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Even though the housing market is hot once again, many buyers have been pushed to the sidelines due to the high mortgage rate environment.
This year’s housing market is booming despite the higher mortgage rate environment. Open houses are lined with buyers. Bidding wars have returned, along with homes selling above their asking prices. Today’s market feels incredibly hot because low demand is pitted against even lower inventory. Demand may be 39% lower than the average before COVID, but the inventory is an astonishing 66% lower. There are only 2,276 homes available in all of Orange County, versus 3,806 last year when there were 67% more options. The 3-year pre-pandemic average is a mind-blowing 6,708, nearly triple today. There are not enough homes available to adequately satiate today’s weaker demand.
The main reason the inventory has ground to a halt and has not changed much this year is that far fewer homeowners are willing to sell their homes. They are unwilling to move due to their current underlying, locked-in, low fixed-rate mortgage. The difference between their underlying rate and today’s prevailing rate is significant and precludes many homeowners from listing their homes for sale and moving to another house.
Even with today’s home affordability predicament, the market is scorching with an Expected Market Time at 44 days, the second lowest level for a start to July since tracking began in 2004, only behind 2021. It is not because of unbelievable buyer demand. Instead, look to the drought of FOR-SALE signs.
What we're seeing:
→ Elevated spring demand tapering off
→ Low demand & high interest rates
→ Different from past markets
→ Low inventory, but lots of buyers
→ Multiple offers on trophy listings
→ Buyers are more critical
What we can expect:
→ Inventory continuing to drop through October
→ Sellers strategizing on when to sell
Orange County Housing Market Summary:
- The active listing inventory in the past couple of weeks decreased by five homes, nearly unchanged, and now sits at 2,276. It is the lowest level for a start to July since tracking began in 2004. In June, 41% fewer homes came on the market compared to the 3-year average before COVID (2017 to 2019), 1,580 less. Last year, there were 3,803 homes on the market, 1,527 more homes, or 67% higher. The 3-year average before COVID (2017 to 2019) was 6,708, or 195% more, nearly triple.
- Demand, the number of pending sales over the prior month, decreased by 35 pending sales in the past two weeks, down 3%, and now totals 1,560, the lowest level for a start to July since tracking began in 2004. Last year, there were 1,710 pending sales, 10% more than today. The 3-year average before COVID (2017 to 2019) was 2,582, or 65% more.
- With demand falling and the supply unchanged, the Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, increased slightly from 43 to 44 days in the past couple of weeks. It was 67 days last year, slower than today and rapidly cooling as rates were rising.
- For homes priced below $750,000, the Expected Market Time remained unchanged at 29 days. This range represents 18% of the active inventory and 27% of demand.
- For homes priced between $750,000 and $1 million, the Expected Market Time remained unchanged at 28 days. This range represents 15% of the active inventory and 23% of demand.
- For homes priced between $1 million to $1.25 million, the Expected Market Time decreased from 32 to 29 days. This range represents 10% of the active inventory and 15% of demand.
- For homes priced between $1.25 million to $1.5 million, the Expected Market Time increased from 31 to 34 days. This range represents 10% of the active inventory and 13% of demand.
- For homes priced between $1.5 million to $2 million, the Expected Market Time increased from 51 to 56 days. This range represents 14% of the active inventory and 11% of demand.
- For homes priced between $2 million and $4 million, the Expected Market Time in the past two weeks decreased from 89 to 81 days. For homes priced between $4 million and $6 million, the Expected Market Time increased from 131 to 217 days. For homes priced above $6 million, the Expected Market Time decreased from 435 to 424 days.
- The luxury end, all homes above $2 million, account for 36% of the inventory and 12% of demand.
- Distressed homes, both short sales, and foreclosures combined, comprised only 0.5% of all listings and 0.4% of demand. Only five foreclosures and seven short sales are available today in Orange County, with 12 total distressed homes on the active market, up five from two weeks ago. Last year there were six distressed homes on the market, similar to today.