Anyway, despite the recent weather patterns, Southern California, particularly the coastal communities such as Orange County, remains in high demand. As a result, home values remain strong even as mortgage rates have increased to around 7%. However, this double-edged sword has resulted in reduced affordability for home buyers. Conversely, home prices have started to slide in other regions, providing relief to home buyers who have faced increased rates. Our recent blog post showed that most experts think interest rates are likely to fall by the end of the year, but what will that mean for home buyers? And what are the current market conditions for those interested in entering the market as a buyer or a seller? Let's break it down in this month's market update.
March Market Stats for Orange County
Active Listings
The number of active listing inventory, which refers to the number of homes currently for sale in Orange County, decreased again this month to 3,011. This number is very small historically.
To understand just how low or limited our inventory is, we can compare it with previous years:
- February 2023 - 3,011
- February 2021 - 3,962
- February 2019 - 7,644
- February 2008 - 18,548
Our inventory would need to increase by 150% to reach pre-pandemic levels seen in 2019, not to mention where things were during the Great Recession in 2008, which were more than 500% higher than current inventory levels.
Why does this matter?
Well, everyone wants to know where the market is headed. Will the market crash? Are we in a housing recession? The answer is to look at it simply regarding supply vs. demand. For home prices to crash, supply must drastically exceed the level of demand.
I'm here to tell you that's not what we see in today's market.
So we understand inventory is low, but that's only one piece of the puzzle. We know supply is meager, but how about demand?
Closed Sales
With the interest rates doubling in such a short amount of time, it has sidelined many would-be buyers, resulting in fewer transactions taking place. However, it's better than it may appear. The average number of sales in February over the last 10 years is around 1,800 in the month of February. With 1,269 sales in February 2023, we are only down 30%.
This is the demand side of the equation. So while yes, we have a slowdown in demand, if you compare that with the drastic decrease in inventory, there needs to be accessible to supply, so prices are likely to fall in a meaningful way.
If we see demand stay muted and active listings shoot up past 10,000 homes for sale in Orange County, that will indicate things are changing, but we are far from that.
Days on Market
Another good indication of how hot or cold the housing market is today is to look at the Days on Market, which refers to the number of days it takes for a home to sell in Orange County. For February, we saw the Median Days on the market fall to 25, down from 31 days in January.
At first glance, this seems much higher than in recent years. The time frame was only 7 days in February 2022 and 9 days in February 2021, a blazing hot seller's market where we saw every listing getting more than 10 offers, regardless of the condition or price. Today's number of 25 is much healthier and indicative of the market we experienced pre-pandemic.
Sales Price
One of the primary concerns for both buyers and sellers is the sales price of homes in Orange County. How have all the factors above impacted the sales price in the region?
The median sales price for a home in Orange County is up for the second month and currently sits at $950,000. This is 4% less than in February of 2022. However, it is essential to note that the rolling 12-month average shows an 8.8% increase in home values over the past year and a 27% increase since February 2021.
Prices will continue to rise, albeit slower and more sustainably than in the past few years. As interest rates increase to more comfortable levels, more buyers will fall into affordability and re-energize the market.
Conclusion
For Buyers
Suppose you are a prospective homebuyer and are confident that you will live in the home for the next 3 to 5 years. In that case, I recommend that you act sooner rather than later. While we predict that mortgage rates will fall, the effect will likely accelerate the market, making it more challenging to find the right home at a fair price.
In this low-inventory and high-demand market, you must work with a knowledgeable and experienced real estate agent who can guide you through the buying process and help you find the right home.
For Sellers
If you are considering selling this year, now is the time. Spring is when we start building inventory, and buyers will have more options. Although we predict a decline in mortgage rates, many buyers are still priced out of the market for homes meaning it could take longer to sell.
It's never been more critical to partner with an advisor who deeply understands today's market with cutting-edge marketing strategies to expose properties to the highest number of buyers possible.
One thing has remained consistent for listings, homes that look great and are priced accurately are still selling quickly. On the other hand, overpriced, under-marketed, and poorly documented homes are sitting on the market. Sometimes for months.
