July Housing Market Forecast for Orange County

Half of the year is already gone and many who thought a giant housing crash was coming this year are surprised to see that home price in Orange County are actually headed back up. Since March we have seen homes appreciate in Orange County and as we head to the back half of the year, based on the current data, you can expect that trend to continue. Even with high rates and home prices, there is just not enough supply on the market to allow values to drop. More than 60% of homes are selling at or above asking price right now in Orange County which is even more than last month. With home owners hesitant to sell their homes and give up their historically low interest rates, and because current interest rates haven't budged much lower than the beginning of 2023, inventory is likely to be a problem for the remainder of the year. An even more surprising stat is that in Orange County we are only about 4-5% below all time highs again for the median home price. 😮 

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Josh Alexander

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Full episode transcribed below:

Is the housing market going to explode like all of the fireworks this month? Well, if you're thinking of buying or selling a home in Orange County this summer, you need to watch this episode. If you're returning subscriber, thank you so much for your continued support. I really do appreciate it. If this is your first time here. Hi, I'm Josh Alexander, host of Orange County Housing market news, as well as your local real estate agents. So if you're thinking about buying or selling a home somewhere in Orange County or the surrounding area, make sure you hit that LIKE SUBSCRIBE and FOLLOW button. So you get up to date information on what's happening in the Orange County Housing market. So on today's episode, we're going to be going over what to expect in the month of July as I go through my monthly housing market forecast. So let's go ahead, get into it.

Okay, so as I do with all of these episodes, first, we're going to review what happened over this last month of June, because that's going to give us a much better idea of what is trending and what to expect in the month of July. So for the month of June, in terms of the inventory side of things, our inventory is right around 2300 homes in Orange County. So for reference that is extremely low. Last year, at this time, we had 53% more homes on the market. And before COVID, if you look at the average three years leading up to COVID, we had 191% more homes on the market during this time of year in Orange County. So right now we have the lowest inventory we've ever seen. And that is including the year COVID happened for this time of year in Orange County. So needless to say inventory is still the major issue plaguing the housing market in Orange County as well as throughout the United States right now. So on the demand side of things, we're really having a problem in the industry right now trying to get a good handle on exactly how high demand is. Because the traditional way that we used to look at demand, which is pending sales. So how many homes have gone into escrow just isn't working right now. Because right now, let's say one home is for sale, one buyer is going to be able to get into escrow on the home.

However, there might have been 5678 buyers also placed offers on the home that is not accounted for when you look at pending sales. So the next best way, we have to determine what demand looks like right now is going to be mortgage application. So how many buyers are going into a lender and getting approved to go out and look for a home. And when you look at mortgage applications, mortgage applications over the last few weeks have been going up every single week, which just shows that even with interest rates hovering in the very high 60s Right now, demand is still pretty stable. It is lower than normal. However, it is stable. And there's a lot of reasons that staying so stable. But one of the main reasons is we have the largest demographic patch in the United States right now Millennials entering prime homebuying years. So that demand number is staying relatively consistent. Not all Millennials can afford a home. In fact, in Orange County, you're probably looking at one in five Millennials can maybe afford a home right now. However, there's so many of them that it's creating that stable demand, even with interest rates as high as they are right now. And that demand number just doesn't seem to want to dip.

So supply is extremely low, demand is low, but it's still much higher than supply. So we are still in a hot seller's market throughout Orange County and have been that way for the last three or four months prices are going up. And they're going to continue to rise as we head into July. And the last data point I want to go over before we get into what to expect in July that really supports this hot housing market isn't going away anytime soon, is if you look over the last week of home sales in Orange County, and there's been about 350 of them 63% of those sold for at or above asking. Now if you look at last month at this time, we were hovering right around 59%. So over the month of June, we're actually having more homes sell for above asking price than we did the previous month. So again, we're not going to see this hot housing market turn around anytime soon, there's going to be positive appreciation happening in the Orange County Housing market for the foreseeable future. So speaking of the future, let's go over what to expect in July.

So in a typical housing cycle, we usually see inventory peak for the year towards the end of July, early August. And over the last two years, it's been peaking closer to the end of August and this year, I probably expect the same thing where we will see a gradual increase over the next couple of weeks in the amount of inventory we see in the market. But it's not going to be significant because we really have been floating around that 2300 number since April. So you really haven't seen inventory go up that dramatically. So I expect it to go up a little bit, but nothing that's going to really impact the housing market in terms of numbers. Now when it comes to demand typically during the middle of summer is when you start seeing demand drop because buyers are going on vacation hanging out with family going to the beach, they're not as concerned with home buying. So in a typical year, you usually see demand peak around April and then slowly head down over the summertime before it drops more dramatically as we head through fall. And we are seeing demand drop a little bit in the numbers right now in terms of looking at The average days it takes to sell a home, because at the beginning of June, it took about 39 days from when the seller placed their home on the market to when it went into escrow. And right now it's hovering around 43. Is that significant enough to make any difference in how the market feels on a day to day basis? No, but the numbers are starting to show that there is a slight dip, and it takes a little bit longer to sell a home on average. But again, you wouldn't really know it if you were in the market, the beginning of the month versus right now, because it feels about the same. And like I said earlier, we are still in a hot seller's market, especially for those price ranges at 1.5 million below.

Anything at that 1.5 million and below is typically taking 30 days or less to sell once you go above 1.5 million. So for instance, 1.5 to 2 million, the days on market goes from about 31 to 51. So it jumps up by 20. That is still a seller's market, especially in that price range, when typically you see it three months or more. So you're still going to get great offers on your home and sell it a lot faster than normal. However, things do start slowing down the higher price you go. And that's just typical of any housing market that we've ever been in. Now probably the biggest question I get from both buyers and sellers right now is what should I expect interest rates to do so during the month of July? Should I expect them to go up should I expect them to go down interest rates have been one of the hardest things to predict this year. So back in February, they got as low as going into the high 5% range. And then just a couple of weeks ago, they were up above 7% again. So the nice thing about the month of June is we finally saw interest rates settle down. And they only varied a little bit. So they were going between 6.8% and 7% for most of the month. And so predictability is starting to be a little bit easier with interest rates.

As long as you don't get any major upsets with any of the economic news or any world events, you can probably expect interest rates to stay around those ranges. So someplace in the high sixes is where interest rates are most likely to be for the month of July. So even though rates have stabilized, and it looks like over the month of July, we should see that stabilization continue. As a buyer, I always recommend that you're never looking at what you think interest rates are going to do. You're always buying based on what you can afford now in today's market. So talk to a lender, get that pre approval and figure out can I afford a home in the neighborhood that I want with the amenities that I want. And if you can't, then by all means go forward, start looking for a home. But if you're one of those buyers that are saying to yourself, I am not going to even look at the housing market until interest rates get to this predetermined number that I've made up in my head, you could be setting yourself up for failure for many reasons, which we'll go over in a little bit. Okay, so now let's go ahead and go over what my personal recommendations are for both buyers and sellers who are looking to enter the market either in July or August as we head through summer. So right now let's start on the buying side first. So buyers this first half of the year has been tougher you not only are interest rates still elevated, but we're seeing home prices go back up again, month after month making homes less and less affordable. And because inventory is so low, you might be willing and able to purchase a home, but you just can't find the right place for you. And so it's taking you weeks or even months to be able to get into that home that you want. So understandably, it can be very frustrating for buyers right now.

And I hate to be the bearer of bad news. But for those buyers out there that can afford to purchase a home right now, but are sitting it out because they're waiting for interest rates to come down or hoping that home prices fall, I have some bad news for you. So on the supply side of things, unfortunately, you're just not going to see any relief on that anytime soon. So not only are we about to hit the seasonal high for supply, and supply should start falling as we head through the rest of the year. But because interest rates have shot up so significantly, there are a lot of homeowners out there that either purchased a home or refinance the home during the COVID years at those 234 percent interest rates that we might like to move and be able to move normally. However, when they go look at a house with rates almost at 7%. Now, even to move into a house, it's the same price as theirs, they could be looking at double the mortgage payment. This is causing a lot of sellers to stay put sit still maybe do some renovations on their own home and not sell. And this is one of the major reasons why we're not seeing inventory go up like it should at this point. Because it just doesn't make financial sense for a lot of sellers out there to put their house on the market and then go to a payment, it's going to be double unless they absolutely have to because they're moving for a job their household is expanding with more kids or relatives moving in. Unless there's a good reason for them to move.

A lot of homeowners are sitting put, and they're just not going to move until interest rates get lower. So on the inventory side of things, don't expect that to change anytime soon. Now on the interest rate side of things, the two most probable scenarios for interest rates for the remainder of the year is either one they stay around the same as they are right now in the high sixes and like we've talked about even at that rate, home values are continuing to go up or like a lot of economists predicting by the end of the year you shouldn't see rates slowly continue to drop, which could actually be more of a disadvantage for buyers right now. So let me explain over the first half of this year, we've seen high interest rates every single week that we have interest rates higher right now, as well as home values going up, you're having less and less buyers that want to purchase a home able to actually afford it. So this demand pool of buyers is getting bigger every single week, the interest rates are high. So what do you think is going to happen if all of a sudden we do get a dramatic dip in interest rates, the floodgates are going to open and again, we might see a few more sellers pop on the market if interest rates go down by half or full percent. But even if interest rates dropped by a full percent, you're not going to see a flood of homebuyers into the market, because they're still going to have much better mortgage payments, and a much better interest rate already locked in. So even though you might see supply go up slightly, if you see interest rates dropped dramatically, you're going to have that flood of buyer demand into the market that have been hoping for each to drop or they can afford something all at once, which means you're going to be competing with possibly two or three times as many buyers for the same home.

And what do you think that's going to do to home prices, home prices are going to go up faster than they are right now. So even though you might have gotten a lower interest rate, the problem then becomes can you actually get into escrow on a home, because there's so much competition, and how much over asking price are you're going to have to pay to be able to get into escrow. So right now, if you're able to afford a home, there's no better time to start looking. Because if you can identify and find that right home, get into escrow and close it, you know only got that home while home values are still on the rise. But if interest rates drop in the future, you can always refinance and reduce your monthly mortgage payment, but your house is locked in. So really, it doesn't make financial sense, in most cases, for buyers to wait and hope that interest rates go down. Because the possible disadvantages are just too great at this point. So if you think you can afford a home and you want to find out, make sure you talk to a lender, it's completely free, they can get you that pre approval and figure out exactly how much you qualify for. And then you can take that pre approval and be ready maybe you're not purchasing a home right away. But maybe three or four weeks down the road that perfect home does pop up, but you are ready, you have the pre approval, you can place an offer on it and have a good chance of getting into escrow versus if interest rates do go down and you have all that competition in the marketplace, you're going to have a much harder time getting that home of your dreams when there's going to be a lot more competition for it.

Now sellers. Yes, the market is currently favoring you. However, we're not like we were back in COVID times where you can take a few cellphone photos, place it on the MLS, and by that weekend, you'd have 10 offers on the home over asking price and in escrow the next day, right now, yes, we are in a seller's market. However, if your home is not marketed properly priced properly, and it's not exposed to as many people as possible, it could still take you a while to sell your home, especially if you don't price it properly. So it's extremely important that when you price your home, you're looking at those comparable sales and not overpricing it to begin with. Because those first two and three weeks are so critical on getting the best offer for your home. If you overprice it and then a couple weeks later have to reduce the price, the chances of you getting the best offer on your home goes down dramatically. So make sure when you place your house on the market, you're doing the prep work, you're getting your house clean, you're getting your landscape upgraded, putting new mulch down, putting new plants down pressure washing the driveway, the outside of the house, having a fresh coat of paint inside and outside definitely help as well. Those steps you take to get your house ready for sale are going to pay off dramatically. When your home stands out over everybody else's in the neighborhood, you're going to get more eyeballs on it more offers and ultimately a better price for your home. Now if you're selling a home and also buying a new one at the same time, you really need to make sure that you're completely comfortable with all the different contingencies that you can put in place to keep yourself protected. Because even though you can sell your home quickly, it might take you a couple of weeks or a month or more to be able to find a new place. So if you don't have the properly written contract, when you go into escrow, you can end up selling your house and then have no place to go. So it's extremely important for sellers that are looking to purchase a home to make sure you talk to an agent, they walk you through all that process, how you keep yourself protected, all the different options that are available to you.

So that way when the time comes, you can make a smart decision on which offer to accept to not only get you the best price, but also make sure you have the most flexibility to go out and find the next home of your dreams that you can move into without having all the stress of being on a timeline and not being able to move quick enough and then having to find someplace to live on a very short notice. So make sure that you know all of those contingencies and timelines involved and again, if you have a good real estate agent, all this will be explained to you so you know all the options available to you. Now speaking of if you're thinking of buying or selling a home and have more questions about how to go about the process To successfully buy or sell a home in today's market, whether it's questions about your specific neighborhood your home what you need to be doing what you need to be looking for when you're placing offers. If you're watching this on YouTube, feel free to click the link in the description below. And you can set up a free 30 minute discovery call with me anytime that works for you. And we can go over your specific situation, and I can give you some guidance on what might be the best steps for you. If you're watching this anywhere besides YouTube, it will either be in the comment section or you can find the link in my bio as well. It's all there schedule that free 30 minute conversation because I am passionate about helping people make a smart financial decision when it comes to buying or selling their home. And one last favor I have to ask for you. If you found this information useful. Can you please consider hitting that like subscribe and that share button below if you have anybody that you think that could use this information? I would really appreciate it and until next week, stay healthy, stay happy and I'll see you on the next show. Bye everybody.