The Orange County housing market is experiencing a surprising and uncharacteristic increase in demand this autumn. After mortgage rates topped 7.5% in April, they have now settled into the low sixes, sparking renewed buyer interest. As of late September, mortgage rates are hovering around 6.21%, creating a significant boost in affordability. This improvement has triggered a 10% jump in buyer demand over the last couple of weeks—a trend not seen at this time of year since 2012.

 

 

Mortgage Rates Fuel Demand

In recent years, mortgage rates have played a pivotal role in shaping housing market dynamics. For most of 2024, rates remained stubbornly above 7%, even hitting 7.5% in April. However, since then, rates have been on a gradual decline. By the end of August, rates had dipped below 6.5%, and they have since remained in the low sixes, opening the door for potential buyers who had previously been sidelined by high borrowing costs.

The current rate of 6.21% is a stark contrast to last year’s 7.61%, translating to a substantial monthly saving of $749 on a $1 million home purchase. For many buyers, this represents nearly $9,000 in annual savings, which has significantly improved affordability and encouraged more people to re-enter the market.

 

 

Jump in Demand and Market Time Reduction

Thanks to the lower rates, buyer demand, measured by new pending sales, increased from 1,413 two weeks ago to 1,554 pending sales—a rise of 10%. This increase is particularly remarkable given that last year saw a 4% drop in demand during the same period. The 3-year pre-COVID average (2017-2019) also showed a typical demand drop of 4% during this time, making this year’s rise even more notable.

In addition to the demand surge, the Expected Market Time (the number of days it takes to sell all listings at the current pace) has also decreased significantly. Over the past two weeks, it dropped from 78 days to 71 days, marking the largest decrease at this time of year since market tracking began 20 years ago.

 

 

Declining Inventory

The rise in demand coincides with a slight decrease in the housing inventory, which fell by 1% over the last two weeks. Orange County’s active listings dropped by 29 homes, bringing the total to 3,666. This marks the first inventory drop since March, suggesting that the housing market may have reached its inventory peak in mid-September. Typically, the peak occurs earlier, between July and August, but a late peak could signal a more gradual decline in listings for the remainder of the year.

Outlook for the Luxury Market

The luxury segment, defined by homes priced above $2 million, has also seen a slight improvement. Luxury inventory increased by just 1%, while luxury demand rose by 3%, resulting in a slight reduction in the Expected Market Time for homes in this price range—from 150 days to 147 days. Despite this improvement, the luxury market remains slower than the broader market, where homes priced below $2 million have an Expected Market Time of just 56 days.

 

 

With mortgage rates now in the low sixes and possibly heading lower, the Orange County housing market is heating up as autumn approaches. Buyer demand has surged unexpectedly, and the decline in inventory suggests a competitive market moving forward. For those considering entering the market, now could be the perfect time to take advantage of favorable rates and improved affordability. As the Federal Reserve continues to monitor economic conditions, including the job market, mortgage rates may shift again, but for now, the Orange County housing market is witnessing a rare autumnal surge in demand.