The Coming Change
Sharp rise in mortgage rates from 2.65% during first week of January to 3.09% today is just the beginning of rising rates
The Los Angeles Lakers reached the playoffs 10 years in a row between 1995 and 2004. They hoisted the Larry O’Brien Championship Trophy three times between 2000 to 2002. The team was stacked and included Kobe Bryant, Shaquille O’Neal, Derek Fisher and Rick Fox. What happened in 2005?
Shaquille O’Neal was traded to the Miami Heat and Derek Fisher signed as a free agent with the Golden State Warriors. The Lakers won only 34 games and missed the playoffs for the first time in 11 years. In sports, phenomenal teams do not last forever.
Housing is in the midst of its own playoff run and has been a hot seller’s market since June of last year, nine months straight. It is the longest since the 16-month streak that ran from March 2012 through July 2013. What happened in the summer of 2013 to end the run?
The market decelerated because of higher mortgage rates.
In 2013, there was very little supply, and low mortgage rates were juicing demand.
Doesn’t that sound familiar? A low supply and a truck load of demand?
The difference between 2013 and 2021 is that the supply of available homes to purchase today is even lower and demand is a bit higher due to even lower mortgage rates.
The Orange County active inventory in 2013 had reached its lowest level since tracking began in 2004, starting the year with 3,161 homes. It remained at the low level until April when it finally began to rise. Mortgage rates were at 3.34% in January 2013 and had increased to 3.63% in March. In June, rates increased to 3.9%, and they reached 4.37% in July.
The active inventory increased from 3,208 homes at the end of March to 5,522 to start August, a 75% rise. Typically, the inventory peaks between mid-July and the end of August. The 2013 peak did not occur until October at 6,350 homes, a 98% rise from the low levels of March.
Orange County Housing Summary
- The active listing inventory decreased by 17 homes in the past two weeks, down 1%, and now totals 2,349, its lowest level since tracking began in 2004. In February, there were 6% fewer homes that came on the market compared to the prior 5-year average, 209 less. Last year, there were 4,159 homes on the market, 1,810 additional homes, or 77% more.
- Demand, the number of pending sales over the prior month, increased by 152 pending sales in the past two weeks, up 5%, and now totals 3,110, its strongest mid-March level since 2012. The ultra-low mortgage rate environment is continuing to fuel today’s exceptional demand. Last year, there were 2,398 pending sales, 23% fewer than today. Keep in mind, it was the start of the pandemic too, which negatively affected demand.
- The expected market time, the number of days to sell all Orange County listings at the current buying pace, decreased from 24 days to 23, and extremely hot seller’s market (less than 60 days) and the strongest reading since tracking began in 2004. It was at 52 days last year, slower than today.
- For homes priced below $750,000, the market is a hot seller’s market (less than 60 days) with an expected market time of 17 days. This range represents 30% of the active inventory and 41% of demand.
- For homes priced between $750,000 and $1 million, the expected market time is 14 days, a hot seller’s market. This range represents 16% of the active inventory and 26% of demand.
- There were 2,283 closed residential resales in February, 12% more than January 2020’s 2,044 closed sales. January marked a 1% rise over January 2020. The sales to list price ratio was 98.8% for all of Orange County. Foreclosures accounted for just 0.09% of all closed sales, and short sales accounted for 0.17%. That means 99.74% of all sales closed were good ol’ fashioned sellers with equity.
California, Fullerton, Housing, James Bobbett, Market Update, Martina Bobbett, Orange County, Real Estate, Realtor