According to OC Register’s Marilyn Kalfus. “It’s not really a concern about rising interest rates that’s created a sizzling housing market in Orange County, but a lack of sellers.” There are simply too few sellers and a glut of buyers competing for deals. However, this only holds true in Orange County’s lowest price ranges.
Steven Thomas, author of (OC) Reports on Housing, says “Two-thirds of the action is at $750,000 or less. But so far this year, 27 percent fewer homes have been placed on the market below $500,000 compared to 2016. “That is nearly an 800 home difference, leaving buyers with a very limited supply of homes to choose from,” he says in his bi-weekly report.
In the most recent 12 months, 29% of ALL homes sold were priced below $500,000 – the fastest shrinking price range.
In addition, Thomas reports that 8 percent fewer homes have been put up for sale between $500,000 and $750,000. “Talk to any buyer looking to purchase an affordable home right now, and they would describe the housing market as insanely hot due to a lack of options,” he said.
This is an astonishing trend that I’m seeing this first hand. My most recent listing was priced at $479,000, $9,000 higher than the most recent comparable sale. Within 72 hours on the market and multiple offers, my clients sold for $490,000. And it appraised for the contract price.
The middle market however has slightly more inventory, with 262 more homes available this year than last, making things a little less desperate for buyers in the $750,000 to $1 million range.
Yet OC’s highest priced homes are experiencing a totally opposite reality. In the prior two weeks, buyer demand for homes priced above $1.5 million fell 4% while 2% more homes were added to the inventory. It’s becoming less and less a Seller’s market.
Here’s a few sobering stats. In the most recent 12 months, 107 homes priced between $4 – $5 million were sold. At this moment, there are 121 homes actively for sale in this range. Worse, only 173 homes sold priced above $5 million. Yet there are a whopping 259 on the market right now, expecting to sell. THIS is how I know people are not doing their homework.
These $5 M+ sellers stand a stronger chance of being struck by lightning in the next six months, than actually selling their home. Their only hope is that their real estate marketing is truly global in scope and their agent makes the home incredibly easy to see on short notice (wealthy global travelers are very busy people). Otherwise, get comfy. You’re not selling anytime soon.
The silver lining is that this is a sweet scenario for move-up buyers, who can sell their homes priced below $750K quickly and then buy a more prestigious home with far less competition. Buyers who want to retain their current homes and move up can expect healthy rental income; lease rates have risen another 5-6% over the last year, according to the OC Register.
So, while having fewer affordable homes to buy has caused local market fervor, I think we can expect added buyer neurosis in higher ranges, as well. Because the majority of buyers are currently owners, who will have to juggle the question of whether it’s worth it to to sell now and lose their delicious 3.5% interest rate, only to buy a home that is both more expensive and has a higher interest rate loan. Or worse, they’re downsizing and the payment on the new smaller home is the same as they’re paying now, because the cost of money has risen. It may be too bitter a pill for many to swallow. The smartest will negotiate for the seller to prepay loan fees, to get a new mortgage rate similar to the one they’re leaving behind.
The more mortgage rates rise, the more these current homeowners will stay put, and the more likely inventory levels will either not rise, or may actually fall again.
All I can say is this. Buyers need to buy NOW. And sellers need to stay on top of their market competition and be prepared to get uber competitive if buyers do get skittish and pull back. Call me – I’ll help you with a strategy for any price point. You WILL sell.
It’s what I do.