Orange County Q4 2021 Market Report

The numbers for the housing market in Orange County showed growth in the fourth quarter as they have throughout the year. Homes are also spending fewer days on the market compared to the same quarter of 2020, even though there was a slight uptick over the third quarter of 2021. The number of single-family home sales dipped a bit as well but is still impressive overall.

The best news is for sellers who are generating sales prices well over their asking price in many cases. With higher prices resulting from shrinking inventory, a housing shortage could be on the horizon. That said, low interest rates are prompting many to buy now as high prices are inspiring sellers to get their homes on the market fast. Here’s a deeper dive into the numbers and what they mean for both home buyers and sellers in Orange County. 

2021: Another Great Year for Real Estate Sales

Interest rates remained low throughout 2021 and that made a huge difference in the growth of single-family home prices. In fact, it produced the highest number of SFH sales we’ve seen in the past decade and a half. These historically low interest rates kept the foreclosure rates low which prevented another crash in the housing market.

It is perhaps because of the pandemic, however, that home buyers were quick to act. With mortgage interest rates low, folks were keen to act before the Fed raised them. The end result is more homeowners and sellers who got well over their asking price in many cases. Of course, sellers were happy to get that extra money, but more homeowners means more people paying property taxes, and communities across the country benefit from that.

Another way COVID-19 assisted the market was that many people were forced to reduce spending on other things. Going out to dinner and the movies, and taking vacations was put on hold for much of 2020 so people were able to save more and put it towards a home purchase in 2021. A shortage of housing stock also created a seller’s market where home sellers were able to entertain higher offers with their homes spending less time on the market. All in all, the housing market was a bright spot in what had otherwise been a pretty dismal year—thanks to the pandemic and its many variants—which we are still dealing with as the new year begins.

It was because of all of the pandemic anxieties that the Fed kept interests as low as they have. This prompted many people to take advantage of those rates. The result is what will turn out to be the highest number of sales since 2006. If housing stock remains in limited supply, prices will stay high and days on the market low.

Median Sold Price

Looking at the number for the Orange County real estate market for the fourth quarter shows a slight increase in the median sold price. If we look at the median sold prices for homes in the fourth quarter of 2021 compared to the previous quarter, we see an increase from $1,083,700 to $1,131,000. Not a huge gain, a bit over four percent, but any increase is good for sellers in what has consistently been a seller’s market. When compared to 2020, however, when the median sold price was $925,000 for the fourth quarter, that’s a 22 percent increase. That’s impressive and indicative of the record-breaking numbers we saw around the country in 2021.

When we talk about the median sold price, this is different from the average sold price. The median price indicates the halfway point in pricing between the high and low numbers. It provides a better picture of the actual sales price than the average because it removes the outliers of the highest and lowest sale prices.

Number of Homes Sold

Next, let’s look at the number of homes sold in Q4. In the fourth quarter of 2021, that number was 4,920. Compare that to the 5,841 homes sold from October through December of 2020 and that’s a decrease of about 19 percent. So, while prices remain high, the number of single-family homes sold has dropped. This could be a signal that the market is cooling off a bit. Looking at the Q3 numbers for 2021 shows a drop from 5,860 which shows this decrease happened over the fourth quarter of last year. This could also be a sign of a housing shortage. Not a huge shortage but it is a sign of stiffening competition for available housing stock in a hot market. 

Median Days on the Market

With a high demand for homes comes increased competition but it also results in quick sales with homebuyers making offers well over the asking price. When we look at the number of Days on the Market for the fourth quarter, we see that number remains relatively unchanged. It’s also down from the 10 day average of 2020’s fourth quarter. This is a positive sign that the market in Orange County remains healthy. It’s important to remember that the Median Days on the Market is the total number of days the house is on the market from listing to the signing of the contract.

Mortgages Rates

If you could say anything positive about the ongoing COVID-19 pandemic it’s that it has kept interest rates low. This has provided a huge incentive to buyers looking to lock in a good rate. That said, there have been changes early in 2022. For example, a few rates surged upward to a level not seen since the early part of 2020, with 15-year fixed and 30-year fixed mortgages among them.

The average for a 15-year, fixed mortgage just last week was 2.76%. That’s an increase of nearly 20 points over the first week of the year. While the monthly payment will be higher, this rate is lower than that of the 30-year mortgage which was at a 3.49 percent average at the beginning of last week, another nearly 20 percent increase.

The Future of the Market

The current year will likely be another strong one for the real estate market and it will also remain a sellers’ housing market. We can expect home values to rise as well, perhaps by double digits. That is going to price some folks out of the market, but if the job market continues to grow, with a little patience, things will start opening up for everyone. That said, a continued housing shortage would take the shine of that bright future, for sure. 

In conclusion, the housing market in Orange County looks good for 2022. Even if mortgage rates do trend upwards, with more people able to work from home, Orange County will continue to be an attractive alternative to folks commuting to Los Angeles. Even the commute will be taken out of the equation. 

Important Note

The data in this article was obtained from several sources. It’s subject to change over time and is presented here only as a snapshot of the Orange County real estate market in December 2021.

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