Orange County’s housing market is ‘normalizing’
LAGUNA BEACH, Calif. — After two frantic years in Orange County real estate, Suzanne Seini finally sighs in relief.
A year ago, Seini, the CEO and partner at Active Realty in Irvine, would write several offers on behalf of her client buyers, only to see them either get outbid or rejected by the seller.
In the past few months, Orange County’s real estate market has been changing, Seini told Spectrum News.
“It’s a little fairer now,” said Seini. “Over the past couple of years, we saw a lot of buyers experience heartbreak. So many were trying hard and needed to get into a home because of changes in their life or growing family, and they couldn’t do it. They are in a better position now.”
Although mortgage rates and inventory have risen and home prices stabilized, real estate agents are welcoming the slower pace of the current real estate market despite fewer buyers.
Josh Schroeder, a sales associate at Pacific Sotheby in Laguna Beach, likened the real estate market at the early onset of the pandemic to a speeding car on the freeway.
“Here we are [pre-pandemic] traveling down the highway going the 65 miles per hour speed limit, and then when the pandemic hit, everyone was going 165 miles per hour,” said Schroeder. “The police officer — the Feds have caught up — and real estate is pumping their brakes. Now, we’re going about 75 miles per hour.”
“There’s nothing wrong with this kind of normalization happening,” said Schroeder.
The coronavirus pandemic created a fierce real estate market in the past year and a half. Lured by historically low mortgage rates, buyers outbid each other, inflating home prices and draining home inventory.
But with the federal reserve clamping down on inflation and raising interest rates, many buyers have backed off, fearing a looming recession.
The market is shifting.
According to the Fannie Mae Home Purchase Sentiment Index, released Monday, consumers nationwide continue to express pessimism about home buying conditions. The survey found that only 17% of respondents think it’s a good time to buy a home.
“Unfavorable mortgage rates have been increasingly cited by consumers as a top reason behind the growing perception that it’s a bad time to buy, as well as sell, a home,” said Doug Duncan, a senior vice president and chief economist at Fannie Mae in a news release. “With home price growth slowing and projected to slow further, we believe consumer reaction to current housing conditions is likely to be increasingly mixed: Some homeowners may opt to list their homes sooner to take advantage of perceived high prices, while some potential homebuyers may choose to postpone their purchase decision believing that home prices may drop.”
Data suggest Orange County’s market is slowing, albeit slightly.
According to Reports on Housing, the pendulum still swings in favor of home sellers.
The expected market time — the time between when the home is listed for-sale to escrow is 67 days in Orange County. A regular market is 90 to 120 days. Anything under 90 days is considered a seller’s market. Meanwhile, a buyer’s market is anything 120 days or more.
In Orange County, the market time dropped from 72 to 67 days in the past couple of weeks.
“Surprisingly, the Orange County housing market got a little hotter,” said Steven Thomas, a chief economist at Reports on Housing, a data company that analyzes Southern California’s real estate market. “It appears as if this year’s rise in market time has stopped and will remain a slight seller’s market for the remainder of the year.”
Thomas said Orange County’s current active inventory is about 4,069, the highest since Oct. 2020. However, it’s still far below the three-year average of 6,750 pre-pandemic. So there’s still a scarcity of homes available in the region, and prices have yet to drop.
Orange County’s median home price is $1.025 million, a nearly 14% jump from the previous year.
And while mortgage rates are rising, with Freddie Mac’s primary mortgage market survey reporting that the 30-year fixed rate is at 5.2% as of Aug. 11, there is still a lot of demand for homes in Orange County, especially along the coast, said Schroeder.
“It’s still a good time to buy and sell,” said Schroeder. “Buyers are seeing all of these [sensational] headlines that the market is going to crash, but fundamentally, it’s still as strong as it’s ever been.”
Schroeder said people need to stop thinking about the sudden rise in the price appreciation of homes in the past couple of years and how quickly homes sold during the pandemic.
He said that buyers and sellers need to be realistic in this current market.
“Gone are the days of 20% or 30% price appreciation like we saw during the [early part of the] pandemic,” he said. “We’ll still see price appreciation, but it’ll be normal.”
And sellers, he said, should remain patient.
“Homes aren’t going to sell in the first weekend. It’s going to sit longer, but it will go under contract eventually,” he said.
For Seini, she also advises her sellers to adjust to their mentality and have realistic expectations.
“You’re not going to see 30 offers or $100K over ask,” she said. “It’s really important for them to educate them about the market today.”
For buyers, Seini said, they have more options. Yes, the rates are higher, and affordability is an issue. But there are plenty more choices for those who can afford a home.
She tells buyers to go after the homes they want.
“Marry the house, not the rate,” she said. “They can always refinance later.”
She recalls helping a family secure a home in Aliso Viejo after being outbid and shut out last year.
“They couldn’t afford to be competitive last year, so now, fast forward a year, and the market is doable,” she said. “They hold the cards now. They were able to put in offers at under asking price and eventually ended up buying a home at the list price. They had that negotiating room to buy a house and didn’t have to give their firstborn to get it.”