We asked our clients—homebuilders, land developers and real estate investors—to give us their outlook in ten words or less on the 2023 new home market in the California geographies where they are active. They had a lot to say. The chart below categorizes the responses by location and whether a comment was generally positive, neutral, or negative.
San Diego had the highest proportion of positive outlook comments at 48%. Many of the positive comments related to a very low supply of new homes which survey respondents thought would provide more price support and result in smaller price adjustments in San Diego in 2023 compared to other California markets. Ventura had the second highest proportion of positive comments at 42%. Ventura also had the lowest number of negative comments at just 27%. A reoccurring comment for Ventura was “optimistic.”
The highest proportion of negative comments related to California’s more affordable inland market areas, including Sacramento, the Inland Empire, and the Central Valley. While you may think that the outlook for more affordably priced areas would be better than that of more expensive markets, the fact is that buyers looking for lower priced homes tend to be much more monthly payment sensitive, and therefore more interest rate sensitive, than homebuyers in more expensive areas. The rise in interest rates in 2022 hit the inland markets the hardest. The two most frequent comments regarding the three inland markets were “higher incentives,” and “lower prices.” However, the most common positive comment for these three markets was “low supply,” and a number of respondents thought that the markets would “find the bottom” on prices in the first half of the year, leading to price stability in the second half of the year.
Clarity Real Estate Advisors works with public and private homebuilders, real estate investors, land bankers, land developers, and land brokers throughout the western U.S. We decipher the nuances of real estate market trends, identify opportunities, provide market-based feasibility guidance, and help our clients make the best real estate investment decisions possible.
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