Realtors’ Association Projects Softening Housing Market With Moderate Recession in California in 2023

As mortgage rates are up near 7 percent and home sales slow down across the country, many are wondering if the Golden State of California is still a seller’s market.

Real estate experts predict that California’s housing market will soften in 2023, with home prices expected to fall by 8.8 percent. However, they believe that this is only a modest adjustment before the market returns to normalization, and will not experience the same price crash as during the last financial crisis in 2008–09.

The California Association of Realtors (CAR) released its latest forecast on Oct. 12, predicting a 7.2 percent year-over-year decline in existing single-family home sales next year, bringing down the sales to 333,450 units.

The projected 2022 sales figure, 359,220 units, is 19.2 percent lower compared with the 444,520 homes sold in 2021.

Jordan Levine, vice president and chief economist of CAR, told The Epoch Times that the current sales pace remains “relatively low in the face of higher interest rates.”

CAR Vice President and Chief Economist Jordan Levine at C.A.R. premiere real estate trade show, on Oct. 12, 2022. (Linda Jiang/Epoch Times)

“I think that the increase in interest rates, the economic uncertainty, all kind of combined to reduce buyer demand,” he said. “So we think we’re going to end this year, probably down 20 percent from where we were at the same time last year, and then probably in 2023 fall a little bit more.”

CAR estimates that the California median home price will retreat 8.8 percent, to $758,600 in 2023.

“A less-competitive housing market for homebuyers and a normalization in the mix of home sales will curb median price growth next year,” said the CAR report.

According to Levine, housing demand and home prices will soften throughout 2023, sales will take longer, and there will be more inventory and fewer homes selling above listing price.

Nonetheless, he stressed that such price reductions are a normal market reaction.

“But the thing I would advise buyers to keep in mind is it’s not 2008 all over again. We have much better fundamentals in the mortgage market. A lot of people have a lot of home equity, fixed-rate loans. And so even as we’re going through a challenging macroeconomic time, it’s not going to result in the same kind of price pressures that we had during the last financial crisis,” he said to The Epoch Times.

In addition, the CAR report said housing affordability in California is expected to drop to 18 percent next year from a projected 19 percent in 2022.

Mortgage Rates to Remain High

CAR’s 2023 forecast projects a dip in the U.S. gross domestic product of 0.5 percent in 2023.

With California’s 2023 nonfarm job growth rate at 1.0 percent, the state’s unemployment rate will edge up to 4.7 percent in 2023, the report said.

CAR projects high inflation and growing economic concerns will continue into next year, keeping the average for 30-year, fixed-rate mortgage interest rate elevated, at 6.6 percent, in 2023, up from