Orange County Fall 2022 Housing Market Forecast

Fall Orange County 

Housing Market Forecast

The Fall housing market is here, our already extremely low inventory hit it's peak for the year a few weeks ago and is dropping, and demand, which is already historically low as well, is now dropping too. The good news? As they both drop together this should keep our housing market relatively stable for the remainder of the year. That is, unless we see a prolonged spike in interest rates.

Want to know more? Check out my Fall housing market forecast by clicking the video above.

Key Orange County Housing Stats

Demand  has actually been increasing throughout the month of August due to rates dropping back down to the low 5% range. However over the last 2 weeks we have seen rates start to head back closer to 6%. So unless we see rates drop significantly again, we have most likely seen the peak in demand for the year.  Expect demand to fall gradually for the next few months. This is completely normal for the Fall housing market. However what is not normal is the amount of demand. Right now we have not seen demand this low since 2007. Now before you start thinking housing crash, you also have to take into account the other side of Econ. 101 which is supply. 

Supply is also at historic lows right now and has only decreased more throughout the month of August. We started the year off with the lowest supply ever in the housing market, and so far, this year through the month of August, we have put 12% fewer homes in Orange County on the market compared to a typical year before covid(taking averages from 2017-2019).  Over the last week alone we saw supply dip by 4% in Orange County. 

So even though we are dealing with historically low demand, it's being matched with the same historically low supply and unfortunately for anyone hoping for a housing crash in the near future are going to be disappointed. There are just not enough homes available right now to make that happen. Foreclosure wave, not going to happen, for multiple reasons I've discussed before, and homeowners are now staying in their homes longer than ever before in Orange County and those who have locked in the lowest rates ever during covid now have one more reason NOT to move.  There is really only one real path to see home prices drop this year.

Interest rates are the wild card here. They have been more volatile over the last 3 months than anytime in recent history with swings of over a percent in less than a month. We have even seen interest rates fluctuate by more than a half of percent in just one day. However, the one good thing, at least for market predictability, that has come from this is we are getting a better idea of what rates would need to be to see a dramatic decrease in demand opening the door for home prices to fall. That number seems to be when the average interest rates get to over 6%. Now if they go above 6% for a week or two it will impact the market, however in order to see home values fall by more than a few percent we would have to see rates stay above that 6% mark for a few months.

Now how likely his this to happen? Well a lot of it will depend on what happens in the next two months in the economy, especially when it comes to inflation. When we get the jobs numbers tomorrow and the latest CPI data on the 13th we should have a better idea of what rates will do as we go through Fall. If employment numbers are better than expected, and inflation starts going back up, you will most likely see rates continue to rise. However if we get a worse than expected jobs report and inflation starts to go down you can expect to see rates go down as well and at that point and the near term possibility of rates going and staying above 6% will go down dramatically as well.  Remember, inflation is the enemy of long term interest rates

Average Days on Market(DOM) is currently 63 days which is 9 days faster than a month ago, again mostly due to the temporary increase in demand from the low 5% rates we saw for the last 2 months. So from the time you place your home on the market to when it goes into escrow is currently over two months on average at this point and will probably start growing again slightly as we get further into fall, especially if rates continue to rise.

Buyers

Should you buy a home this Fall? Right now we are seeing some of the best conditions for buyers that we have seen in a long time. Yes, prices are higher than a few years ago and interest rates are up, so some buyers are running into affordability issues. However, if you are able to afford a mortgage right now, when you go looking for a home 1) There is significantly less competition. Most homes are now only receiving 0-3 offers, allowing buyers to pay fair market value for the home and sometimes slightly less than market value on homes that have been on the market for a long time. 2) Buyers are having better success in negotiations, and are able to leave more contingencies in place that protect them in escrow vs. having to  over pay for the house, not having any negotiation leverage, and having to remove all contingencies like buyers had to just a few months ago. 

A word of caution for buyers. Before you decide if you want to go through with buying a home right now, one of the biggest questions you should be asking yourself is how long you plan on living in your new property. The market has transitioned from a hot seller's market to a slight seller's market so there will be more risk when buying homes for short term gains right now. If you are looking to buy a home to flip it, unless you find a really good deal, it's not something I would highly recommend doing right now. 

On the other hand if you plan on living in the home 5+ years your risk level for any short term market fluctuations is going to be minimal and the longer you plan on staying, the less it will impact you, as home values have always gone up in the long term, especially when we see high inflation levels. If you can afford it financially, it improves the quality of your life, and you plan on being there long term, then the only thing I really recommend you focus on regardless of the current market conditions is that monthly payment.  You are buying a home for you and your family to live in so you need to look at it for what it is, a long term investment.  If you are renting right now, having that fixed monthly payment is going to be one of the biggest benefits to you, especially over the next few years as rental prices are predicted to increase significantly. 

One last tip for buyers that is becoming more common in today's high interest rate environment. If the rates have gone up so much that homes are just slightly out of what you want to pay for a mortgage you might want to consider talking to your lender about buying your rate down. What is buying a rate down? This financial strategy will allow you to pay the lender a certain sum of money when escrow closes to purchase a lower interest rate. If you are planning on being in the home long term this could end up being a great deal for you as it will most likely save you a few hundred dollars a month on your mortgage payment

But what if you don't have any extra money laying around to buy the rate down? Well, in today's housing market, in some cases it will be possible to write an offer on a home and actually ask the seller for a credit at the end of escrow to use towards buying your rate down, This means that the SELLER is actually paying you to get a lower interest rate. No money out of your pocket. Will this work on every home, no. However for those sellers that have had their home on the market for a month or more they might consider doing this to get their home sold before the holiday season kicks off.  So if this is something you might be interested in getting more information about, just reply to this email, call or text me and I can discuss it further with you. 

Are you thinking of buying a home this year but don't know where to start? Contact me now for a free home buyer consultation where I will cover the step-by-step process of purchasing a home, go over the market conditions in more detail, and create a customized plan for you to get into your next dream home. Reply to this email or CLICK HERE to set up a time now!

Sellers

In today's market the two things you need to do when selling a home are: 1) Be very, very, careful when pricing your home. If you price it even slightly above market value there is a very real chance you'll get no offers and it will just sit on the market for weeks and months. 2) Market your home so as many people see it as possible. You might have been able to get away with cell phone pics of your home that showed your reflection in the bathroom mirrors at the beginning of the year but if you do that now, you're not going to sell your home. 

When I help sellers, I am not just taking professional photos, but also doing 3D property tours, video, paid social media marketing, google marketing, email marketing, sending it to realtors in and outside my network, and letting all the neighbors know about your home which will ensure that as many qualified buyers see it as possible. Having poorly lite cell phone photos of a home was always a bad idea but especially in today's market agents/homeowners that are not using all these different types of resources are going to have a hard time successfully selling a home. 

Also, because buyers are able to take their time and shop around in today's market, you really need to make sure your pricing strategy includes looking at your competition(other active homes). If you have a neighbor up the street that has their home priced at $850,000 and is slightly larger than yours with a pool but has been on the market for more than a month, you need to make sure you take that into account when trying to make your home stand out. If you price your home anywhere similar to your neighbors is just going to sit as well. 

On top of that, you need to understand that the listing price of your home can often be completely different than the market value of your home. Let's go over a quick example: 

If your home is currently worth $815,000 and you price it at $815,000 then you could be missing out on marketing to a bunch of qualified home buyers. Let me explain. 

When looking for a new home using a site like Zillow do you think that potential buyers are going through and saying, "show me homes that are $729,000-$815,000 or are they more likely to search for homes that are $700,000-$800,000? 

Most buyers will use the round number option when looking for homes. On top of that, some buyers that put that $800,000 as their max can often afford slightly more than that but they might not want to stretch to their max to try and stay within a budget. However, and I see this happen all the time, when the buyer finds the right house, often times the budget tends to go out the window and paying that extra $50 a month to get into the home they really love is not that big of a deal. All this to say that there is a strategy when deciding on the list price of your home, if you price your home at $800,000 you not only appear to be a better value, more buyers will see it and ultimately this give you a better shot at multiple offers from buyers that fall in love with the property and are willing to stretch to get into the home that they are already starting to picture themselves living in.

Last tip for sellers. Although your home doesn't have to look like HGTV in today's market it really needs to be move-in ready. What does this mean? Buyers should be able to move into the house without any major issues to worry about. Have old beat up carpet, it probably needs to be replaced before selling. Have holes and scuffs all over you paint, you will most likely want to get the house painted before selling. Have a leak under the sink? You probably want to address that before putting you house in the market. Have mismatching furniture and no uniform decor throughout the home. You probably want to look at getting your home staged so it flows better and will allow buyers to better picture themselves living there. With buyers having more options and not having to rush into a purchase, they are now taking their time to find that perfect home. If your home needs work and doesn't leave a good first impression on buyers, they will likely pass it up and move on to the next one. 

Want to know what your home is worth? CLICK HERE to get your HOME VALUE INSTANTLY. Or if you want a more in depth review where I fine tune the value of your home, go over what you would net from the sale, discuss marketing strategies that work in today's market, and give you up-to-date housing market info on your specific neighborhood reply to this email or contact me by phone (714)-366-2186 for the free home equity analysis now!

Don't want to watch the video and rather read it instead?

Josh Alexander 0:00

Kids are finally back in school the pumpkin spice latte from Starbucks has arrived. That can only mean one thing. The Fall housing market is here. And you can be guaranteed that this year's fall housing market is going to look completely different than the last couple years. How that's exactly what we're going to talk about on today's episode. Hi, I'm Josh Alexander and your host of Orange County Housing market news, your one stop shop for all things Orange County real estate. So in today's episode, we're gonna go over my housing market forecast for fall 2022. What should you expect if you're a buyer or a seller over the next couple of months before we hit the holiday season, that's exactly what we're going to talk about today. So let's go ahead and get into Okay, so like I do with all of these forecasting episodes, first, we're going to briefly go over what's been happening over the last month in the Orange County Housing Market, where that puts us today.

And then we're going to use some data and trends to look at what you should expect to happen in the housing market as we go through fall this year. So let's go ahead and look at what happened in August in Orange County. So over the month of August, on the supply side, we saw supply finally peak for the year and start heading down. So supply has been going up over the last couple months. Because interest rates have been higher, however it has peaked and is now heading downwards. And that's completely typical for this time of year, it actually dropped 4% over the last week alone. And if you look at the total supply in the housing market, we are still very, very low. So we started the year out with the lowest supply ever. And we've added about 12% Less homes than a typical year before COVID, when you look at where we are right now, and we've actually added less homes this year on the market than we did during the COVID years as well.

So supply is just not improving, it's going to remain low and continue dropping for the rest of the year. So on the demand side of things in August, we actually saw something kind of interesting, we saw demand actually increase throughout most of August. And that was due to interest rates going from 6.28%, dropping down to the low fives for a large chunk of August as well as most of July. And that put a lot of buyers in a better position and enabling them to be able to afford homes again. So we saw demand slightly rise over the month of August, however, interest rates have started going back up again. So I expect as we head into September, you're going to see that demand also peak for the year and start heading downwards, which it typically does during this time of year as well. So that brings us to where we are right now. So the average days on market for a typical home in Orange County is 63 days. So from the time you place a for sale sign in your yard to when it goes into escrow, typically is going to take around two months. And that puts us in a very slight seller's market where sellers still get a call a lot of the shots however, you're not seeing a lot of homes with multiple offers anymore. Typically, you're going to get one to three offers on most homes in Orange County right now.

And that's been the case for about the last month and a half. So if you're trying to sell a home right now, on the market, yes, you still have a small advantage as long as you price it correctly. If you're trying to buy a house right now, the competition is way less than it's been the last couple of years. Which means if you place an offer on a home, typically you're only having to compete with one maybe two other offers in order to get into escrow, which means that you no longer having to bid up the prices, remove contingencies. And you can take your time looking for a house right now. So buyers that are entering the market right now are having greater success finding a home and not overpaying for it. So that brings us to what you should expect if you're thinking of either placing your home on the market in the next couple of months, or applying for a mortgage and buying a house over the next couple of months as well. So typically during the fall market, you're going to see supply peak and go down.

And like I just said supply has already peaked for the year, and it's starting to drop. So that's typically what you're going to see. And that's exactly what's happening this year. And on the demand side during the fall market, you can expect demand to continue decreasing as we go through the fall as well. And it usually decreases about the same as supply. So as demand goes down, supply goes down. And like I just said before, again, it looks like demand has probably peaked for the year and should be heading down which again, reflects a pretty normal market for the fall. So if you are thinking of buying or selling a home during the fall market, let me give you some advice. Let's first go ahead and start with the seller's because that's going to be the most dramatic shift compared to what sellers have been used to over the last couple of years. So right now, yes, we are in a slight seller's market, because demand is still slightly higher than supply. But it's not that significantly higher, which means on your end, you have to pay attention to a lot right now. Number one,

Josh Alexander 4:33

you have to price your house correctly. If you overprice your home in this market is just going to sit there you're not going to get offers. The demand is just not there to support that high of number anymore. You need to make sure that you partner with a real estate agent that is going to take the time to go over in detail all the most recent comps and ideally they should probably only be using comps from the last 90 days because the market has definitely shifted So that's gonna give you a better picture of what your home should be worth right now. So that you're using those comps, and accurately pricing your home and giving you a fair market value. If you're not doing that right now, again, if you overprice it, it's going to sit on the market and you're not going to have success selling your home during this fall market. So that's number one.

Number two, if you do place your home on the market, those cell phone pictures that you see from realtors, they're just taking pictures of the house, walking through, you see them in the mirror, it's not going to cut it anymore. Yes, you probably could have gotten away with that over the last two years during COVID Because demand was out of control. However, in today's market, if you don't have the right marketing plan and marketing materials, and you're not showing your house in the best possible light, it's going to be difficult to sell your house. So on your end, this means that you need to make sure you're having professional video professional photos, 3d walkthroughs, you need to make sure you're also promoting your house on all the different channels. So YouTube, Facebook, Instagram, Google, you need to make sure your agent is mailing things to the neighborhood your house is in need to be talking to those neighbors trying to find as many buyers as possible to look at your house. And on top of that you are probably going to have to put in some work before you place your house on the market right now if your house is not moving ready, which doesn't mean it has to be HGTV ready, it just means that buyers need to be able to move into the house and not have any major problems to deal with. So if you have old carpet, old flooring, that's all beat up, most likely, it's going to be a good idea to replace that if you have dings and dents all over your walls, you're most likely going to have to repaint the interior of your house to make it look as good as possible.

Because when buyers walk in, you need to have that great first impression. If they walk in, it looks like every other home on the market right now. And your house is not standing out. The odds of you getting good offers or any offers at all, dramatically decrease. So you need to be fixing those small things around the house that are broken, you need to make sure Visually, it looks great. So whether that small repairs, doing some cosmetic work on the inside outside of the house, including landscaping, getting your home staged right now, so the buyers can better picture themselves living in the house. And the house makes sense in terms of a theme. And it all ties together. Those are the things that you're going to need to do in order to successfully sell your house during this fall market. So make sure whatever real estate agent you're working with, can offer all these services for you and has recommendations for you on how to better prepare your house for sale. So you have the best chance of success, and your home doesn't sit on the market for months. Now the other thing that sellers definitely need to make sure they're paying attention to that they didn't have to do as much during the COVID years is you have to know what your current competition is doing.

So what are the other active homes in your neighborhood? What are they priced at? How will they look because you need to be competitive with that when buyers have more options to choose from, they're going to be more picky on which homes they look at. So if you have a house down the street from yours, it's in much better condition, more upgrades that has a pool, and you're thinking of pricing at somewhere similar to that you're not going to have success selling your home in today's market. So you need to make sure that you're pricing it not only based on the comps, but based on what's going on around your neighborhood to be able to attract as many buyers as possible because the marketing price is not the same as the fair market value price. The marketing price is going to have to take into account what your competition is doing, what upgrades you have in your home, and what the fair market value of your house is, as well as what buyers are looking for.

So for example, let's say that an agent goes to your house does a comparable market analysis and says that your house is worth $815,000 however, you have a neighbor up the street that has a house that's slightly larger and a little bit more upgraded selling for $850,000. And it's been sitting on the market for three months, you need to take that into account when you're deciding what the price of your house is going to be. You also need to look at what buyers are searching for when they go into Zillow, are they saying I want homes that are $815,000 and above? Or are they saying I want homes that are $800,000. And above or on the low side of things, they might be looking for homes that are 650,000 to 800,000. If you then go and price your home at 815. Those people that are searching for homes online that have their filter set for a maximum of $800,000 that maybe could stretch and get to the $815,000 are not going to see your home pop up on their email list.

So you need to take all this into account when you're deciding on the market price for your home to get as many qualified buyers into your house as possible to give you the best chance of not only getting the best offer, but also getting that into escrow quickly. So it's not sitting on the market for months at a time. And eventually you have to start reducing your price. So these are just some of the things that I'm looking at as an agent when I'm talking to sellers trying to figure out what is the best marketing price for their house because again, a marketing price is completely different than the fair market value price. You're trying to get as many qualified buyers enter the house as possible. And doing that in today's market requires a little bit of creativity. And a lot of marketing. Okay, so now let's go ahead and look on the buying side of things. So if you're thinking of buying a home in the fall market, here's a few recommendations that I have. Number one, interest rates have been swinging dramatically over the last couple of months. And that's probably going to continue over the next couple of months as well.

Which means for you, it's very important that if you're getting a loan on the property, that you'll be in constant communication with your lender, because I've seen rates over the last couple of weeks moved by more than half a percent in just a week alone, which can dramatically impact your affordability, especially if you're trying to stretch towards the upper range of what you're approved for. So you might be able to be approved for a home one week, but then the next week rates jumped by a half percent, and you can no longer afford that home. So make sure right before you place an offer, you're in communication with your lender, and you can understand what the payments are most likely going to look like based on the current interest rate that day, because they are fluctuating a lot right now. So the second thing buyers need to pay attention to if they're trying to buy a home right now. And again, this goes back to the lender is that right now, because rates are so high, it might make sense if you're planning on staying in the home for long term to start buying the rate down a little bit. And what this basically means is you're paying a lump sum to the lender in order to get a better interest rate. So that way, your monthly payments could be dropping by hundreds of dollars a month. Now again, this is for long term homeowners, it's not something I'd recommend, if you're only going to be there two or three years. However, if you're going to be in there long term, it makes sense to at least discuss those options with your lender to see if you have extra money if you're able to buy down the rate. So you're saving yourself hundreds of dollars every single month, making the house more affordable for you.

Now, if you don't have extra cash set aside, in today's market in this cooling market that we're seeing, you might be able to still place an offer and actually ask the seller to credit you towards buying your rate down at the end of escrow. So it could be no money out of your pocket, the seller actually pays for you to buy that rate down and saves you a couple $100 a month. So make sure you discuss that with your agent with your lender to see if that's a possibility for you to do as well because it could be a great option to not only get a great house accepted, but also have a much better interest rate for the next 30 years as well. And the third and probably most important thing that buyers need to be paying attention to right now is before they place the offer, you need to make sure your agent is doing a lot of research, running those comparable sales and giving you an accurate fair market value of the home because right now is not the time to be overpaying for a house, the market has slowed down, which means if you overpay for a house right now, the odds of you making that back up anytime soon, are dramatically reduced. So you need to make sure that you're placing offers still most likely at market value, because that's the type of market we're in.

And the third and probably most important thing that buyers need to remember right now is even though yes, it's easier, and you're going to have more success buying a home right now than you have over the last two years, which is exciting. You need to pay very close attention to those offer prices that you're offering for homes. Because right now we are in a slight seller's market. So you might have one or two other offers to compete with. But if you overpay for a house right now, the housing market is not appreciating like it was over the last two years, which means you can't overpay for a home right now. And you'll be able to make that back up and appreciation in a month or two. If you overpay for a house right now, it's going to take you significantly longer to be able to make up that appreciation, which means you're not going to have equity in your house, which is never a good thing for a buyer. So if you're placing offers on homes, make sure your agent is calling the listing agent every time before you place an offer just to see what your competition is see if you can find out if there's any other offers on their house. If there isn't, then one, you want to make sure that your find the fair market value. But two, you can try offering slightly under that market value to see if the seller will take it and if the house has been sitting on the market for a month or two. Odds are if the seller is serious about selling your home, they're still going to look at your offers seriously. And you might be able to get a house for a slightly under market value. It's not going to happen every time. But there's more opportunity for you as a buyer right now than there has been over the last two years.

Now again, just because the seller is asking for a certain price. That doesn't mean that that's the fair market value of the home. So you need to make sure your agent is doing their due diligence, looking for that fair market value. And then you can base your pricing strategy that you're going to offer based on that price, not the list price of the home. So overall, I'm actually excited for the Fall housing market in Orange County because as long as interest rates stay averaging under that 6% mark, the most likely outcome is going to be supply continues dropping, demand continues dropping at about the same rate, which is going to keep us in about the same market we're in right now. And that means that sellers still have the opportunity to sell their house at fair market value. And buyers have the opportunity to purchase a house without having to compete so much and are able to get it at fair market value as well which is setting us up to finish this year with a much healthier housing market than we've seen over the last couple of years. Which again I'm back Are you excited about So one more thing before I let you go today if you found this content useful, can you do me a huge favor and make sure you hit that like that heart, that subscribe button below and if you know anybody that might find this useful, please consider sharing it with them as well. It would mean the world to me. So until next week, stay happy, stay healthy and I will see you on the next show.