Orange County housing market sees decline in sales as prices continue to rise

Fewer homes are being sold in Orange County as prices continue to rise, illuminating a dearth in real estate inventory leading into 2023.

From November 2020 to November 2021, overall home sales decreased in the county by 3.5%, according to data released Thursday by real estate firm DQNews. Preliminary data show prices peaked in October with an average price of $920,000. The median price of homes increased by nearly 15% in the one-year period, up from $800,000 to $919,000.

Data show that the median home prices in the Southern California region peaked at $693,500 in November.

Some economists expect home price appreciation will slow to single digits next year, in part because they expect mortgage rates will rise. That could be more likely to happen after the Federal Reserve on Wednesday announced more aggressive plans to fight inflation, but for now average mortgage interest rates remain in the low 3% range.

In addition to low borrowing costs, other factors helped create today’s competitive market with fast-rising prices: the pandemic, low inventory, record-low mortgage rates, and an influx of millennials interested in becoming first-time homebuyers.

The intensity prompted some prospective shoppers to put their search on hold after dueling in bidding wars. And some traded the city for a suburban or rural communities in search for more open space, affordable housing and a sense of community, according to a study released this year from the nonpartisan California Policy Lab.

Steven Thomas, chief economist who tracks the Southern California market at Reports on Housing, said Friday that spring is typically the time houses are placed on the market with plans to go into escrow and close over summer. Then, it starts to slow down around the holidays.

The housing inventory was already low prior to the pandemic lockdown in 2020, but then came the “perfect storm,” which exacerbated the issue, Thomas said.

Normally, he explained, the new year in the Orange County real estate market begins with about 5,000 available homes. But that isn’t the case this coming new year.

“The available homes on the market is right around the lowest level I’ve seen,” Thomas said, who’s been monitoring data for over 30 years. “It’s 1,259 as of this morning. That’s nothing on the market.”

In order to see a cool down in demand, he said interest rates must rise above 4% to allow more inventory.

Los Angeles Times reporter Andrew Khouri contributed to this report.

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