Picture this: You’re heading out to run some quick errands, maybe hitting the mall or the Costco. You hop on the freeway without checking your navigation app first, only to find yourself stuck in stop-and-go traffic. A trip that should’ve taken minutes now stretches into hours. Frustrating, right? Unfortunately, this scenario mirrors what’s happening in the Orange County real estate market today.
Many homeowners are placing their homes on the market, expecting quick sales and multiple offers, much like in the days when the market was moving swiftly. However, just like traffic, the market has slowed significantly. The Expected Market Time (the number of days it takes to sell all Orange County listings at the current buying pace) has climbed from 37 days in March to 73 days today, indicating a more competitive market for sellers.
Why Has the Market Slowed?
The slowdown isn’t due to a dramatic drop in demand, as seen in 2022 when interest rates skyrocketed from 3.25% in January to 7.37% in October. Instead, it’s a classic case of supply and demand. More sellers are competing for a limited number of buyers.
In 2024, demand—measured by the number of new pending sales—has followed a similar trajectory to 2023. For example, in February, there were 140 fewer pending sales year-over-year, while May saw 99 more pending sales. Today, demand sits at 1,470, just five more pending sales than at the end of August last year.
However, demand has been “bouncing along a bottom” ever since mortgage rates climbed above 6%. Affordability constraints have limited buyer activity, keeping demand far below pre-COVID levels. To put it in perspective, from 2017 to 2019 (pre-pandemic), the average demand for the end of August was 2,438 pending sales—66% higher than today’s numbers.
What About Supply?
The real shift has occurred on the supply side. In January 2024, there were 1,785 homes on the market—29% fewer than in January 2023. However, by April, inventory levels began to rise, eventually surpassing last year’s numbers. Today, there are 3,599 homes on the market, more than double the amount at the start of the year. Compared to August 2023, there are 1,214 additional homes for sale, illustrating a clear increase in competition.
This spike in inventory has slowed the market, creating a scenario where more sellers are competing for a relatively small pool of buyers. This imbalance has led to longer Expected Market Times, extending the process of securing an offer..
Looking Forward
While the current market may feel sluggish, there is hope on the horizon. Mortgage rates, which have stayed above 6% for two years, are expected to fall in the not-so-distant future. As rates decrease, affordability will improve, bringing more buyers back into the market and shortening Expected Market Times once again.
For now, sellers need to adjust their expectations. The days of quick sales and bidding wars are on hold, at least until demand picks up and inventory levels stabilize. The market slowdown is expected to continue through the remainder of the year, with inventory peaking soon and then gradually declining as we head into the holiday season.
In conclusion, just like navigating through traffic, success in today’s real estate market requires patience and planning. Sellers need to be aware that the market has changed. While demand remains steady, the rise in inventory has slowed things down. Keep an eye on mortgage rates and prepare for a better market as affordability improves in the future.