Will Housing Prices Drop in 2023?

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According to the National Association of Realtors (NAR), median sales prices nationwide remain near record highs. While 30-year fixed mortgage rates approaching 8%, the San Diego housing market remains bullish thanks to sustained low inventory. Despite the market cooling in the first half of the year, property prices remain steady. 

“You’re not going to see house prices decline… There’s just not enough inventory.” said Rick Arvielo, head of mortgage firm New American Funding.

Lawrence Yun, chief economist of the NAR, continues “The idea of a housing recession is essentially over” and any market cooling experienced in the first half of the year has been reversed in Q3 of 2023.

Home prices in 2023

This means that housing in San Diego County will continue to remain challenging for first time home buyers, particularly as high mortgage rates double monthly financing costs. “Buyers still struggle with the triple threat of rising listing prices, record-high mortgage rates and limited inventory, making affordability a continued concern,” Realtor.com chief economist Danielle Hale said in a statement. Demand also remains high as an increasing number of professionals are choosing to work from home, spending significantly more on housing

Predicting a Market Correction

Factors influencing a market correction include low inventory levels, rising mortgage rates and sustained housing prices. In the unlikely event of a radical market correction, the decreasing housing prices will likely not approach the decline in pricing that was experienced in the 2005/2007 real estate market crash fueled by poor lending practices and the ensuring flood of distressed properties entering the market. Moreover, most homeowners have a solid equity cushion on their homes, and foreclosure rates should remain low.

Mixed Zoning Legislation in California

Mixed Use San Diego

In California, legislation for subsidized affordable housing, mixed zoning and streamlined housing development approvals means that rural properties and land will command a premium. Buying rural real estate is also a great way to hedge against inflation and diversify investments.