The housing market has been out of control since the early days of the pandemic, but there is increasing evidence that home prices are declining and will continue to fall throughout 2023. Home prices rose nationally from a median of $254,000 in April 2020 to $344,000 in April 2022, a 35% increase in just two years. However, there is enormous confidence among housing market experts that home prices will decline substantially from their peak. As an example, Moody’s Analytics predicts that home prices will fall 10-15% from their peak 2022 prices.
Home prices in California also rose exponentially in the wake of the pandemic, appreciating from a median of $564,000 in April 2020 to $775,000 in April 2022. This is a 37% increase. Prices peaked in June at $788,000 before falling to $769,000 by September.
Currently, Moody’s Analytics predicts that home prices in every California market will decline from “peak-to-trough”, with most major markets falling by double digits. Small coastal cities will lead the way, with Santa Cruz (-17.6%) and Santa Barbara (-16.9%) falling the most. Generally, home prices in expensive markets on the coasts will decline more than cheaper cities within the interior of the state, such as the central valley.
San Diego will experience the largest home price declines of any major California market at -13.2%, followed by Los Angeles – Long Beach – Anaheim at (-10.9%) and San Jose (-10.8%). Home prices will also decline substantially in Riverside-San Bernadino (-9.3%), Sacramento (-8.2%), and San Francisco-Oakland (-8.2%).
Cities with a lower cost of living will experience more modest declines in home prices. Home prices will fall in Bakersfield (-6.8%), Redding (-5.9%) Fresno (-5.6%), and Visalia (-5.3%), but at a reduced pace compared to their coastal, more expensive counterparts.
Norada reported that housing prices appreciated in nearly every California region between September 2021 and 2022, although at a significantly reduced pace than the year prior. The San Francisco Bay Area was the only region with an annual decline during this period (-2.6%), but the median home price remained the highest in the state at a median of $1,256,500.
Single-family homes increased in California as a whole at $821,000, a 1.6% increase from September 2021, while condos and townhomes appreciated 3.3% during the same period to $620,000.