The story for real estate hasn't changed much in the past month: We still have too many buyers and not enough homes available for them to buy. 

Which leads to many questions:

• How long will this supply shortage last? When will prices start leveling off?
• When will prices start dropping?
• What about short sales and foreclosures now that people can no longer claim forbearance?

While we don't have a crystal ball about exact dates (and anyone who says they do is just guessing), we do have definitive data about forbearances and potential foreclosures/short sales.

To begin with, as you will see in the chart above, 7 million forbearances have been removed - and only 1% nationwide is going to result in actual foreclosure. Why only 1%? Because in the time that people claimed forbearance, home values have increased at a higher rate than what they owe. 

Let's take a home that was purchased at $750,000. In the past year and a half, the value of the house has increased by 20%, making it now worth $900,000. Even if the homeowner didn't make their mortgage payment for a year, the roughly $36,000 that they owe for those missed mortgage payments is still less than the $150,000 the homeowner has made in value. So the homeowner is still ahead by roughly $110,000. The homeowner is not in the same situation as 2009 when they hadn't made mortgage payments in a year and the value of the property had dropped by $100,000+.

Having said all of that, there will be more foreclosures and shorts sales this year. How many exactly are we expecting? Only approximately 500 short sales or foreclosures are coming on the market in Southern California this year which definitely will not make up for the 30,000 homes missing from the market since 2019.

This lack of inventory has undoubtedly led to many frustrated buyers. Even with home prices continuing to increase and interest rates hovering around 4% now, buyers are not deterred.  It seems unfathomable to many on just how buyers can afford the sky-rocketing home prices. But the truth is, homes are more affordable today than they even were back in 2007. 

With inventory incredibly low and demand still insanely high, homes are continuing to sell faster and faster.  The current average time on market for a property in Southern California is 25 days, which is just 1 day less than this time last year (26 days).The 3-year average days on market is 69 days.

As you will see in the chart below, the average days on market from going active on MLS to going under contract has hit record lows in LA, Orange and San Diego counties. It takes 3 weeks or less to sell a home in Orange, San Diego and Riverside counties, and essentially 4 weeks in Los Angeles and San Bernardino counties. 

To put things in perspective, the average days on market will have to hit 90 days for prices to plateau. Days on market would have to hit 120 days for prices to start dropping. What does that mean if you are a buyer? We are nowhere near at the peak of the market and now is still a great time to purchase a home not only for its utility but also as an investment. 

For sellers, this lack of inventory means they are still calling the shots with multiple offers (most well over asking price), free rent back offers, escrow closing quickly, and perhaps not making a single repair. 

What to expect for the rest of 2022

Home prices and values are going to continue to increase in 2022. We won't see any changes to the market until supply starts to increase. If we were to compare the market supply to a faucet right now, we are at a very slow drip. Believe it or not, this slow drip is actually better than the flow of new listings in January - which was was bone dry. We have actually seen the largest rise in inventory this time of year since 2018 and anticipate that the flow of new listings will be at a steady trickle as we approach late March and April.

Bottom Line: There has never been a better time to buy or sell Orange County real estate. As all of us who live in Orange County know, we get a much better bang for our buck than those living in LA or the San Francisco Bay Area. (That is why so many people are moving from those areas to Orange County.) The proximity to beaches, moderate weather, high-paying jobs and lower levels of homelessness, makes Orange County a semi-hidden jewel of California. 

So whether you are looking to buy or sell a home in Orange County, The Swan Team is here to make the process the most profitable, convenient, and stress-free it possibly can be. If you or someone you know is thinking about buying or selling, please contact us. We are here to help answer any questions as well as strategize and plan for your success.

Contact us today by simply clicking on the phone icon at the top of the screen or you can call us at 949-444-1601.

Based on the Primary Mortgage Market Survey from Freddie Mac, the average 30-year fixed-rate mortgage has increased by 1.2% (3.22% to 4.42%) since January of this year. The rate jumped by more than a quarter of a point from just a week ago. Here’s a visual to show how mortgage rate movement throughout 2021 was steady compared to the rapid increase in mortgage rates this year:

Just a few months ago, Freddie Mac projected mortgage rates would average 3.6% in 2022. Earlier this month, Fannie Mae forecast mortgage rates would average 3.8% in 2022. As the chart above shows, rates have already surpassed those projections.

Sam Khater, Chief Economist at Freddie Mac, explained in a press release last week:

“This week, the 30-year fixed-rate mortgage increased by more than a quarter of a percent as mortgage rates across all loan types continued to move up. Rising inflation, escalating geopolitical uncertainty and the Federal Reserve’s actions are driving rates higher and weakening consumers’ purchasing power.”

Where Are Mortgage Rates Going from Here?

In a recent article by Bankrate, several industry experts weighed in on where rates might be headed going forward. Here are some of their forecasts:

Greg McBride, Chief Financial Analyst, Bankrate:

“With inflation figures continuing to surprise to the upside, mortgage rates will remain above 4.0% on the 30-year fixed.”

Nadia Evangelou, Senior Economist and Director of Forecasting, National Association of Realtors (NAR):

“While higher short-term interest rates will push up mortgage rates, I expect some of this impact to be mitigated eventually through lower inflation. Thus, I expect the 30-year fixed mortgage rate to continue to rise, although we aren’t likely to see the big jumps that occurred over the past few weeks.”

Len Kiefer, Deputy Chief Economist, Freddie Mac:

“Mortgage rates are likely to continue to move higher throughout the balance of 2022, although the pace of rate increases is likely to moderate.”

In a recent realtor.com article, another expert adds to the conversation:

Danielle Hale, Chief Economist, realtor.com:

“. . . As markets digest the Fed’s updated economic projections, I anticipate a continued increase in mortgage rates over the next several months. . . .”

What Does This Mean for You if You’re Looking To Buy a Home?

With both mortgage rates and home values expected to increase throughout the year, it would be better to buy sooner rather than later if you’re able. That’s because it’ll cost you more the longer you wait. But, there is a possible silver lining to buying a home right now. While you’ll be paying a higher price and a higher mortgage rate than you would have last year, rising prices do have a long-term benefit once you buy.

If you purchase a home today valued at $400,000 and put 10% down, you would be taking out a $360,000 mortgage. According to mortgagecalculator.net, at a 4.42% fixed mortgage rate, your mortgage payment would be $1,807 a month (this does not include insurance, taxes, and other fees because those vary by location).

Now, let’s put that mortgage payment into a new perspective based on the substantial growth in equity that comes with the escalation in home prices. Every quarter, Pulsenomics surveys a panel of over 100 economists, investment strategists, and housing market analysts about their expectations for future home prices in the United States. Last week, Pulsenomics released their latest Home Price Expectation Survey. The survey reveals that the average of the experts’ forecasts calls for a 9% increase in home values in 2022.

Based on those projections, a $400,000 house you buy today could be valued at $436,000 by this time next year. If you break that down, that means the equity in your home would increase by $3,000 a month over that period. That’s greater than the estimated monthly payment above. Granted, the increase in your net worth is tied to the home, but it is one way to put the home price appreciation to use in a way that benefits you.

Bottom Line

Paying a higher price for a home and a higher mortgage rate can be a difficult pill to swallow. However, waiting will just cost you more. If you’re ready, willing, and able to buy a home, now will be a better time than a year, or even six months from now. Let’s connect to begin the process today.

Call us at 949.444.1601 or email info@theswanteamoc.com to learn more about the options available to you and to make your real estate goals and dreams a reality.

As rates zoom upwards, home affordability is beginning to impact the housing market in several profound and meaningful ways. 

The scent of orange tree blossoms is captivating. It is just the beginning of the slow metamorphosis from flower to fruit. After the flower blooms, it takes navel oranges seven to 12 months to mature. It is far from instant, but as the petals drop, it reveals a tiny, green fruit that will eventually become a juicy, ripe orange. 

Similarly, the evolution of the housing market is far from instant. It does not change like a snap of the fingers. Higher rates are like the orange blossom, just the beginning of a slow metamorphosis from an insane, out-of-control housing market to a slower, more balanced, normal housing market. It takes time, but new trends are already emerging. 

1.Rapidly rising rates mean affordability has taken a dramatic hit so far this year. According to the Mortgage Bankers Association®, interest rates have risen from 3.31% on December 29th to 4.8% on March 30th, representing a 45% increase. The purchasing power for buyers has rapidly eroded in such a short period of time. For a buyer looking to put 10% down and desiring a $4,000 per month payment, at the end of December they were looking at a $1,013,333 home. Today, that same buyer is now looking at homes just below $850,000. Another way of looking at it is how much more the payment is on a $1 million home. At 3.31% with 10% down, the payment would be $3,947 per month versus $4,772 per month at 4.8% today. That is an additional $884 per month, or $10,608 per year. Persistent higher rates will eventually diminish demand and, ultimately, throttle back the housing market. The pool of buyers able to purchase shrinks as rates rise. 

2. Significantly fewer homes are being placed on the market this year compared to the average prior to COVID. Last year there were 2,368 missing FOR-SALE signs in Orange County compared to the 3-year average between 2017 to 2019, 6% less. Yet, through the first three months of 2022, there are 1,866 missing signs, down 18%. Originally, the extremely anemic inventory was preventing homeowners from entering the fray. Today, it is more than that. Owners are more than happy staying put in their homes. They are acutely aware that home values are continuing to rise, that mortgage rates have substantially climbed, and that the underlying mortgage loan on their home is substantially lower than today’s 4.8% rate. In doing the math, homeowners are opting to stay put. Many homeowners who purchased several years back have refinanced to below 3% and have realized substantial appreciation. Yet in calculating their monthly mortgage payment and property taxes if they sell and purchase a larger home, the monthly difference can be staggering. As a result, many homeowners are opting to stay. 

3. Demand, a snapshot of the number of new escrows over the prior month, has been substantially muted this year. Today’s demand is at 2,286 pending sales. So far this year demand has risen from 1,295 during the first week of January to 2,286 today, an increase of 991 pending sales. The 3-year average rise in demand prior to COVID (2017 to 2019) was 1,277, or 29% higher than today. Last year’s demand reading was at 3,162 pending sales, 38% higher than today. Today’s level is the lowest reading to start the 2nd quarter of a year since 2007. Demand has been muted all year. A big reason for muted demand readings is the acute lack of homes available to purchase. Simple economics: “You cannot buy what is not for sale.” True demand, the number of buyers in the marketplace, is considerably higher than tracked demand based upon escrow activity, yet is impossible to gauge other than home showing activity and the number of offers generated on homes today. Anecdotally, reports from the real estate trenches detail a reduction in the number of multiple offers real estate agents are receiving. Over time, if mortgage rates persist at these higher levels with duration, then demand will continue to remain muted compared to prior years even with more homes coming on the market. It is important to note that the strongest demographic patch of first-time home buyers ever, millennials, is making its way through the real estate market right now. The surge of prime first-time home buyers aged 32 years old occurs between 2020 and 2024. That demographic was added on top of an increase in buyer activity during COVID thanks to record low mortgage rates. Those record rates are gone, but there are still an astonishing number of millennials contributing to demand. 

The Orange County housing market has been running at an insane pace since July 2020. Yet, with mortgage rates climbing from 3.31% at the end of December to 4.8% today, new trends have emerged that will ultimately lead to a market downshift as long as higher rates endure. 

In Summary

• The active listing inventory decreased by 2 homes, nearly unchanged, and now totals 1,552 homes, its lowest level for this time of the year since tracking began 18 years ago. In March, there were 18% fewer homes that came on the market compared to the 3-year average prior to COVID (2017 to 2019), 685 fewer. Last year, there were 2,240 homes on the market, 688 additional homes, or 44% more. 
  
  
• Demand, the number of pending sales over the prior month, increased by 2 pending sales in the past two weeks, nearly unchanged, and now totals 2,286. Last year, there were 3,162 pending sales, 38% more than today, and the peak for demand in 2021. The 3-year average prior to COVID (2017 to 2019) was 2,668, or 17% more. 
  
  
• With supply and demand unchanged, the Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, remained unchanged at 20 days in the past couple of weeks, an insanely Hot Seller’s Market (less than 60 days). It was at 21 days last year, similar to today. 
  
  
• With the exception of homes priced between $750k-$1.25m, the expected market time is shorter than this time last year. Homes priced between $1.5m-$4m have seen the biggest drops in expected market time. (See the chart below for details)
  

• The luxury end, all homes above $2 million, accounts for 29% of the inventory and 12% of demand. 
  
  
• Distressed homes, both short sales and foreclosures combined, made up only 0.2% of all listings and 0.2% of demand. There are only 3 foreclosures and no short sales available to purchase today in all of Orange County, 3 total distressed homes on the active market, up 1 from two weeks ago. Last year there were 8 total distressed homes on the market, similar to today. 
  
  
• There were 1,774 closed residential resales in February, 22% less than February 2021’s 2,283 closed sales. February marked a 2% drop compared to January 2022. The sales to list price ratio was 103.7% for all of Orange County. Foreclosures accounted for just 0.2% of all closed sales, and short sales accounted for 0.3%. That means that 99.5% of all sales were good ol’ fashioned sellers with equity. 
  
  
  

If you would like more information or are interested in selling or buying a property, please call 949.444.1601 or email info@theswanteamoc.com.

{Report courtesy of ReportsonHousing.com.}

The Market is starting to shift...but how? Watch Leslie explain the status of the Canyon Crest Estates market specifically as well as giving an overall market update.

See for yourself what is going on in the Canyon Crest market:

What's currently for sale?
Click here to see properties that are currently active

What properties are in escrow (under contract or pending)?
Click here to see properties in escrow

What properties have sold in the past 30 days?
Click here to see properties that have sold recently

What properties have sold in the past 6 months?
Click here to see the properties that sold in the past 180 days

With inventory in Canyon Crest at zero and people chomping at the bit for a home in our beautiful community, NOW is a great time to sell your home.  

Striking while the iron is hot is key to your success; just as working with the right real estate team is paramount to selling it quickly and for top dollar. That is where The Swan Team comes in! 

Our team doesn't merely market, list and sell your home. We are consultants who help you understand your options, help create a plan that accounts for your particular wants and needs and then execute the plan with a precision that exceeds your expectations. 

Contact me now and get the best team in the business working for you! (You can click the phone icon or the envelope at the top left of your screen, too!) 

Experts in the real estate industry use a number of terms when they talk about what’s happening with home prices. And some of those words sound a bit similar but mean very different things. To help clarify what’s happening with home prices and where experts say they’re going, here’s a look at a few terms you may hear:

Appreciation is when home prices increase.

Depreciation is when home prices decrease.

Deceleration is when home prices continue to appreciate but at a slower pace.

Where Home Prices Have Been in Recent Years

For starters, you’ve probably heard home prices have skyrocketed over the past two years, but homes were actually appreciating long before that. You might be surprised to learn that home prices have climbed for 122 consecutive months (see graph below):

As the graph shows, houses have gained value consistently over the past 10 consecutive years. But since 2020, the increase has been more dramatic as home price growth accelerated.

So why did home prices climb so much? It’s because there were more buyers than there were homes for sale. That imbalance put upward pressure on home prices because demand was high and supply was low.

Where Experts Say Home Prices Are Going

While this is helpful context, if you’re a buyer or seller in today’s market, you probably want to know what’s going to happen with home prices moving forward. Will they continue that same growth path or will home prices fall?

Experts are forecasting ongoing appreciation, just at a decelerated pace. In other words, prices will keep climbing, just not as fast as they have been. The graph below shows home price forecasts from seven industry leaders. None are calling for prices to fall (see graph below):

Mark Fleming, Chief Economist at First American, identifies a key reason why home prices won’t depreciate or drop:

“In today’s housing market, demand for homes continues to outpace supply, which is keeping the pressure on house prices, so don’t expect house prices to decline.”

And although housing supply is starting to tick up, it’s not enough to make home prices decline because there’s still a gap between the number of homes available for sale and the volume of buyers looking to make a purchase.

Terry Loebs, Founder of the research firm Pulsenomics, notes that most real estate experts and economists anticipate home prices will continue rising. As he puts it:

“With home values at record-high levels and a vast majority of experts projecting additional price increases this year and beyond, home prices and expectations remain buoyant.”

Bottom Line

Experts forecast price deceleration, not depreciation. That means home prices will continue to rise, just at a slower pace. Let’s connect so you can get the full picture of what’s happening with home prices in our local market and to discuss your buying and selling goals.

IN COMPARING THIS YEAR TO LAST YEAR, THE HOUSING MARKET IS PROFOUNDLY DIFFERENT WITH HIGHER MORTGAGE RATES, MORE AVAILABLE HOMES, MUCH LOWER DEMAND, AND SIGNIFICANTLY 

LONGER MARKET TIMES. 

The tell-tale signs that the market has changed are all here. OPEN HOUSE directional arrows now adorn busy intersections, and it is common to see the same OPEN HOUSE for multiple weekends in a row. The number of price reductions is rapidly growing, indicating buyers’ sensitivity to pricing. Sales prices are no longer stretching tens of thousands of dollars above asking prices. The heydays of 2020, 2021, and the first few months of this year are gone. We wondered when the insanity would end and now we know. The rapidly appreciating, insanely hot housing market has transformed into a completely different, much slower Slight Seller’s Market that requires a much different strategy and approach to find success. 

The Orange County housing market has transitioned from an Expected Market Time (the number of days between hammering in the FOR-SALE sign to opening escrow) of 19 days in March to 72 days today. Anything below 60-days is considered a Hot Seller’s Market. Below 40-days is insane, and at 19-days it is nothing short of nuts, almost instantaneous. That is where buyers trip over each other to see every home that enters the fray, sellers call all the shots, multiple offers and bidding wars are the norm, and home values uncontrollably skyrocket higher. Yet today, the Expected Market Time has risen to 72 days, a Slight Seller’s Market, where sellers still get to call more of the shots, but there are fewer multiple offers, home values are not appreciating that fast, the market is no longer instant, and properly pricing is absolutely crucial to find success. 

What happened in just a few short months? When mortgage rates climbed from 3.25% at the start of the year to over 6% in June, home affordability took a massive hit, buyers backed off, and demand dropped. Year-over-year, demand (the number of pending sales over the prior 30- days) is down by 40%, or 1,119 fewer pending sales. In fact, Orange County demand is at its lowest level since tracking began in 2004, slightly lower than the start of the housing meltdown in 2007.

It is down in every price range, including luxury, due to Wall Street volatility. Demand is down the most (by more than 50%) in the lower price ranges, homes priced below $750,000, where higher mortgage rates and qualifying for loans has had a deeper impact. 

It took a while this year to feel the transformation in the inventory due to starting 2022 with a record low 954 homes on the market. The 3-year average start prior to COVID (2017 to 2019) was 4,665 homes. As rates continued to rise, demand diminished and the active inventory continuously rose, unabated, since January. In mid-May, there were more homes on the market compared to the prior year for the first time since August 2019. The unrelenting rise in rates slowed demand further and the inventory climbed significantly since May. 

The inventory is now up 59% compared to last year, or 1,504 extra. Every price range has a lot more homes available to purchase, other than homes priced below $500,000. Due to values rising substantially over the past year, there are fewer homes worth less than a half a million dollars, thus the drop of 24%. There are significantly more homes available between $750,000 and $1 million, 79% more, or an extra 443. Between $1 million and $2 million there are more than double the number of homes that were available at the end of July 2021. 

Many sellers are approaching housing as if nothing has changed. They are stretching the asking price and testing the market as if home values are continuing to rocket higher. Unfortunately, OVERPRICED homes are now quite common. An astonishing 35% of all homes available to purchase today have reduced their asking price at least once. It was at 19% in May. These price reductions are not indicative of a drop in home values; instead, it illustrates the volume of sellers who initially price their homes out of bounds, much higher than their true Fair Market Value. In the process these overpriced sellers lose out on the most valuable marketing period, the first couple of weeks after placing their home on the market. 

ATTENTION SELLERS: Carefully arriving at the Fair Market Value by scrutinizing the most recent comparable and pending sales is essential to be successful, meticulously taking into consideration the condition, location, and amenities. Overzealous sellers who require future price reductions will procure fewer interested buyers, fewer offers to purchase, and, ultimately, will net less money. 

Every time the housing market transitions away from a Hot Seller’s Market, too many homeowners fall victim to waiting to sell. They do not understand the magnitude of the current market shift and how quickly the market has evolved so far in 2022, and where it is going from here. Many will be kicking themselves as they learn the hard way what it is like to sell in a much slower market during the second half of this year. It will be a case of “you snooze you lose,” as many sellers will have an extremely hard time finding success. 

ATTENTION BUYERS: While the market is slower than the start of the year, it is NOT a Buyer’s Market where values are going down. Homes that are upgraded, in great condition, and priced well will fly off the market. The longer a home has been on the market, the more willing a seller is to negotiate. 

Up until about 20 years ago, rates generally remained about 7.5% and home buyers purchased homes at record rates to get their slice of the American Dream. But now that rates are in the mid-5% range, sales are slowing dramatically.

This is what we know to be true:

1. Rates have nearly doubled since the beginning of this year

2. Buyers have started to "hold off" on buying

3. Inventory is at historically low levels

4. Cash buyers once again reign supreme (for a time there, it was worth it for a seller to wait for a buyer with financing because they were willing to pay more than a cash buyer)

5. Since fewer people are buying, more people will need to rent causing greater competition in rental properties and causing rents to increase 

6. People will be throwing away money in rent when they could be investing it in their primary residence and writing off their interest payments

7. Rates will continue to go up making today a better time to purchase than tomorrow (Plus, if rates did ever go down in the future, you have the opportunity to refinance at any time.)

What is a Buyer to do??

BE REALISTIC. Yes, 6 months ago you could afford the monthly payment of $1 million and now your realistic budget is $800,000. (Good news: that's potentially $40,000 less you have to come up with in down payment!) Unlike 6 months ago, there isn't the same amount of competition - meaning you won't be in a bidding war and could actually purchase a home for its listing price. 

If you want to buy and aren't sure what to do, contact a lender and find out what you qualify for and what programs best meet your needs. Don't know any lenders? Contact us and we can put you in contact with our trusted lending partners. 

Want more information? Contact us anytime at 949-444-1601.

With all the headlines and buzz in the media, some consumers believe the market is in a housing bubble. As the housing market shifts, you may be wondering what’ll happen next. It’s only natural for concerns to creep in that it could be a repeat of what took place in 2008. The good news is, there’s concrete data to show why this is nothing like the last time.

There’s a Shortage of Homes on the Market Today, Not a Surplus

The supply of inventory needed to sustain a normal real estate market is approximately six months. Anything more than that is an overabundance and will causes prices to depreciate. Anything less than that is a shortage and will lead to continued price appreciation.

For historical context, there were too many homes for sale during the housing crisis (many of which were short sales and foreclosures), and that caused prices to tumble. Today, supply is growing, but there’s still a shortage of inventory available.

The graph below uses data from the National Association of Realtors (NAR) to show how this time compares to the crash. Today, unsold inventory sits at just a 3.0-months’ supply at the current sales pace.

One of the reasons inventory is still low is because of sustained underbuilding. When you couple that with ongoing buyer demand as millennials age into their peak homebuying years, it continues to put upward pressure on home prices. That limited supply compared to buyer demand is why experts forecast home prices won’t fall this time.

Mortgage Standards Were Much More Relaxed During the Crash

During the lead-up to the housing crisis, it was much easier to get a home loan than it is today. The graph below showcases data on the Mortgage Credit Availability Index (MCAI) from the Mortgage Bankers Association (MBA). The higher the number, the easier it is to get a mortgage.

Running up to 2006, banks were creating artificial demand by lowering lending standards and making it easy for just about anyone to qualify for a home loan or refinance their current home. Back then, lending institutions took on much greater risk in both the person and the mortgage products offered. That led to mass defaults, foreclosures, and falling prices.

Today, things are different, and purchasers face much higher standards from mortgage companies. Mark Fleming, Chief Economist at First American, says:

“Credit standards tightened in recent months due to increasing economic uncertainty and monetary policy tightening.” 

Stricter standards, like there are today, help prevent a risk of a rash of foreclosures like there was last time.

The Foreclosure Volume Is Nothing Like It Was During the Crash

The most obvious difference is the number of homeowners that were facing foreclosure after the housing bubble burst. Foreclosure activity has been on the way down since the crash because buyers today are more qualified and less likely to default on their loans. The graph below uses data from ATTOM Data Solutions to help tell the story:

In addition, homeowners today are equity rich, not tapped out. In the run-up to the housing bubble, some homeowners were using their homes as personal ATMs. Many immediately withdrew their equity once it built up. When home values began to fall, some homeowners found themselves in a negative equity situation where the amount they owed on their mortgage was greater than the value of their home. Some of those households decided to walk away from their homes, and that led to a wave of distressed property listings (foreclosures and short sales), which sold at considerable discounts that lowered the value of other homes in the area.

Today, prices have risen nicely over the last few years, and that’s given homeowners an equity boost. According to Black Knight:

“In total, mortgage holders gained $2.8 trillion in tappable equity over the past 12 months – a 34% increase that equates to more than $207,000 in equity available per borrower. . . .”

With the average home equity now standing at $207,000, homeowners are in a completely different position this time.

Bottom Line

If you’re worried we’re making the same mistakes that led to the housing crash, the graphs above should help alleviate your concerns. Concrete data and expert insights clearly show why this is nothing like the last time.

For more information about the real estate market in your community, please contact us at 949-444-1601.

The looming recession has buyers on the edge of their seats fully aware that the housing market has slowed considerably. From the flood of online news articles describing the real estate slowdown to the countless YouTube and TikTok videos detailing in only a few minutes how housing is about to crash, many buyers are convinced that the Orange County housing market is on the brink of collapse. Homes are taking a lot longer to sell. The number of price reductions has surged higher in the past couple of months. As a result, many buyers sit on the sidelines waiting for prices to plunge. They are waiting for a deal, a total bargain. 

Just because so many people are jumping to the conclusion that home values must plummet does not make it so. Merely mention a recession and everyone’s collective minds recall the devastating blow to housing during the Great Recession. Instead, homeowners across the country purchased their homes with huge down payments, extremely strong credit scores, money in the bank, and qualified for their mortgages. Buyers over the past many years have not been purchasing homes utilizing subprime loans, pick-a-payment plans, teaser rate adjustable mortgages, or zero down programs. This is not 2005 to 2008 all over again. 

Instead, with an Expected Market Time (the time between hammering in the FOR-SALE sign to opening escrow) of 67 days, it is a Slight Seller’s Market (between 60 and 90 days). It is not a Balanced Market (between 90 and 120 days). It is not a Buyer’s Market (over 120 days). The market still lines up in favor of sellers. In fact, in the past two weeks, the Expected Market Time dropped from 72 to 67 days. Surprisingly, the Orange County housing market got a little hotter. 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. This is due to the active inventory nearing its 2022 peak, rising by only 28 homes in the past couple of weeks, and demand jumping by 7% with rates falling to levels last seen in April. 

The issue is that everyone had grown accustomed to two years of an auction-like atmosphere where there were only a limited number of homes available and an ocean of buyers willing to purchase, prompted by historically low mortgage rates. Open houses were flooded with potential buyers. It was not uncommon for homes to procure 20 or 30 offers in just days after coming on the market. Sales prices soared above their purchase prices. The trajectory was up, up, up, and up. That market was extremely unique and home values rose nationally at a record pace. Flash forward to today and the housing market is distinctly different. 

Most homes are not selling instantly. Busy intersections are now adorned with weekend Open House signs. It is not uncommon to see the same home open for several weeks in a row. Price reductions are quite common in today’s market. There are fewer multiple offer situations, and most homes are selling below their asking prices. This is a “normal” market. The issue is that nobody has experienced a normal market in several years. It is hard to recall when housing was just ordinary. 

An astounding 39% of the active inventory has reduced their asking price at least once. Many believe that price reductions are indicative of a buyer’s market where prices are falling. That is just not the case. Given today’s 67-day Expected Market Time, the price adjustments reveal the considerable number of homeowners who simply overpriced and did not cautiously approach pricing. When the Expected Market Time drops below 40-days as it did between August 2020 and May of this year, sellers got away with stretching their asking prices. Many real estate professionals scratched their heads in disbelief as their sellers picked arbitrary prices much higher than what was suggested by the professional, yet they still were able to obtain multiple offers and sell above their inflated asking prices. That market is now in the past. Arbitrarily pricing a home and stretching the asking price above the last comparable sale will result in limited activity and the need to readjust pricing. 

Many sellers are pricing their homes in line with a sale from earlier this year when there was nothing available and buyers paid way over the asking price. This occurred even while mortgage rates climbed from 3.25% at the start of this year to over 5% in May (according to Mortgage News Daily). The problem was that there was nearly nothing available to purchase and plenty of buyers ready to pounce on anything new that hit the market. On January 1st there were only 954 homes available, a record low compared to the 3-year average reading prior to COVID (2017 to 2019) of 4,665. Eager buyers who had written offer after offer with no success were willing to do whatever it took to finally purchase, including paying way over the asking price, often $50,000, $75,000, or even $100,000 plus over the list price. The underlying, changing mortgage rate environment did not justify these extremely high sales prices, yet it occurred, nonetheless. This was a frothy stage of this year’s market. 

Sellers who price their homes according to these frothy comps are finding that they are not able to sell. While a home may have closed for a top dollar record price in one neighborhood, there are often adjacent neighborhoods with comparable properties that did not experience a frothy sale this year and have homes available to purchase for far less. Buyers shopping around will notice the disparity in pricing and will opt to purchase the cheaper homes. 

It is a Slight Seller’s Market. That means that sellers still get to call more of the shots, but homes are not selling instantly, and home values are no longer soaring higher. In order to find success, sellers must carefully consider the most recent pending and closed sales and take into consideration the location, condition, upgrades, and amenities. While it may have been a place they called “home” for years, buyers do not have that emotional tie and will instead rely on the Fair Market Value based on comparable properties. With today’s higher interest rate environment, they do not want to overpay. 

Buyers must understand that the market is still not lining up in their favor. Yes, Orange County housing has slowed. They no longer have to make an instantaneous decision. They no longer are competing with a busload of other offers to purchase. They no longer need to write offers tens of thousands of dollars above the asking price. Yet, the market is still hot enough that they are not going to get a “deal” or buy a home at a “bargain” price. Values are not dropping. Instead, it is finally a normal market. 

Want more information about the market or perhaps your home? Contact us at 949-444-1601 or info@theswanteamoc.com.

Boy, has the market changed in the past few months. Back in April, a property wouldn't stay on the market for more than a few days, and now we are looking at an average of 67 days on markets. The looming recession has buyers on the edge of their seats fully aware that the housing market has slowed considerably. From the flood of online news articles describing the real estate slowdown to the countless YouTube and TikTok videos detailing in only a few minutes how housing is about to crash, many buyers are convinced that the Orange County housing market is on the brink of collapse. Homes are taking a lot longer to sell. The number of price reductions has surged higher in the past couple of months. As a result, many buyers sit on the sidelines waiting for prices to plunge. They are waiting for a deal, a total bargain. Simply put, that is not going to happen. The market is, and will likely remain a slight seller's market through the end of year.

What does that mean?

That means that prices are not going to drop. They are going to remain stable. But, it does also mean that we aren't going to see the bidding wars that were ever-present in the first quarter of this year. 

In April/May, we hit what I like to call "an unrealistic peak." Buyers were willing to throw more money than anyone could fathom because they had access to a low-interest mortgage rate. They had to make an insane offer to stand out as a clear winner from the 10's of competing offers. The property on Deerbrook selling for $2.36m and then the Peartree property selling for $2.3m were buyers needing to rise to the top of the offer heap...those sales prices are more than anyone in our community could have ever imagined for a tract home. 

Those April/May prices are gone. Homes are now closer to the February sales prices - which are still amazing prices! But price reductions are quite common in today’s market. There are fewer multiple offer situations (if any), and most homes are selling below their asking prices. This is a “normal” market.

The issue is that nobody has experienced a normal market in several years. It is hard to recall when housing was just ordinary. The key to selling your property in a "normal" market is to price your home at fair market value.  Fair market value takes into consideration any upgrades you have (or haven't) made to the property and compares that to most recent sales. Buyers are looking for remodeled/upgraded homes - those are selling faster than homes that need updates.  

Need help determining how your home compares? That is where I come in!

I don't merely market, list, and sell your home. I am a consultant who helps you understand your options, helps create a plan that accounts for your particular wants and needs and then executes the plan with a precision that exceeds your expectations. 

Contact me now and get the best team in the business working for you!

See for yourself what is going on in the Canyon Crest market:

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