The housing market has cooled significantly in 2023. According to realtor.com, home sales are expected to decline by nearly 16% in 2023, which is more than 4 million homes. This would be the smallest annual total of homes sold since 2012. According to a Pleasanton Realtor, here are a few reasons for the cooldown in sales.
Higher Mortgage Rates
For the week ending July 27, 2023, the 30-year fixed rate averaged 6.81%, up from 6.78% the week before. In 2022, the 30-year fixed rate mortgage was 5.30%. It is estimated that 82% of buyers who are also attempting to sell their home feel they are “locked” in their current lower rate, which prevents them from moving.
Lower Inventory Levels
Even though housing prices have stabilized, we remain in a seller’s market, and the country overall is still seeing a decline in housing inventories. Consider the following statistics:
- In 2006, new residential housing projects peaked at nearly 2.2 million units. In January 2023, we saw 1.3 million housing starts.
- In California, the unsold inventory index (UII) for June 2023 decreased 8.3% year over year, indicating the housing supply is still tight.
- To create an equalized housing market, it typically takes a 4-to-6-month supply of available homes. According to the National Association of Realtors, there was only a 3-month supply of homes available at the end of May.
Note: Inventory levels can vary greatly across the nation. Waco, Texas has the highest housing inventory with 11.3 months’ worth of homes. Two cities in California, Freemont, and Chula Vista rank among the lowest with only 1.2 months’ worth of inventory.
Fewer Home Insurers
Nationwide, homeowner insurance is getting more expensive, with premiums up 11% to $1700 on average. In Florida, homeowners could see a 40% increase in property insurance rates. On the other hand, California has some of the lowest rates in the country, partly due to strict state regulations on what insurance companies can charge.
In some states, private home insurers have stopped writing new policies or are exiting the area altogether. The primary reason is due to increased risk of climate related events:
- State Farm announced it would stop accepting new applications from California home and business owners, effective May 7, 2023.
- In Florida, nearly two dozen private companies have either stopped issuing policies, declared insolvency, or withdrawn from the state since 2022.
These and other actions can cause policies to become more expensive or make insuring the property more difficult. This can prompt a decrease in demand for homes in the area, putting existing homeowners in a serious bind.
There are just a few of the reasons for the cooling of the housing market. Other potential factors are layoffs and company closings in particular regions. If these trends persist, we can expect the housing market to remain cool for the immediate future.
About Pleasanton Realtor of Range Homes
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Why Pleasanton CA?
Pleasanton CA is known for its good economy, beautiful landscapes, and extremely popular housing market. When other states and territories have experienced a decline in housing prices the Bay Area, in general, has remained strong. This doesn’t mean you should not diversify your portfolio across many states, but Pleasanton Realtors agree that this is certainly a strong place to start for a novice investor. There are even some great low-cost homes that are ripe for renovation.
We have a team of friendly, helpful Pleasanton Realtors that specialize in East Bay CA real estate and property sales that can help you work out how to best get your property portfolio started. Our agents are here to put your needs first, get you the best deals and offers, help you buy or sell your dream home and build your investment portfolio. Reach out to our team today to find out your options.
If you are looking to find a Pleasanton Realtor, looking for homes for sale in East Bay CA, or even to sell your home with someone who will make sure you get the best deal and understand your needs – look no further – when you work with us, consider yourself family.