The Sacramento Area is one of the largest metropolitan areas in the United States and a popular destination for hopeful homeowners looking to buy, creating a hot market for sellers. In this post, we’ll explore some trends that could impact your decision to buy or sell in 2023, along with our forecasted predictions for the greater Sacramento area market in 2023.
A Decline in Overall Home Sales in California in 2023
The California real estate market is one of the most expensive in the country, and it’s only going to get worse. However, data provided by the California Association of Realtors, or CAR for short, has indicated that the number of home sales in the state has dropped a staggering 47.7% in December of 2022 when compared to December of 2021. Zillow gives us even more insight into the state of the California housing market with this information: ” home prices in California have increased by an average of 5% per year since 2000–more than twice as fast as they have nationwide.”
While the actual number of home sales is trending downwards, the median home price is still slightly on the rise, with a 4.4% increase in median value landing most California homes around $760,644 as of February 2023, according to Zillow.
Will Home Prices in California Decline or Continue to Rise in 2023?
The state has seen interest rates rise since the beginning of the pandemic, and this has had a negative effect on housing affordability challenges across California’s metro areas.
The Sacramento Area falls in line with what we are seeing across much of the state. According to Zillow, in February of 2023, the median home value in Sacramento was $490,537, up 4.0% year over year from 2022.
The Impact of Interest Rates on Housing and the Economy
Interest rates have a direct impact on the housing market. As interest rates rise, home prices will, generally speaking, decrease, and vice versa.
This is because when you buy a house with a mortgage, your monthly payment is based on how much money you borrow from the bank and at what rate they lend it to you. If the cost of borrowing money increases (which happens when interest rates increase), then it becomes more expensive for people to purchase homes because their monthly payments will also increase accordingly. This is a major contributor to why home sales are declining in general across not only California, but the rest of the country.
The rise of interest rates will knock many buyers out of the game, so to speak, and we will see a decline in bidding wars on properties and fewer appraisal waivers coming from big lenders like Fannie Mae and Freddie Mac, making it harder to purchase homes in less than perfect condition.
Sacramento Area Housing Affordability Challenges
The median home value in the Sacramento Area is $490,537. This figure is well above the national average and can be attributed to the high demand for housing and a limited supply of properties.
Rising interest rates mean that buying a house becomes less affordable over time because you’ll pay more per month on your mortgage payment (or rental payment). In addition to low inventory levels and high demand driving up prices across all types of housing options–single-family homes as well as condos–the cost of owning a home has increased considerably over the past few decades due primarily to inflationary factors such as labor costs and land use regulations which affect both construction materials used in building new units as well as rents charged by property owners making repairs to existing structures.
The demand for housing in Sacramento isn’t going away; just the number of transactions that we will see over the course of 2023 will decline. According to one set of data, we are still missing around 40% of the number of buyers that existed pre-pandemic in Sacramento.
Other reasons we might not see an immediate increase in the volume of transactions in 2023 include the following:
● Lifestyle Changes – many buyers and sellers are looking to move out of congested areas to a more rural setting, causing many to leave Sacramento.
● A Continued Rise in Interest Rates – will put a hold on many buyers’ dreams of purchasing a home due in part to the dramatic increase in the monthly mortgage payment for a similarly priced property year over year.
● Employment – a sharp increase in national and local layoffs might cause buyers to be more hesitant than they have been in the past few years to make big life changes.
These reasons and so many more will all contribute to the Sacramento real estate market in 2023.
When is the Best Time to Buy or Sell a Home in Sacramento in 2023?
The best time to sell in Sacramento is from April to June, with the peak season being May and June. Home sales are typically highest during these months because it’s after winter, and many buyers will shift their attention to the housing market with a predicted drop in interest rates coming from the Federal Reserve.
During this period of high demand, buyers should be prepared to make a competitive offer on the home they want; sellers should be ready to accept offers quickly so that they can take advantage of a solid offer.
So, what will the real estate market hold for Sacramento in 2023? We will see a continuous slow rise in the median value of homes, around a 5% increase in total throughout 2023. We will also see a drop in sales activity, with a slight increase in the spring due to a predicted drop in interest rates.
When is the best time for you to make your next real estate move? The best way to find out if this is the right decision for you is by contacting a local real estate agent who can provide detailed information about current market conditions and help guide you through all steps of your buying or selling process.
To connect with a trusted, local Sacramento/El Dorado Hills/Folsom/Granite Bay agent, please fill out a contact form, and one of our agents will be in touch to discuss your homeownership journey.