Santa Cruz Real Estate Market Outlook for 2023

Santa Cruz Real Estate Market Outlook for 2023

  • Daniel Oster
  • 09/6/22

The COVID-19 pandemic has led to one of the most competitive real estate markets in the recent history of the United States, as median home prices have continued to rise. Wondering if we will continue to see a seller’s market in 2023 or if we will pivot back towards a buyer’s market? Some experts predict that first-time home buyers might begin seeing a shift in their favor by 2023. It’s crucial to be aware of any and all real estate trends so that you can navigate the ever-evolving housing market. Whether you are planning to buy or sell a home in 2023, it’s important to learn more about the Santa Cruz real estate market outlook. Here is everything you should know.

Mortgage rates

Mortgage interest rates will probably keep rising and leveling out throughout the remainder of 2022, but rates might fall back to around 4.3% to 4.6% by the end of the year, meaning that rates will either stay stagnant or drop in 2023. In 2021, real estate experts predicted that the median mortgage interest rates would break through the 3% range, but the rates did not go above 3.1% to 3.3%. But in July 2022, the average 30-year fixed-rate mortgage rate went up to 5.51%, partially due to the federal funds rate hike by the Federal Reserve.

The predicted drop and stagnancy in mortgage rates is excellent news for potential buyers concerned about the rising mortgage rates and home prices. Mortgage rates might continue to increase slightly through the end of 2022, but they should begin to level out and even drop by 2023. If you are planning to buy in 2023 while you wait for the mortgage rates to start dropping, you can work on improving your credit score, which will help you get the lowest mortgage rate possible for your home loan. For most kinds of mortgages, you need a minimum credit score of at least 500 to 620 to be approved, but it certainly helps to have a higher credit score to enjoy a lower mortgage rate. That being said, if you want to just buy a home now, you can always refinance your loan later after your credit score has risen and mortgage rates have gone down.

Home prices

Between the trend toward working from home, the home supply shortages, and the reduced mortgage rates, home sales and home prices have risen in 2022. That said, while home prices are still on the rise, they aren’t increasing as much as they did in 2021. The median home prices increased about 17% to 18% from May 2021 to May 2022 due to the trend toward working from home and the housing supply shortages.

Due to labor and supply chain shortages, new single-family homes can’t be built as quickly. New home construction helped to regulate housing demand in the past, which means that home prices have continued to rise due to these shortages. And the trend toward working from home and continued interest in working remotely has led to increased real estate costs in many markets. About 20% of all homeowners are moving to the suburbs since they don’t need to be close to their city center jobs anymore.

The growth in home prices means that potential buyers need to make sure they can actually afford the homes they want to purchase. Buyers also need to worry about bidding wars with a limited home inventory. That being said, home prices will likely begin to stagnate and possibly drop in 2023.

Home values

Are you looking for Santa Cruz homes for sale? It’s also essential to learn about home values in the area. Home values differ from home prices since home value, also known as current market value, is the value that a professional appraiser has assigned to a property, while the home price is the amount the property is listed for or sells for. Bidding wars affected home values in 2021 since buyers who immediately wanted real estate were willing to pay more than the prices for homes.

Home values increased about 11% from January 2020 to January 2021 and 17.5% from January to November 2021. They will likely keep rising until 2023, when they might begin to stagnate. To offset the problem of rising home values and prices, potential buyers can make sure they’re not overpaying for a property by getting a professional appraisal. If the professional appraiser says that the property's value is too low, this could mean that the listing price is too high, and the buyer could end up with negative home equity if they buy the home.

Millennials will drive the market upward

Over 45 million Millennials, who fall between the ages of 26 and 41, will purchase their first homes in 2022 or 2023. This demand from potential Millennial home buyers could keep driving the housing market upwards, despite the increase in the number of homes available. Luckily, first-time home buyers can use specific loan and assistance programs to purchase their first homes. These programs are typically available through government entities like Freddie Mac or Fannie Mae. Millennial buyers could also opt to use government-backed mortgages, like FHA or VA home loans. Buyers can make use of these loan program offers to make owning a home more affordable.

The bottom line

The housing market will keep evolving through the end of 2022 and into 2023. Home values, home prices, and mortgage rates are predicted to continue to steadily rise, and home price appreciation will happen, although many parts of the home market will go through a slowdown. More homeowners will list their homes for sale through the end of 2022 and 2023, but these homes might stay on the market for longer stretches of time.

Partner with a Santa Cruz real estate agent

Are you looking for Santa Cruz homes for sale? Reach out to trusted Santa Cruz real estate agent Daniel Oster for guidance. Daniel is a fierce advocate for his clients and is the perfect partner whether you’re hoping to buy or sell in Santa Cruz and the surrounding areas.

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