San Francisco Bay Area Housing Market Forecast and Predictions for 2023

  • Bay Area housing market predictions for 2023 predict a cooling trend.
  • Forecasts suggest slower price growth and less demand among buyers.
  • Inventory gains could also cool the Bay Area real estate market in 2023.
  • This outlook is fueled by changes on both the supply and demand side.

The San Francisco Bay Area real estate market has set numerous records over the past couple of years, including unprecedented home-price growth and an all-time high for house values.

Now, as we enter the second half of 2022, many folks are wondering what the Bay Area housing market will be like in 2023. While no one can make such predictions with complete accuracy, it seems likely that the real estate scene could cool down considerably over the coming months.

Our predictions for the Bay Area housing market in 2023 center around three trends. We expect to see: (1) an overall slowdown in home-price growth, (2) an increase in inventory levels, and (3) less competition among buyers due to reduced demand.

Bay Area Housing Market Forecast for 2023

Real estate forecasts and predictions are basically an educated opinion. No one can predict future economic or housing-related trends with total accuracy. There are too many variables involved. That’s something to keep in mind, as we progress through the Bay Area housing forecasts below.

Even so, certain trends and conditions do appear highly likely over the coming months. Those are the predictions we will focus on below.

Here are the three specific trends we expect to see next year:

1. Home-price growth should begin to slow down.

A somewhat obvious prediction for the Bay Area real estate market in 2023 is that prices will rise more slowly, when compared to 2021 and 2022. In fact, we’re already seeing evidence of such a slowdown, when measured by month-to-month changes.

In a housing market report published in June 2022, the California Association of Realtors (C.A.R.) said that “Home prices could be leveling off though, as the monthly gain in price appears to be moderating.”

We expect the pace of home-price appreciation to decline over the coming months, possibly slowing to a more “normal” pace by mid-2023.

The past couple of years have been anything but normal. The COVID pandemic created a surge in home-buying demand that depleted inventory and boosted prices like never before.

The median home value for the Bay Area real estate market rose by roughly 20% during 2021 alone. That kind of pace isn’t sustainable long term, because it squeezes too many buyers out of the market. Eventually, a “correction” will occur, wherein house values cool in response to reduced demand.

Several forecasts for the Bay Area housing market in 2023 predict more moderate price growth. We anticipate that house values in the region will continue to rise — to some degree — through this year and into 2023. But the rate of appreciation will almost certainly decline over the coming months.

Current trends and long-range predictions for the Bay Area suggest that home prices could rise by less than 10% in 2023, which would be a move toward normalcy. When measured from month to month, we could even see some leveling off — or perhaps even a monthly dip in prices. Time will tell.

2. Home buyers should have more properties to choose from.

Our second prediction for the Bay Area real estate market in 2023 relates to inventory. After two years of record-low inventory levels, home buyers should have more properties to choose from in 2023. We’re seeing evidence of this trend already, in the Bay Area and across the state of California.

According to a recent report from the state’s Realtor association:

“The overall supply condition in California improved further in May, with the statewide unsold inventory index (UII) surging from the prior month and from the same month of the prior year.”

Supply growth has been reported within the Bay Area region as well. In its June 2022 housing report, Realtor.com reported a sizable increase in the number of property listings. The total number of active real estate listings in the San Francisco-Oakland-Hayward metro area rose by 46.3% in June 2022, compared to a year earlier.

These reports bring good news for Bay Area buyers, especially those who are planning to purchase a home in 2023. Forecasts suggest that inventory levels could be significantly higher next year, compared to what we saw during 2021 and the first half of 2022.

3. The housing market will be less competitive and slower paced.

It’s an understatement to say the San Francisco Bay Area housing market has been “hot” over the past couple of years. Blistering is a more appropriate adjective. During the second half of 2020 and through all of 2021, home buyers were challenged by bidding wars and lightning-quick sales.

But this too is changing, and it leads to our final prediction for the Bay Area real estate scene in 2023.

Next year, home buyers in the San Francisco Bay Area should get a break from the frenzied market conditions seen during the past couple of years. We’re already seeing a decline in home sales across the region, and this could continue due to rising housing costs and other factors.

Mortgage rates and home prices have both risen substantially. The average rate for a 30-year fixed mortgage loan shot up by more than 2% during the first half of 2022. And home prices in the Bay Area are higher now than they’ve ever been before.

These and other factors (like a possible recession) will likely reduce home-buyer demand going forward. When you combine that with the rise of inventory mentioned earlier, you have all the ingredients for a general cooldown within the real estate market.

Disclaimer: This page contains Bay Area housing forecasts extending into 2023. Long-range real estate predictions are the equivalent of an educated guess and should be treated as such. The publishers of this website make no claims or assertions about future housing trends or conditions.