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All across the nation, 2023 has been a turbulent year for the housing market. Rates surged in the second half of the year and are now at their highest level in more than two decades, leaving homes unaffordable for many Americans.
California is one of the most populous and largest states in the country, and it’s also one of the most expensive. If you live in the Golden State, or are hoping to move there, you might be wondering how the real estate market in the state has fared over the past year. Let’s take a closer look at the California housing market.
California housing market overview
This state has a highly diverse population and an equally diverse real estate market. Trends may vary widely in major cities — especially in San Francisco and other pricey Bay Area towns — compared to other parts of the state.
While that makes it hard to generalize about the state overall, California is certainly one of the most expensive places to live in the United States. Thanks to Silicon Valley it is home to three of Bankrate’s top five most expensive places to buy a home, and most necessities are costlier than national averages.
Put simply: California’s cost of living is high. But you pay for quality, and the state has many highly appealing places to live, including popular beachside cities like San Diego and the movie-star allure of Los Angeles.
California market trends and stats
- Homes in California are now even more expensive than they were one year ago. According to data from the California Association of Realtors (CAR), existing single family homes sold for a median of $859,800 in August 2023, compared to $834,740 in August 2022.
- That’s a 3 percent increase, and it’s more than double the national median of $407,100. Today’s significantly higher interest rates make that price feel even less affordable.
- This overall statewide trend does not necessarily hold true across all regions. For example, CAR data shows that prices in Santa Cruz dropped by nearly 8 percent, while in Santa Barbara they rose by a whopping 16.4 percent.
- Homes are also selling faster, Redfin reports. The median amount of time on the market for a California home was 27 days in August, 5 days less than August of last year.
- According to CoreLogic’s ClosingCorp, closing costs in California average 1 percent of the home’s sale price. For a median-priced $859,800 home, that comes to $8,598.
Should you buy or sell in the California housing market?
Deciding whether now is the time to buy or sell requires something of a crystal ball, especially with increasing worries about mortgage rates. Today’s high rates — an average of 7.8 percent on a 30-year home loan, as of early October — work against both buyers and sellers. Here are a few things to consider:
If you’re a home seller
In general, sellers have the upper hand in real estate deals here. Demand is high and supply is very low — just 2 months worth, according to Redfin, which is well short of the 5 or 6 months balanced markets need.
However, if you’re looking to sell your California home, high mortgage rates might make finding a buyer who can afford the purchase harder than it used to be. And if rates continue to increase, making high-priced homes even less affordable, you may have to settle for a lower price. Make sure you have a good understanding of what your home is worth before you list, and work with a local real estate agent who understands the ins and outs of your specific area.
If you’re a homebuyer
On the other hand, if you’re looking to buy a home in California, you have a variety of factors to consider. If mortgage rates continue to rise, that will lead to higher monthly payments and less buying power. However, rising rates could also cause home prices to fall, which may help balance the higher cost of financing.
If you decide that now is the right time to jump into the market, make sure you understand how much house you can comfortably afford. Bankrate’s home-affordability calculator can help you crunch the numbers, and getting preapproved for a mortgage will give you an idea of exactly how much you can borrow. Preapproval also puts you in a good position to move quickly when you find a home you want to buy.
Don’t forget to consider the cost of living in your desired area, as this can vary greatly from one part of the Golden State to another.
California housing market predictions
It can be hard to predict real estate markets, and exactly how future trends will impact home prices. You’ll hear competing information from all sides, with some seeing all doom and gloom while others saying the market is still strong. However, most experts see no sign of an imminent housing crash. Instead, it looks likely that the market will continue to be sluggish until mortgage rates lower — slower, but not crashing. Expect the California market to remain robust, with high prices despite a lower volume of sales.
Find a California real estate agent
Whether you’re looking to buy or sell a home in California, find a real estate agent who knows your local market and can guide you on your journey. Agents are licensed professionals who will help you navigate the entire process. Ask friends and family for recommendations, or reach out to a few agents and interview them to see who seems like the best fit for your needs.
Knowing which way the real estate winds will blow is difficult, but recent trends have shown a slight uptick, with prices rising and homes selling faster. Redfin data shows that in August 2023, California home prices were up 5 percent from the year before, and homes selling 5 days faster. So, while the overall volume of sales is down, no the market is not experiencing a steep drop.
No, the state’s already high prices are actually rising. Redfin data for the California housing market shows that home prices rose by 5 percent between August 2022 and August 2023, while data from the California Association of Realtors reports a 3 percent increase. That may not seem like a lot, but given that the state’s median price is more than double the nationwide figure, 3 to 5 percent can be significant.