Expect a rise in home prices this year, followed by a price decline in 2023, says a forecast released this week by the California Association of Retailers.
Prices for single-family homes in California will rise about 5.7 percent in 2022. Then the trend will reverse in 2023 with a price decline of 8.8 percent, according to the trade organization.
The forecast also predicted a decline in the number of sales for existing single-family homes sales of 7.2 percent in 2023. About 333,450 units are forecast to sell next year, compared to a projected sales figure of 359,220 units sold in 2022. This year’s home sales were down 19.2 percent from the go-go sales year of 2021.
Sales and prices have been battered by rising interest rates, but economists speaking Oct. 13 at CAR’s Reimagine! Conference & Expo at the Long Beach Convention Center, forecast that the state’s housing market will remain strong longer term.
“There’s a major slowdown in activity,” said Jeff Tucker, an economist for Zillow. “Until mortgage rates come down, it’s going to remain a challenging environment for homebuyers.”
In the short term, Tucker forecasts that prices will decline. But the state’s economy should provide a strong foundation.
“We saw the same thing happen in 2018 -2019,” he said. “It was the last time rates almost got to 5 percent. It did cause prices to dip in Northern California. Then they resumed their climb. In the meantime, people are going to have to figure out what a fair price is for homes.”
Robert Kleinhenz, an economist at his self-named Kleinhenz Economics and an adjunct professor at California State University Long Beach, said demographics would give California’s and the nation’s real estate market a lot of moxie.
“We do need to keep a long-term outlook on demographics. We got the millennial generation who are in their prime home buying years. Numerically, there are opportunities coming forth,” Kleinhenz said.
According to Statista.com, there are more than 72 million American millennials. Kleinhenz said if agents can wait out the current slow market, there will be a lot of business opportunities coming from millennials.
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