Q2 of 2022 saw a lot of changes and new trends in the housing market, which some might argue were necessary to tackle the rising rate of inflation. The numbers for the housing market in Orange County showed growth in many respects but not for the same reasons you might be thinking.
Declining number of houses on the market paired with rising interest rates have resulted in the fall of buyer demand but what’s more interesting is that houses are still selling within a week. The coming quarters for Orange County will see the competition for real estate heat up even further. To understand how some of these variables are changing the course for Orange County’s housing market, let’s take a look at some statistics.
The Median Sold Price
The median sales price in Orange County in Q2 of 2022 was $1,090,000, up 5% in comparison to numbers reported in the last quarter and nearly 11% more than Q2 of 2021. The numbers are expected to rise further in the coming months but don’t expect anything too dramatic.
The demand for homes is falling in Orange County as home prices and interest rates are starting to go up again. This temporary spike in home prices was majorly caused by lower inventory. In fact, in some cities, sellers are already starting to feel the impact of a dip in demand and have had to resort to lowering their initial asking price to align with buyer expectations.
The Number of Homes Sold
The number of homes sold in Orange County has gone up from the previous quarter, however, when compared to Q2 of 2021, we are looking at a dip in numbers. Last year, Orange County saw an increase in activity in the housing market mainly due to low interest rates. Many people, who otherwise were not planning to buy a home, found a great opportunity to secure real estate at historically low prices. Subsequently, many sellers in that period had to lower their asking price fearing the economic distress caused by the Covid pandemic. Long story short, we saw a boom in the housing market even with low inventory and rising mortgage rates.
Looking at the number of homes sold and sales prices, we get a clear view of what the true demand is and how it is being shaped in the current economy. We had less buyers in Q2 as interest rates went up and many people realized they could not afford new home purchases any longer.
The Median Days on Market
The median days on market for Orange County in Q2 of 2022 was eight days. This is the same as last quarter but when compared to Q2 of last year, days on market went up by a day. This nominal fluctuation is a clear indication that regardless of rising home prices and low inventory, buyers are still not waiting too long to get into a contract.
While this may give some sellers the impression that the housing market is growing, however, in reality, the trends we saw in Q2 are pointing towards a more stable point in the future. The demand has not gone up for a while now which is mainly due to rising home prices but that is yet to hamper some buyers who can still afford to make a purchase.
The Current Mortgage Rates
The mortgage rates for the State of California sat close to 5.8 percent in the second quarter of 2022. This is a slight increase in comparison to last quarter which saw rates close to 4.5 percent. Feds are incrementing the Fed Funds rate in a step by step manner so as not to overwhelm communities and businesses that are still recovering from the economic setback caused by the Covid pandemic, which is why we are looking at home prices going up gradually.
We might see another drastic dip in demand as the interest rates rise further and that should land the housing market in Orange County in a more stable position. It’s safe to say that the seller’s market was no longer prevalent in Q2 of 2022 and things might be changing for the better. While it’s a good thing that more people could afford buying homes leaning on post pandemic economic relaxations, when in reality, this trend was actually favoring the seller’s market. So as prices go up, expect homes to stay on the market longer as the housing market tries to achieve a balance between supply and demand.
The Future of the Market
Q3 in Orange County will likely see home prices go up along with days on market. There is a high chance that interest rates will rise further, pricing many buyers out of the market who were dependent on the economic relaxations passed by the feds to battle inflation caused by the pandemic. Rising home prices are another indication that the inventory for homes is not increasing as the current market is still not viable for new construction. Supply chain disruptions have caused developers, and people looking to build new homes, a major setback but this allowed existing sellers to raise their asking price.
If you are a seller in Orange County, the good news is that closing times continue to remain short due to low inventory and an eagerness amongst buyers to act before prices make another leap ahead. If you are a buyer in Q3, make yourself familiar with the best options to finance your purchase so you are in-line with the current trends. The market has undergone many changes in the last quarter and we have hard evidence to believe that this will continue through Q3.
Both buyers and sellers must learn from their agents about what their best options are. First-time home buyers may feel the pressure from the housing-crunch but if they continue to be patient, they can lean on their savings to close a good deal. That said, I highly recommend these clients get in on the action as soon as possible.