After home prices fell in 2022, what’s ahead for 2023 Stanislaus County real estate market?
Stanislaus County home buyers and sellers are likely in for another year of higher interest rates driving down demand and sales, according to real estate experts.
After a strong start to 2022, the Federal Reserve’s decision last summer to tame inflation through major key interest rate hikes had an immediate impact on the local market, according to data from TrendVision. Median home prices for the county were down 4.5% last year, ending at $420,000.
But the fall in home sale prices came after an 11% rise in median sale prices, which peaked at $485,000 last April, said Daniel Del Real, a broker associate at PMZ Real Estate.
“It was a pendulum, it was a year of two stories, where midyear we were looking at an 11% increase in median price but now we are 4.5% lower than we were at the end of 2021,” he said.
Del Real said he expects the second half of last year’s story, one of falling home prices coupled to rising mortgage rates, to be the dominant narrative for the 2023 real estate market as well.
That should mirror the statewide forecast from the California Association of Realtors, which reported a projected 8.8% decline in median home prices for 2023.
“With the market shifting as home sales and prices are predicted to temper next year, buyers and sellers are adapting to the new realities of the market,” CAR President Otto Catrina said in a statement from the group on its 2023 forecast.
Mortgage rates largely have followed the Federal Reserve’s rate increases and are expected to drive median home sale prices in 2023. Del Real said higher rates mean less affordability for buyers, which means sellers are looking at lower prices and sitting longer on the market.
So instead, Del Real said, some local sellers are deciding to stay in their homes. Many current homeowners have historically low mortgage rates and would have to shift into a higher rate to purchase a new home. At the end of 2021, mortgage rates were at about 3.1%, which jumped to 6.1% at the end of 2022. Still, the end-of-year rate is down from a year-high 7.1% that the county hit in October.
Del Real said the increase in the interest rate could mean up to a 30% lifetime increase in payments for buyers, pricing many out of the market. But there is reason for some optimism in the new year, he said, as many expect the rates to stabilize by midyear.
“We’re going to have another year where we have two stories. The first two quarters of the year as we see what Fed will do. But we won’t see prices find a stable button until the end of the second quarter,” he said.
He said the other story coming into the new year is both sellers and buyers getting realistic about where the market is now. He said buyers, sellers and real estate agents are in a “lose-lose-lose” with lower median sale prices, higher mortgage rates and fewer transactions overall.
“We’re having real conversations with sellers and saying you have to price your homes to market. We’re not pricing to expectations of what it was,” he said. “And we need to inform sellers that even though buyers are ‘winning’ because of lower price points, they’re really not because of higher mortgage rates and overall payments. Everyone needs to come together to create a successful transaction for all parties.”
