Southern California’s residential real estate landscape is adapting to evolving conditions in 2023. The Region has always been a sought-after destination for its stunning landscapes, vibrant culture, and economic opportunities. After two years of runaway home price growth, buyer frenzy, and ultra-low inventory, this vast region is transitioning to a more moderate market. While values remain high, buyers have more options and bargaining power. Sellers can no longer expect instant sales at inflated prices.
Southern California encompasses a diverse range of cities and neighborhoods, from the sunny beaches of San Diego to the bustling streets of Los Angeles and the laid-back charm of Orange County. The region has long been known for its high property values and competitive market.
As a prime area within the nation’s most populous state, trends in SoCal signal where other regions may be headed. Key factors influencing housing in counties like Los Angeles, San Diego, Orange and Riverside include rising mortgage rates, inflation, remote work flexibility, and affordability challenges.
Swiftly rising mortgage rates over the past year, breaching 7% before declining to 6.5%, have drastically reduced buyers’ purchasing power. Higher interest curtails the loan amount borrowers can qualify for. Homes are sitting longer before selling as competition drops. Sellers are dropping list prices to meet cautious buyers focused on monthly payments versus price.
The median sales prices in Southern California have followed the statewide trend of decreasing between 2022 and 2023. As of May 2023, the median sold price for existing single-family homes in the region stands at $800,000, down 5.3% from the previous year. This reduction in prices can be seen as an opportunity for prospective buyers looking to enter the market.
Rampant inflation is also hindering affordability in Southern California. The Housing Affordability Index for the region was reported at 36 in Q1 2023, significantly lower than the national index of 58. Essentials like food, gas, and rent grew even more. With household budgets stretched thin by inflation, buyers have minimal wiggle room on housing costs. Prices need to descend for sales volume to rise.
A noteworthy development in Southern California's housing market is the rise of remote work. With more companies adopting flexible work arrangements, many residents are reevaluating where they want to live. This shift has influenced housing demand, with some individuals choosing to live in areas that were once considered less commuter-friendly.
For both buyers and sellers, the new realities of Southern California's residential market require thoughtful navigation. Homeowners planning to sell need to thoroughly examine recent comparable sales and price their homes competitively. Investing in visual appeal through upgrades like fresh paint and landscaping pays off. And negotiating flexibility on details like closing timelines keeps deals progressing. Savy buyers willing to act prudently can capitalize on more choice and take time bargaining. Getting pre-approved for a loan based on current rates locks in home buying power.
Whether you're a first-time buyer trying to break into this competitive market or a seller looking to capitalize on your property's value, it's essential to stay informed, work with experienced professionals, and be prepared to adapt to the evolving landscape of Southern California's real estate market.