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With so many varying viewpoints and narratives swirling about the housing market, it is best to take a step back from the noise and focus on the latest trends.
Everyone seems to have an opinion about real estate. With so many differing viewpoints, from doom and gloom to surging markets, it is difficult to make heads or tails of the direction of the housing market. News articles with catchy headlines and YouTube channels devoted to negative narratives make understanding the current market even more confusing.
It is time to step aside from the constant buzz and look at the trends that have developed to wrap up 2024.
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When mortgage rates drop below 6.5% with duration, demand will rise and market times will drop. According to Mortgage News Daily, October has seen a reversal in mortgage rates, increasing from 6.2% on October 1st to 7% today. The rise comes from strong economic readings, speculation, and post-election positioning. The path of rates will continue to be volatile. Nonetheless, once rates drop below 6.5% with duration, the housing market will heat up with an increase in pending sales, more homeowners opting to sell, and a rise in closed sales.
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The 2024 inventory peak has been delayed yet again. The higher mortgage rate environment has not allowed enough pending sales activity to cut into the active inventory. Typically, the Orange County inventory peak occurs between July and August. Once the kids go back to school, the supply of available homes slowly drops for the remainder of the year.
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Negotiations have shifted more toward the buyer's favor as the year winds down. The Expected Market Time dropped to 37 days at the end of March. Back then, homes flew off the market with multiple offers and plenty of showing activity. Flash forward to today, and the Expected Market Time has risen to 69 days. It was 78 days in September but improved as the sub-6.5% mortgage rates worked through the market. Yet, with rates back up to 7%, expect the market to slow a bit from here.
This is the most buyer-friendly market since the end of 2022 when rates were screaming higher. The bottom line: steer clear of all the hype, narratives, and differing market views. Instead, lean in on data, statistics, and trendlines and continue to look for changes. Let the data speak for itself and allow it to set market expectations properly.
What we're seeing:
→ When interest rates drop below 6.5% we see demand spike
→ Inventory has sustained because interest rates went back up
→ Buyers are doing a lot of negotiations
→ Deals being put together at a lower price
→ Good time for buyers to negotiate right now
What we can expect:
→ Nov/Dec sellers generally pull their homes off the market
→ If sellers don't pull homes we'll see higher inventory in 2025
→ Higher inventory will create more competition
Orange County Housing Market Summary:
- The active listing inventory in the past couple of weeks decreased by 54 homes, down 1%, and now sits at 3,640, its lowest level since August. It appears as if Orange County reached its annual peak at 3,694 homes two weeks ago. In September, 25% fewer homes came on the market compared to the 3-year average before COVID (2017 to 2019), 743 less. Yet, 323 more sellers came on the market this September compared to September 2023. Last year, there were 2,406 homes on the market, 1,234 fewer homes, or 34% less. The 3-year average before COVID (2017 to 2019) was 6,010, or 65% extra.
- Demand, the number of pending sales over the prior month, decreased by 26 pending sales in the past two weeks, down 2%, and now totals 1,572. Last year, there were 1,284 pending sales, 18% fewer. The 3-year average before COVID (2017 to 2019) was 2,180, or 39% more.
- With supply and demand falling at a similar pace, the Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, remained unchanged at 69 days in the past couple of weeks. The 3-year average before COVID (2017 to 2019) was 85 days, slower than today.
- In the past two weeks, the Expected Market Time for homes priced below $750,000 decreased from 53 to 52 days. This range represents 17% of the active inventory and 22% of demand.
- The Expected Market Time for homes priced between $750,000 and $1 million remained unchanged at 46 days. This range represents 14% of the active inventory and 21% of demand.
- The Expected Market Time for homes priced between $1 million and $1.25 million increased from 48 to 52 days. This range represents 11% of the active inventory and 15% of demand.
- The Expected Market Time for homes priced between $1.25 million and $1.5 million increased from 56 to 57 days. This range represents 11% of the active inventory and 13% of demand.
- The Expected Market Time for homes priced between $1.5 million and $2 million decreased from 86 to 76 days. This range represents 15% of the active inventory and 14% of demand.
- In the past two weeks, the expected market time for homes priced between $2 million and $4 million increased from 103 to 113 days. For homes priced between $4 million and $6 million, the Expected Market Time increased from 194 to 240 days. For homes priced above $6 million, the Expected Market Time decreased from 444 to 346 days.
- The luxury end, all homes above $2 million, account for 32% of the inventory and 15% of demand.
- Distressed homes, both short sales and foreclosures combined, comprised only 0.2% of all listings and 0.1% of demand. Only six foreclosures and one short sale are available today in Orange County, with seven total distressed homes on the active market, up two from two weeks ago. Last year, four distressed homes were on the market, similar to today.
- There were 1,622 closed residential resales in September, down 2% compared to September 2023’s 1,647 and down 14% from August 2024. The sales-to-list price ratio was 98.9% for Orange County. Foreclosures accounted for 0.1% of all closed sales, and there were no short sales. That means that 99.9% of all sales were good ol’ fashioned sellers with equity.