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With the second-fewest homes to start a year since tracking began in 2004, the Orange County housing market is already hotter than pre-COVID years.
The Orange County housing shelves are half empty. It is tough being a buyer looking for a home today with higher mortgage rates and very few options to purchase. Demand is muted due to affordability constraints and fewer FOR-SALE signs. Still, the inventory crisis eclipses today’s diminished demand, resulting in a market that already feels hot at the start of January.
The Orange County housing market will thaw from the holidays and improve from here. Cyclically, far more homes will be placed on the market in January and February compared to November and December, the cycle lows yearly. Buyer demand will increase with the distractions of the holidays in the rearview mirror and more homes entering the fray. Further fueling the increase is how rates are now hovering around 6.75% today, after remaining above 7% since the end of July and even breaching 8% in October. The housing market’s direction is predicated on the direction of mortgage rates and home affordability. As rates drop, affordability will eventually improve enough to instigate more demand. Mortgage rates will gradually fall as the economy slows this year and inflation continues to fall.
Advice for Buyers:
→ Don't wait for the market to slow and negotiations to line up in your favor
→ Needs to be more homes available to purchase compared to weak demand
→ Increased buyer competition with increased home affordability once rates drop
→ pursue a purchase with patience and steadfast determination
→ It may take several offers to find success, but persistence is key
Advice for Sellers:
→ Take advantage of the hotter market by pricing a home close to the last comparable or pending sale
→ Set a realistic price, don't overprice
→ Take advantage of the buyer pool
Orange County Housing Market Summary:
- The active listing inventory in the past couple of weeks decreased by 77 homes, down 4%, and now sits at 1,785, its second-lowest start to a year since tracking began in 2004, only behind 2022. In December, 36% fewer homes came on the market compared to the 3-year average before COVID (2017 to 2019), 532 less. Last year, there were 2,530 homes on the market, 745 more homes, or 42% higher. The 3-year average before COVID (2017 to 2019) was 4,665, or 151% extra, more than double.
- Demand, the number of pending sales over the prior month, plunged by 192 pending sales in the past two weeks, down 18%, and now totals 861, its lowest initial demand reading since tracking began in 2004. Last year, there were 900 pending sales, 5% more than today. The 3-year average before COVID (2017 to 2019) was 1,391, or 32% more.
- With demand plunging compared to the drop in supply, the Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, increased from 53 to 62 days in the past couple of weeks. It was 84 days last year, slower than today. The 3-year average before COVID (2017 to 2019) was 104 days, considerably slower than today.
- For homes priced below $750,000, the Expected Market Time increased from 37 to 39 days. This range represents 19% of the active inventory and 31% of demand.
- For homes priced between $750,000 and $1 million, the Expected Market Time increased from 36 to 43 days. This range represents 15% of the active inventory and 22% of demand.
- For homes priced between $1 million and $1.25 million, the Expected Market Time increased from 34 to 47 days. This range represents 10% of the active inventory and 13% of demand.
- For homes priced between $1.25 million and $1.5 million, the Expected Market Time increased from 38 to 55 days. This range represents 9% of the active inventory and 11% of demand.
- For homes priced between $1.5 million and $2 million, the Expected Market Time decreased from 56 to 72 days. This range represents 12% of the active inventory and 10% of demand.
- For homes priced between $2 million and $4 million, the Expected Market Time in the past two weeks decreased from 121 to 105 days. For homes priced between $4 million and $6 million, the Expected Market Time increased from 235 to 357 days. For homes priced above $6 million, the Expected Market Time increased from 293 to 374 days.
- The luxury end, all homes above $2 million, account for 35% of the inventory and 13% of demand.
- Distressed homes, both short sales and foreclosures combined, comprised only 0.6% of all listings and 0.3% of demand. Only six foreclosures and four short sales are available today in Orange County, with ten total distressed homes on the active market, up one from two weeks ago. Last year, 15 distressed homes were on the market, similar to today.