Despite the natural cool down in the real estate cycle around December, January, and early in February, Orange County has had bullish prices for our houses and a decline in the number of houses for sale. In turn, it served to help drive up the already rising prices. The coming quarters for Orange County will likely be strong, profitable, and a good chance for sellers and buyers alike to find good deals.
No Winter in California Means Summer Pricing Year-Round
It is fairly common to see businesses die down a bit at the end of the fourth quarter. Many buyers are less inclined to start the expensive and lengthy process of getting a home after Christmas spending and a time of thankfulness.
However, for Orange County, this didn’t mean a drop in housing prices, demand, or a more long-term cooling for the local housing market. In fact, the market seemed to do quite well with the lessened inventory, serving to drive prices up even higher as buyers competed over what remained. Here is a breakdown of some of the key statistics for Q1 and how they match up to previous quarters.
The Median Sold Price
The median sales price in Orange County did extremely well throughout all of 2021 and there doesn’t seem to be an indicator that it will slow down in 2022. Q1 of 2021 saw the median sale price at $870,000. That number rose all the way to $990,000 by the fourth quarter of 2021. Despite the typical slump in the market around the end of the year, the sales prices of houses weren’t affected at all, if anything, they enjoyed a temporary spike due to the lower inventory.
The median sales price for Q1 of 2022 was $1,035,000, which is a 4.5% increase from the last quarter. However, this number is only expected to rise in the upcoming months, with Orange County’s home sales continuing to grow with each new quarter. The only exception to this is during the peak summer months of July through September, when most people are out on vacation.
The Number of Homes Sold
The number of homes sold in Q1 of 2022 has dipped dramatically from both this time last year and from the previous quarter. The end of 2021 saw 6,113 homes sold in the fourth quarter, a pretty healthy number for the end of the year. However, only 4,956 homes were sold in Q1 of 2022. That is a decline of nearly 20% over the course of a few months.
Usually, this wouldn’t seem so drastic when compared with the previous year’s first quarter, but there was still a significant decline in sales when compared to the 5,982 homes sold in the first quarter of 2021. This quarter still saw a sharp decline of 17-18% compared to last year.
However, looking at sales prices and days on the market provides a better view of the true demand still present in the market. It is also important to know that only 5.7 million homes were built between 2009 and 2019, a number severely dwarfed by the 20 million homes built each year between 1950 and 2009.
The Median Days on the Market
Orange County has had a median days on market of about 8 days since the first quarter of 2021. This stayed fairly static, rising by a day at the end of the fourth quarter of 2021. That number then dropped back down to 8 again at the end of Q1 in 2022. What this indicates is that the demand for homes has not diminished, given that this is a fairly short timeline. As a reminder, the number of days on market means how many days between when the listing goes live on the market and when it is sold.
The Current Mortgage Rates
The mortgage rates for the state of California are sitting at 4.43% for a 30-year fixed mortgage, a slight rise from early rates of 3-4% this time last year. This increase was under the direction of the Fed, but these numbers are still historically low compared to previous years, which rose as high as 10-15%.
This indicates that both individual homeowners and investors alike will continue to speed up their home selection process and be less picky about it, indicating another year for a strong seller market. In addition, those who are buying will be able to make the most of their money by getting in on these low mortgage rates while they stay this way.
The Future of the Market
The second quarter in Orange County will continue to see strong demand for houses, whether from the lack of inventory or from people who move farther from the hustle and bustle of downtown LA heading for nearby suburbs where they can work remotely. Rising house prices show that the overall inventory of homes for sale isn’t increasing and, if anything, is actually decreasing as end-users for the homes keep the houses they have bought.
This leaves many who want to make use of the historically low mortgage rates scrambling to snatch up any house on the market that can fit their criteria. If you are involved in the Orange County market as a seller, the good news is that closing times continue to remain speedy and short, and you will have no shortage of potential buyers putting bids in on your home.
On the off chance your home sits on the market for a longer period, it is likely the home will just keep increasing in value, making the time worth the money. If you are a buyer, you will need to consider how to best arrange your finances and the conditions of your offer so that your bid for the home is the most competitive. It is vital that buyers and sellers discuss the market conditions prior to moving forward with a move.
Buyers need to have a clear understanding of how to prepare and then what a winning offer looks like in this market. Sellers need to ask their agent about their options, especially if they need the funds from the sale of their current home. Contingencies are rarely accepted, so what are the other options for a seller who wants to buy. There are some bridge loan-type products as well as rent backs and other options. Again, call me to discuss the details of this market and how to make it work in your favor.