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More homes are hitting the market as homeowners decide to sell at a pace not seen in the past couple of years, and this trend is expected to continue as housing transitions into spring.
Many sellers are listing their homes, intensifying competition and making it increasingly difficult for some to secure a sale. Currently, there are 3,033 homes on the market, a 56% increase from last year’s 1,939 at this time. That’s 1,094 additional homes year-over-year. This is the highest mid-February inventory since 2020, when there were 4,030 homes available.
The increase in inventory is largely driven by higher mortgage rates. The Federal Reserve raised the short-term federal funds rate 11 times between March 2022 and July 2023, causing long-term mortgage rates to surge from 3.25% in January 2022 to over 7% just eight months later. Since July 2023, mortgage rates have remained elevated, mostly above 7%. This has deterred many homeowners from listing their properties, as they “hunkered down” in their homes rather than selling.
However, the sellers now entering the market are facing a landscape of persistently low demand. With more homes available but buyer activity remaining steady, unsold inventory continues to grow, leading to heightened competition among sellers. This pattern was evident in 2024 when inventory peaked in September at 3,695 homes—48% higher than the 2023 peak of 2,496. If mortgage rates remain around 7% or higher, the number of homes on the market will likely keep climbing.
The Bottom Line
Inventory will continue to build as more homeowners choose to sell, especially as the market shifts into the Spring and Summer seasons. This will increase competition and lead to longer market times. Sellers must price their homes appropriately to achieve a successful sale. Overpricing in this environment will result in properties sitting on the market without attracting buyers. This is not the year to “test” the market with an inflated asking price. Instead, sellers should focus on determining their home’s fair market value by carefully analyzing recent comparable pending and closed sales while considering factors such as condition, location, upgrades, and overall appeal.
What we're seeing:
→ Active inventory still on the rise
→ Interest rates still at a higher level
→ Demand continuing to go up, which is expected this time of year
→ Beach areas are heating up at a quicker pace than inland
→ Average days on market was 80 days
→ Properties priced correctly going into escrow in average days on market
→ More beach home buyers during spring because of the clear weather
What we can expect:
→ If rates drop, demand will go up
→ Average days on market is expected to be around 40
→ Summer market will slow down based on June gloom
→ Mid summer clears up, heating up the market
Orange County Housing Market Summary:
- The active listing inventory in the past couple of weeks increased by 212 homes, up 8%, and now sits at 3,033. In January, 17% fewer homes came on the market compared to the 3-year average before COVID (2017 to 2019), 528 less. Yet, 473 more sellers came on the market this January compared to January 2024. Last year, there were 1,939 homes on the market, 1,094 fewer homes, or 36% less. The 3-year average before COVID (2017 to 2019) was 4,977, or 64% extra.
- Demand, the number of pending sales over the prior month, surged by 157 pending sales in the past two weeks, up 12%, and now totals 1,497, its highest level since October. Last year, there were 1,397 pending sales, 7% less. The 3-year average before COVID (2017 to 2019) was 2,393, or 60% more.
- With demand rising faster than supply, the Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, decreased from 63 to 61 days in the past couple of weeks. Last year, it was 42 days, noticeably faster than today. The 3-year average before COVID (2017 to 2019) was 64 days, similar to today.
- In the past two weeks, the Expected Market Time for homes priced below $750,000 decreased from 52 to 51 days. This range represents 18% of the active inventory and 22% of demand.
- The Expected Market Time for homes priced between $750,000 and $1 million decreased from 43 to 41 days. This range represents 14% of the active inventory and 20% of demand.
- The Expected Market Time for homes priced between $1 million and $1.25 million decreased from 49 to 46 days. This range represents 10% of the active inventory and 13% of demand.
- The Expected Market Time for homes priced between $1.25 million and $1.5 million decreased from 42 to 38 days. This range represents 9% of the active inventory and 14% of demand.
- The Expected Market Time for homes priced between $1.5 million and $2 million increased from 60 to 62 days. This range represents 13% of the active inventory and 13% of demand.
- The Expected Market Time for homes priced between $2 million and $2.5 million increased from 60 to 65 days. This range represents 6% of the active inventory and 7% of demand.
- In the past two weeks, the Expected Market Time for homes priced between $2.5 million and $4 million decreased from 132 to 112 days. For homes priced between $4 million and $6 million, the Expected Market Time decreased from 183 to 166 days. For homes priced above $6 million, the Expected Market Time decreased from 333 to 208 days.
- The luxury end, all homes above $2 million, account for 29% of the inventory and 12% of demand.
- Distressed homes, both short sales and foreclosures combined, comprised only 0.2% of all listings and 0.6% of demand. Only four foreclosures and two short sales are available today in Orange County, with six total distressed homes on the active market, up two from two weeks ago. Last year, nine distressed homes were on the market, similar to today.
- There were 1,268 closed residential resales in January, up 7% compared to January 2024’s 1,182 and down 22% from December 2024. The sales-to-list price ratio was 99.14% for Orange County. Short sales accounted for 0.1% of all closed sales, and there were no foreclosures. That means that 99.9% of all sales were good ol’ fashioned sellers with equity.