The housing market was so hot at the beginning of the year that the moment a property hit the California Regional Multiple Listing Service (CRMLS) the agent would be inundated with phone calls from agents and buyers trying to schedule a viewing. It’s a market like no other, buyers are making offers before seeing the property, scrambling to get ahead of the rest of the buyers out there, everyone is looking for the edge.
I do believe the Orange County (OC) housing market has cooled off like a summers breeze in the past few months. There are a lot of buyers who have dropped out because of skyrocketing prices, affordability and stiff competition. Talking with local agents and from my own experiences rather than getting 15 to 20 offers on a listing, an agent might get two to five. But all it takes is one and there is still high demand.
The California Association of Realtors mid-year forecast found that the median price of a home — the midpoint of all sales — in the state in June reached a record of $820,000. That’s a 30% jump from the previous year. The median days a home would be listed was eight days, 58% decrease year-to-year. Almost three-quarters of homes close above asking price, it is an incredibly competitive market due to the lack of inventory. Buyers must understand that the low turnover rate in the housing stock is here to stay. The pandemic did not help the issue either. This trend is here to stay, which means that the anemic inventory is not going to change much for the rest of the year and into 2022 as well. Most homeowners are simply content with staying put. As a buyer, waiting for a lot more choices is futile. Buyers that opt to wait will be kicking themselves down the road. Instead, cashing in on today’s historically low rates now is the right move. The housing market has the legs to continue at its current trajectory for quite some time.
My advice for buyers, look at what you can afford now and buy for the long term (5+ years) and that will not only give you a stable monthly payment for the next 30 years to help you better financially plan, but over time home values will continue to rise helping you to create some wealth at the same time. Remember, rising interest rates will impact your monthly payments more than the appreciation we are seeing on a monthly bases, and interest rates are at one of the lowest points they have even been for a mortgage. After reading this, if you are still in the camp of, “I’m going to wait for home prices to fall before buying” remember that the most logical reason for home prices to fall right now would be higher interest rates. If rates go up and home prices go down you will still be paying the same amount or even more for a less expensive house in the future. Just a quick example of this to demonstrate my point. Let’s say right now you buy a home that is worth $750,000 and put 10% down with a 3% interest rate, your monthly principle and interest payment would be right around $2,846. Now let’s say next year that same home somehow loses half of the 17% appreciation(the average in OC) it gained over the last 12 months which would be 8.5% or a new price of $686,250. You put the same 10% down but rates go up as expected to around 3.8%, you’re now paying $2,878, more than you would have if you bought it at the higher price with the lower interest rate. If you can afford to buy now and are just waiting to see what happens the odds are not in your favor right now. There are still deals out there right now and having an experienced agent to make sure you don’t end up overpaying for a home is key. Your agent should be pointing out what upgrades and features are worth paying a little extra for that add value to the home and what updates are really not helping you out financially even though they may look nice.