As we usher in 2024, the Orange County housing market is experiencing an unprecedented dynamic, reminiscent of the bustling activity at local farmers markets, even during the winter months. Just like these markets offer a limited selection of fruits in January, primarily citrus, and lack offerings like peaches or berries, the housing market too is facing a scarcity. This analogy aptly describes the current state of the Orange County housing market: shelves that are only half full.

Current Market Dynamics

The beginning of 2024 sees Orange County with the second-lowest number of homes since records began in 2004. The inventory stands at a mere 1,785 homes, a steep 28% drop from the late 2023 peak of 2,496 homes. This figure was already the lowest peak since 2004. To put this in perspective, the average inventory count from 2013 to 2020 was 4,421 homes – indicating a drastic reduction in available properties. The root cause? Many homeowners are reluctant to let go of their homes with low, fixed-rate mortgages, further tightening the market.

Mortgage Rates and Market Demand

The demand, which reflects the number of pending sales in the last 30 days, has hit its lowest point at the start of any year since this data began to be tracked two decades ago. With only 861 pending sales, it’s even lower than last year's 900. However, as mortgage rates are predicted to decrease, an increase in demand is expected, fueled by improved affordability and more homes becoming available.

Despite the record-low demand, the Expected Market Time (the time it takes to sell all listings at the current buying pace) in Orange County is shorter compared to pre-pandemic levels, indicating a relatively hot market. For buyers, this environment suggests that waiting for a market cooldown might not be the best strategy due to the chronic scarcity of homes. Instead, persistence in making offers could be key. For sellers, pricing homes realistically is crucial. Overpricing leads to wasted market time, whereas appropriate pricing can quickly attract buyers.

Inventory Trends and Luxury Market

The luxury market, defined as homes priced above $2 million, mirrors the general market trends. There has been a slight decrease in inventory and demand, but the Expected Market Time remains longer compared to lower-priced segments. This suggests that luxury home sellers need to be particularly patient and price their homes thoughtfully.

Concluding, the Orange County housing market at the start of 2024 is characterized by a significant drop in available homes and a dip in demand, partly due to high mortgage rates. However, as rates are anticipated to decrease, there’s potential for an increase in demand and inventory. This dynamic underscores the importance for both buyers and sellers to approach the market with well-informed strategies and realistic expectations.