Home prices are becoming moderate in Orange County. After a two-year boom for housing, it's cooling off. Homes sell closer to the asking price, and there's less urgency, fewer offers, and less competition.
It's interesting to see how the real estate market in Orange County will develop in the next few months, and we're unsure if the trends will reverse or continue. Potential buyers and homeowners should be keeping a close eye on the market, consulting with real estate agents for assistance. Let's learn more.
Orange County Housing Market Trends
The housing market for Orange County shows positive and negative trends. Overall, the median sold price for all existing single-family homes increased by about 7.9 percent from a few months ago, which is a significant increase and could be attributed to the limited supply and increased demand.
However, the median sold price compared to the same period as last year decreased by about 4.2 percent, showing a shift in the market. This might be attributed to higher mortgage rates, impacting affordability for homes.
High mortgage rates will lead to higher monthly payments, so some buyers might not be able to buy the homes they want. This leads to lower demand overall and a decline in those home prices. When mortgage rates increase, borrowers can afford less, which limits purchasing power and reduces how many homes they could afford.
Still, low purchasing power and demand mean less competition, which might indicate lower prices. Likewise, some buyers delay the purchase so that mortgage rates can come down.
Factors Affecting the Orange County Housing Market
Here are the factors that could affect the housing market in Orange County:
1. Median Sales Price
The median home sold price has fallen about 3.2 percent from January to $799,000. Though the median home sold price is still about 109 percent higher than the national median sold price, it's fallen 11.2 percent from the peak of last May, and early signs indicate that it will level out at about $795,000.
Though average mortgage rates retreated, the rate for the 30-year fixed loan is up by 6.42 percent. It appears that Orange County is in a seller's market.
2. Less Builder Confidence
Builder confidence has fallen about 55 points to 36 in March, though it's still higher than it was in January. However, local builders are sure to face additional challenges in Orange County. What does this mean? The median listing home price is likely to be higher, and that will cause buyer demand to go down.
Right now, there's a low inventory, though bidding wars might pop up, leading to a push toward a balanced market.
While nonresidential construction is higher, that's not what you get for residential properties. Therefore, sellers shouldn't expect multiple offers for properties priced similarly to the same time period as last year.
3. Significantly High Economy
The economy in Orange County, which includes Long Beach, Los Angeles, and Anaheim, outperforms the rest of the country. Non-farm employment rose by more than 215,000 to 6.33 million jobs in December of 2022. However, it dropped in February.
In general, the annual growth accounted for about 4.8 percent of the national gain, even while the Orange County population accounts for a US total of 3.9 percent. However, local unemployment fell in December, but it was still higher than the average in the United States.
4. Foreclosure Trends
There are low unemployment levels, and many homeowners have mortgages with low rates because of 2021 and 2022. However, delinquencies and foreclosures are almost nonexistent in Orange County and throughout California.
What does this mean for those who want to invest in Orange County real estate? Since interest rates are leveling out, the median listing home price is staying steady. There are fewer bidding wars, and people aren't getting the asking price they want.
Will the Housing Market Crash in Orange County?
The housing market in Orange County isn't like to crash, but it probably won't be the best time for investors. If you look at the median home price, whether it's the sold or median listing home price, you'll see that they are still pretty high.
Most investors don't want to deal with this. It's also pointing to Orange County and Los Angeles County having a lower demand and a higher supply. A balanced market requires about four to six months of inventory, so it's a seller's market right now.
Overall, the housing supply in Los Angeles and throughout Orange County dipped in March 2022 and has slowly been coming up. Between November 2022 and January 2023, inventory ranged from 3.01 to 3.81 months, which is an indication that it will fall again.
Sales activity for the coming months will likely be impacted by the higher mortgage rates because of inflation. While it's trending downward at a slow pace, annual inflation is significantly high for the Federal Reserve. In fact, it hiked the federal funds a quarter-point back in March.
While purchase applications rose for the fourth week, they're still down by an average of 35 percent year on year. Overall, buyers and sellers are sitting on the sidelines and waiting. Sellers clearly want a higher median listing home price, and they still keep their houses at the higher amount. Still, they don't get multiple offers and may have to go lower than the median price if they want to sell.
Buyers and investors, in particular, have significant negotiating room, especially when it comes to standing inventory. These sellers want to get rid of their homes, so the spring market is pretty saturated. However, they try to get as close to the median listing home price as possible, which means they wait. Investors have to be pushy and picky about where they go.
Most investors focus on Los Angeles because it's a huge city, and they can get higher rents because of it. However, they also have to deal with rent control in most cases. Therefore, it might be wise for them to turn to Seal Beach, which is an affordable city for buying.
Orange County Housing Market Statistics
- The median listing home price is about $1.1 million.
- The median listing home price per square foot is $604.
- The median sold home price is about $965,000.
- The average median days on the market is 55.
Housing Market Predictions
Analysts believe that home prices will continue falling, though it shouldn't be a dramatic increase and won't offset the higher interest rates. However, homes might seem less affordable.
Lower Home Prices
Most experts think that the home prices won't go down because of a limited supply. Still, many people believe that higher interest rates will force all sellers to drop prices.
Orange County Housing Market Predictions
Despite the recent population declines from high housing prices, the economic giant of the West continues attracting commuters and job hunters from other areas. Therefore, there's a floor under rents and home prices.
The two-county region has had its share of problems, including an affordable housing deficit, low use of public transportation, and traffic gridlocks. However, it's creative with its solutions. Only time can tell if they will retain the dynamic that has made millions enjoy the California dream.
Overall, the Housing Market Index from US News is forecasting about 3,800 single-home permits and 6,968 permits for multi-family homes in the Orange County area. This includes Long Beach, Anaheim, and Los Angeles County. Permits should continue declining throughout the forecast period.
Though the pandemic did push sales in the past, things are now ebbing. There's more inflation, the government is focusing on the national debt, and things aren't looking well for the nation overall. These tidbits play a part in how the housing market goes in any location. However, Orange County seems to have gotten hit the worst.
Mortgages are higher than ever, contractors don't want to build new residences, and there aren't as many foreclosures as investors would like. Generally, they prefer foreclosed homes because they're cheaper and easier to buy. Still, investors have options if they're willing to search and dig deep.
Are the House Prices Dropping in Orange County?
In 2022, there were plenty of homes for sale in Orange County, which includes the Anaheim, Long Beach, and Los Angeles areas. Therefore, buyers saw moderate values and lower median sales prices, which fell slightly in January.
Does Orange County Favor Sellers Right Now?
Yes. Orange County is currently a seller's market on the housing front. Therefore, prices are higher, and homes might sell faster. Still, there are options. Seal Beach features lower pricing, so it might be wise to look at investing there.
With more buyers than sellers, it could be easy to get into a bidding war. Southern California no longer has low mortgage rates.