and in Southern California are projected to decrease by approximately 7% in 2023 compared to 2022, in part because mortgage interest rates are anticipated to remain elevated due to rising inflation.

<<<Also Read: California Housing Market Forecast: Will Price Drop?>>>

Southern California Home Sales Fell in August 2022

The Southern California housing market has slowed significantly in recent months, owing to rising mortgage rates, which have priced many would-be buyers out of the market. Here's how individual counties of Southern California are setting or matching price records as compared to last August (Data released by C.A.R.).

Orange County led the pack again with the highest price increase of 9.1% over last year. San Bernardino is the most affordable with a median price of $472,750 for existing single-family homes. Orange County is the most expensive real estate market in Southern California with a median sales price of $1,200,000. Sales declined in all counties of Southern California by more than 20 percent.

·       In Los Angeles County, the median price rose 3% to $854,960 in August, while sales decreased by 29.1%.

·       In Orange County, the median price rose 9.1% to $1,200,000, while sales decreased by 30.2%.

·       In Riverside County, the median price rose 8.8% to $620,000, while sales decreased by 27.4%.

·       In San Bernardino County, the median price rose 8.7% to $472,750, while sales decreased by 32.6%.

·       San Bernardino County also had the highest decline in sales among all six counties.

·       In San Diego County, the median price rose 6% to $885,000, while sales decreased by 27.7%.

·       In Ventura County, the median price rose 3.6% to $884,000, while sales decreased by 24%.

A Zillow home price measure that attempts to account for such changes in the mix of homes selling shows that the price of a typical home in Orange County is still above $1 million, and overall prices in Southern California haven't fallen as much as the median indicates. San Bernardino County has experienced a 0.5% loss since the peak, while San Diego County has experienced a 2.6% decrease.

Home prices in every county are higher than they were a year ago, an indication of the robust demand that existed before interest rates skyrocketed. Regionally, the median sales price is 4.6% more than it was a year ago; when combined with rising interest rates, this makes housing significantly less affordable than it was in 2021.

Southern California Housing Market Forecast 2022 & 2023

The housing market in the United States, and notably in Southern California, has been impacted as a direct result of rising mortgage rates. As a result of falling sales and rising inventory, a growing number of potential buyers and sellers are pondering whether or not home prices will fall in 2022 or 2023. According to some experts, both national and Southern California prices will fall next year, owing in part to the increasingly expected recession.

As the recession comes closer, some industry analysts feel the scenario is becoming more realistic, and some of them have even modified their predictions to call for price cuts in 2023.  These forecasts are a divergence from those made earlier this year when the vast majority of industry professionals were of the opinion that increased mortgage rates would only postpone price appreciation. That is, home prices would proceed to go up, but at a more gradual pace compared to those seen in the preceding two years in Southern California.

A significant number of industry professionals maintain the view that a scenario involving slower development is the one that is most likely to occur. There are very few well-known analysts who anticipate price declines on par with those that were seen during the Great Recession if any at all. However, the rapidity with which the housing market is transforming is shown by the fact that a number of prominent analysts have already predicted that prices will fall in the Southern California real estate market, which is something that has not occurred for more than a decade.

Home prices are going to fall in California, according to Jordan Levine, chief economist for the California Association of Realtors. In response to falling demand, an increasing number of home sellers have reduced the prices at which their houses are placed for sale. If overall sales prices are to fall in the future, this is the first step that must be taken. Levine anticipates the California median sales price to rise 9.7% year on year in 2022, a substantial decrease from the over 20% growth projected in 2021.

Then in 2023, he expects the Federal Reserve’s actions to fight inflation will cause a mild recession, and the combination of job losses and higher rates will cause the statewide median price to fall 7.1% compared with this year, with similar declines in Southern California housing market specifically. Southern California home prices will either decline or should be largely flat over the next few years.

The job recovery trend is good, and the prospect of resuming all jobs lost due to the pandemic is becoming more tangible. Despite greater inventory levels and rising borrowing costs, the Southern California housing market is nevertheless operating strongly. However, the frenzied rate of activity during the last 18 months or so will reduce, but not to an alarming degree. The market remains favorable to house sellers, and they remain in control.

Will Home Prices Drop in Southern California Real Estate Market?

The following analysis of select counties of the Southern California real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner.

Southern California Home Sales

·       In the second quarter, 47,596 homes were sold, a 19% decrease from the previous year but a 13.1% increase over the first quarter.

·       Pending house sales, which are a predictor of future closings, were slightly lower in the second quarter than in the first.

·       Orange County reported the greatest loss in sales, while other areas suffered substantial drops.

·       Nonetheless, the spring market was in effect in San Diego, Los Angeles, and Orange counties, which saw double-digit percentage gains in sales over the previous quarter.

·       Listing activity has increased across the region, providing buyers with additional options.

·       That may explain, to some extent, why pending sales have slowed; purchasers are not feeling as pressed as they were when inventories were extremely low.

Southern California Home Prices

·       Home prices in the second quarter rose 10.9% compared to a year ago and were 5.4% higher than in the first quarter of 2022.

·       There was double-digit price growth in every county other than Los Angeles.

·       Riverside County led the way with prices rising by 16.7%.

·       The rest of the region also saw very impressive sales price growth.

·       Compared to the first quarter, median list prices are still up an average of 8.7%, suggesting that sellers remained rather bullish.

Southern California Days on Market

·       The average time it took to sell a property in Southern California in the second quarter of 2022 was 16 days.

·       It was 2 days less than a year before and 5 days less than in the first quarter of the year.

·       San Diego County homes continue to sell quicker than in other markets in the region.

·       Except for San Bernardino, where properties took one day longer to sell than a year before, other counties witnessed a decrease in market time.

Back in June, Fed Chair Jerome Powell made it clear: The housing market would go through a “reset.”

“I’d say if you are a homebuyer, somebody or a young person looking to buy a home, you need a bit of a reset. We need to get back to a place where supply and demand are back together and where inflation is down low again, and mortgage rates are low again,” Powell told reporters.

Whenever a central bank moves from monetary easing to monetary tightening, there’s going to be an impact on a rate-sensitive sector like real estate. That impact, of course, is going to be even greater when monetary tightening comes after the asset class—residential real estate—spiked 43% in just over two years. Powell admitted that much in June. However, Powell was noncommittal as to whether the rate shock would push home prices lower.

Fast forward to September, and we no longer need to question if the housing “reset” will affect home prices. Back in June, the U.S. housing market was still just in the early innings of a sharp drop in housing activity. Since, we’ve seen housing activity, including home sales and home construction levels, go much lower. But as data rolls in for August, we now have clear evidence that the housing market downturn has moved beyond that first stage (i.e. a sharp drop in housing activity) and into the second stage (i.e. falling home prices).

“The longer that [mortgage] rates stay elevated, our view is that housing is going to continue to feel it and have this reset mode. And the affordability resetting mechanism right now that has to happen is on [home] prices. And so there are a lot of markets across the country where we’re forecasting that home prices are going to fall double-digits,” Rick Palacios Jr., head of research at John Burns Real Estate Consulting, tells Fortune.

Let’s take a deeper look at the three elements that’ll shift as we move into the second stage of the housing market downturn

1. The home price correction is spreading.

Housing prices are a key component of the Consumer Price Index, when home prices go down this could help drive down inflation

Higher Mortgage Rates Are A Key Factor in Lowering Home Prices

Mortgage rates have continued to rise as Southern California heads closer to the Fall season and that has had an effect on home prices in the area as reported by The Los Angeles Times.

Rising mortgage rates are hardly a local phenomenon but are definitely starting to change the once strong seller’s market into more of a buyer’s market. For a change, buyers have had to start to drop their prices to try and attract an increasingly reluctant pool of buyers into considering a purchase. 

One of the biggest changes are my buyers look at homes and they have some time to think about it now. It’s a normal market.”

According to Forbes.com, mortgage rates are two points higher than they were at the beginning of the first quarter of the year and that was after the rates had already increased more than they had at any other time in the last 28 years. 

Inflation is part of the reason that mortgage rates are increasing after the consumer price index also rose to a historically high level. Part of the reason for this is the Federal Reserve’s attempts to combat inflation by raising the benchmark interest rate. 

Joel Kan, an economist at the Mortgage Bankers Association (MBA) said, as quoted by Forbes.com, “Higher interest rates resulting from the Fed’s efforts to combat inflation, as well as the persistently high rate of inflation, are causing stresses for households and businesses.”

Mortgage rates, for the average 30-year, fixed-rate mortgages were as high as 5.81 in June but have gone even higher in late August. The current 30-year, fixed rate mortgage is 5.90% according to Bankrate.com. 

Countries all over the world are having to do the same to combat inflation but in the United States, financial experts predict a slowdown. Wharton business school professor Jeremy Siegel said, as quoted on CNBC’s “Squawk Box Asia, “I think we only need 100 basis points more. The market thinks it’s going to be a little more — 125, 130 basis points more. My feeling is we won’t need that much because of what I see as a slowdown.” indicating that the Federal Reserve will only have to raise the consumer price index by 100 additional basis points. 

Siegel points out that, according to CNBC, housing prices have dropped and in fact have “gone down by a record amount exceeding any six-month period.” These are one of the key indicators of whether inflation will continue to rise or slow and Siegel believes that this shows that a slowdown is on the way.

June 26, 2022

California Housing Market

Once again, during May 2022, the housing market in California has seen a reduction in home sales while prices continue to rise.

House prices rose in May by 1.6% and that is up 9.9% in the last 12 months.  Condo sales declined too, and in fact condo prices bucked the upward trend by falling 3.1%, although still up 14.5% vs last May of 2021.

California home prices soared 4.1% higher than March’s levels to a new record again at $884,890. Sales are slowing and fell 1.9% from March and are down 8.5% from last April.

Judging by declining sales which are uncharacteristically slow at peak buying season, Realtor’s latest outlook this month, and expected rising interest rates, the prediction is for a cooling California real estate market. Market velocity is falling at a faster rate.

The average price of a house sold in California reached another all time peak at $898,980.

When Will Home Prices Drop in California?

Californians are constantly asking if and when home prices will drop, just as the outlook for the summer is perhaps for further new records. Mortgage rates have doubled, pushing up mortgage payments, and it is hurting homeowners besieged with other record high costs. Inflation and a souring economic outlook will begin to show in home prices by summer’s end.

Rent prices too, having reached record heights are beginning to show slower growth.  The rental market suffering from exceptionally low inventory will likely not show mercy to Californians for sometime.  New housing development is once again slowing.

Higher priced homes in the state continue to sell well, while the low supply of affordable homes continues to shrink, making purchases less likely. The share of million-dollar home sales rose again in April to reach the highest level on record at 34.7% Homes sold below $500,000 hit and hit the lowest level recorded.

Supply is still a key matter even as prices and mortgage payments soar.  California Realtors are reporting increased activity up to the week ending June 25th.  Looks like a rise in new listing so the picture may be brighter for buyers desperate for a home.

Home sellers are cutting list prices as more buyers take pause: ‘The market is not the same’

Home sellers are increasingly cutting their asking prices as buyers, constrained by higher mortgage rates and overall inflation, have become less willing to jump into the housing market at any cost.

The growing number of price cuts, a trend showing up in data from Southern California and across the nation, is one of the strongest signs yet that the previously red-hot market, fueled by low mortgage rates and all-cash bidding wars, is cooling.

The price reductions don’t mean overall home values are dropping. In Southern California and the wider U.S., they make up a minority of listings, and most homes still sell for more than the list price.

Industry experts, for now, do not see a plunge coming in the housing market, catapulted to record-high prices in the first two years of the pandemic as many people sought out more space and had new savings to spend.

Values could come down modestly, some experts said, if the Federal Reserve’s actions to tame inflation send mortgage interest rates significantly higher — or tip the economy into recession.

For buyers, the market already feels significantly different from the frenzied competition of several months ago.

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