2023 Southern CA Rental Market Forecast
The 2023 Southern California rental market forecast can be a bit unpredictable. The best way to predict future behavior is by analyzing what happened in the past and where we’re at today. Last year, interest rates stayed high which slowed down the sales of investment properties in Southern California. There was a brief period of time last year where the interest rates stayed steady and there was a peak in home sales in December. According to the California Association of Realtors, “Home sales have fallen for 17 straight months year over year, and it was the fourth time in the last five months that sales dropped more than 30 percent from the year-ago level”
During that brief period where interest rates stayed steady, there was an uptick in home sales because owners jumped on an opportunity to purchase money when lending terms were more favorable. Even with this light increase in home sales, the number of rental properties available on the market was significantly lower than the year before.
Although the selection of inventory was lower, home prices continued to rise. The average home price climbed by a little over 4.5% in 2022, and some experts predicted that it would fall by 8.8% in 2023.
Taking into account what happened in the real estate industry in 2022, experts have a few predictions about what the Southern California rental market forecast will look like in 2023:
Mortgage Rates Are Changing And Factor Into The 2023 Southern CA Rental Market Forecast
One of the most significant indicators of how a rental market will fluctuate comes down to mortgage rates. The National Association of Realtors expects that 30-year mortgages will drop down to 5.2% by the end of the year, and if inflation continues to settle, which is what many professionals expect in 2023, there’s a good chance mortgage rates will stabilize below 6% by the end of the year.
Rents Will Go Up Overall But You Have To Price Competitively
Each year, California sees about a 2% increase in rental prices, and real estate experts expect to see this trend continue into 2023. The average rent price for a one-bedroom apartment in Southern California is 18% higher than it was last year. The trend will likely continue but not at that level. During the pandemic, many landlords had rental rate freezes placed on their properties. Now that most of these are lifted, landlords have had the freedom and opportunity to raise rent prices at will. Demand for rental homes will stay strong, but inflation and a softening economy will cause renters to be more selective. An uptick in inventory due to less homes being put on the market for sale will allow renters more choices. You will have to price your home competitively to meet the market demand.
What Landlords Need To Know About The Rental Market Forecast
In 2023, landlords are going to need to step it up. With more people working from home, renters are willing to pay more for smart home features, home offices, and technology that makes their lives a little bit easier.
With this new wave of remote workers, more renters are moving away from the city and into the suburbs, making the location even more important than ever.
As inflation and cost of living increase, more and more adults are choosing to live with roommates or family to cut costs. This creates a higher demand for larger rental units that can accommodate multiple generations or groups of friends living together.
This early in the year it can be hard to make solid predictions about what the Southern California rental market will do by December. However, experts are expecting more of the same when it comes to rental rates and home prices. If 2023 is the year you decide to jump into the rental market, let’s have a conversation.
If you already own property in the Murrieta or Temecula area and want to maximize your profits this year, connect with Benefit National today
*This is an opinion and prediction based on research and not to be taken as fact or a basis for decisions regarding your investment property.