Housing Market Update
The Real Direction of Real Estate
December's Housing Market Update: 2023
1.) California leads the nation in single-family rentals, boasting 2.1 million units, accounting for 15% of the total in the United States. It's noteworthy that the majority of these properties are owned by small-scale investors.
2.) In 2022, California claimed the top spot in owner-occupied homes with 6.8 million, constituting 9% of the total in the U.S. Following closely were Texas with 6.3 million, Florida with 4.8 million, Pennsylvania with 3.4 million, and New York with 3.2 million. Despite this, California's ownership growth was modest, increasing by only 6%, marking the third smallest gain among states and about half of the 11% national surge.
3.) Housing economists anticipate that a lack of apartment construction may lead to more substantial rent increases in the coming years. Southern California is projected to experience a 2-4% annual increase in apartment rents until 2025, providing some relief to renters from the relentless hikes in recent years. Orange County, a robust rental market in Southern California, is expected to see increases slightly above the average.
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December Housing Market Update (cont)...
4.) Despite an above-average number of delivered housing units in Los Angeles County over the past twelve months, the region still grapples with a chronic rental housing shortage. Building permits for new apartments in the county have declined by 13% this year, reaching just under 11,000 units. Orange County is projected to build approximately 2,600 units annually from 2023 to 2025.
5.) The recent decline in home loan interest rates has spurred increased buyer activity, with a rise in home loan applications. Prospective buyers waiting for further rate drops are advised to reconsider, as rates nearing 6% are expected to draw a significant influx of buyers to the market, exacerbating the existing inventory shortage and potentially leading to a new cycle of competitive home bidding wars, favoring sellers once again.
Final note: The real estate housing market typically experiences a slowdown from October to March. If interest rates decline further, anticipate the springtime buying season to commence in February, a month earlier than usual. Here's a recommendation: If you have the financial capacity to purchase a home now, initiate the process of obtaining pre-approval for a home loan and actively start your home search. After successfully buying your home, consider refinancing your loan at a later date when interest rates decrease, aiming to reduce your monthly payments. It's worth noting that this strategy may not be applicable to those utilizing a down payment assistance program, so it's crucial to engage in a conversation with your lender for tailored advice.
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