The housing market in California, which was once one of the hottest in the nation during the coronavirus pandemic, is projected to experience a decline in home prices of nine percent in the coming year as interest rates continue to skyrocket and the gloomy clouds of a possible recession continue to gather in the sky.

The California Association of Realtors (CAR) issued its 2023 California Housing Market Forecast in the month of October. According to the projections made by the organization, the median price of a property in the state will drop by 8.8%, going from $831,460 in 2022 to $758,600 in 2023.

According to the findings of the analysis, the number of single-family home sales in California may drop by 7.2% between 2022 and 2023, going from the expected sales total of 359,220 in 2022 to 333,450 units in 2023.

Officials with the CAR have stated that the figure for 2022 is 19.2% lower than the 444,520 residences that were sold in 2021.

In a news release, Otto Catrina, president of the California Association of Realtors and a real estate agent based in the Bay Area, stated that "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." Catrina's comments were made in light of the fact that "the market is shifting as home sales and prices are predicted to temper next year."

Since the beginning of the coronavirus pandemic, the housing market has experienced a series of events that run counter to one another, including the sudden drop in home prices and sales.

The beginning of the pandemic sparked a buying craze, comparable to that of consumers on Black Friday.

The demand for housing in a state that was already dealing with a significant shortage of available homes was accelerated as a result of historically low mortgage interest rates, a limited housing supply, and work that could be done remotely.

The high level of demand resulted in the creation of a market that was intensely competitive, with buyers trying to outbid one another. This resulted in an abrupt increase in the values of homes.

According to data provided by CAR, the median price of a home in the state will have increased by 32 percent, from $592,000 in 2019 to $786,000 in 2021. According to projections made by the association, the median price of a home in the state will reach $831,000 by the end of this year. This represents a year-over-year increase of 5.7%.

However, over the course of the most recent few months, the Federal Reserve has begun to raise interest rates in order to put a stop to historically high inflation. Prospective homebuyers have been scared off by the high-interest rates, which has led to an increase in the number of sellers entering the market.

The latest mortgage survey conducted by Freddie Mac found that the average rate for a 30-year mortgage has now reached 6.9%, marking its highest level in the past 20 years. The national average mortgage interest rate reached 6.89% in April 2002.

Mortgage interest rates, according to officials from Freddie Mac, are continuing their climb to new record highs.

According to Freddie Mac officials, who were quoted in a news release, "We continue to see a tale of two economies in the data: Strong job and wage growth are keeping consumers' balance sheets positive while lingering inflation, recession fears, and housing affordability are driving housing demand down precipitously." "The economy and the housing market will undoubtedly be going through some significant changes over the next few months".

The officials at CAR anticipate that the rates for 30-year, fixed mortgages will remain around 6.6% throughout the coming year.

According to Jordan Levine, vice president, and chief economist at CAR, "as the housing market continues to cool, the U.S. economy will moderate further and is expected to slip into a mild recession in the first half of next year." This prediction was made after Levine observed that the housing market was continuing to cool. "In the coming year, persistently high inflationary pressures will cause mortgage rates to remain elevated, thereby lowering prospective buyers' purchasing power and making it more difficult for them to afford to house. As a consequence of this, housing demand, as well as home prices, will decrease throughout the year 2023."