The housing market in Orange County, California is a vibrant and ever-changing market. The sunny beaches and close proximity to Los Angeles have attracted homebuyers to the area, which led to a dramatic increase in home prices and competition for available homes in recent years.
However, after a two-year housing boom, the Orange County housing market has started to cool off in 2022. During this year, homes were sold closer to their asking price. It was also observed that there was less competition among buyers and fewer multiple offers were made.
How will this trend affect the Orange County real estate market in 2023? Read on to learn more about the current state of the housing market in the region and what prospective homebuyers should know to make informed decisions.
What Are the Current Trends in the Orange County, CA Housing Market?
The first few months in 2022 witnessed a rapid ascent of the 30-year fixed mortgage rate. This started to level off in June, coming close to reaching 6%. But this quickly went up again by September, exceeding 7% for the first time in two decades.
This rise has led to an increase in the monthly cost of homes and reduced the loan amounts available to borrowers. Consequently, residential home sales in Orange County declined year-on-year.
As the year 2022 came to a close, the median home price in Orange County decreased by 3.2% from November to December, at $1,131,760. Compared to the same month in 2021, there was a 4.4% decline in the median home price, which was $1,182,500.
Because there were fewer people looking to buy a home, properties stayed on the market for longer, giving the remaining buyers more options. And so, while single-family home sales in Orange County significantly fell by 43.3% from 2021, sales went up 3.1% from the previous month.
Orange County, CA Housing Market Forecast – Current Data
When it comes to housing market, Orange County, CA is the most expensive in Southern California, with a median sales price of over a million dollars. Newport Beach is the most expensive city in Orange County, with a median listing home price of $3.5 million.
Orange County was a seller’s market in December 2022. This means that there were more people looking to buy than there were homes available. Homes typically sell after 65 days on the market.
As a result of the Federal Reserve clamping down on inflation and raising interest rates, many buyers began holding back, fearing a recession. Only 1,416 homes were sold, down from 2,523 in the same month in 2021.
After the coronavirus pandemic created a fierce real estate market in the Orange County, where historically low mortgage rates encouraged buyers to outbid each other, inflating home prices, and depleting home inventory, the environment has shifted from hot to a more balanced market.
Orange County, CA Housing Market Forecast – 2023 Predictions
During the early half of 2023, the housing market is predicted to remain sluggish as high mortgage rates curb demand. However, prospective home buyers can look forward to mortgage rates dropping and inventory rising throughout the rest of the year.
The Chapman University forecast predicted Orange County housing prices to fall by more than 7% this year, as residential building permits are expected to fall 21%, from 7,100 units in 2022 to 5,600 units in 2023. The average home price in Orange County may drop by 7.3% during a “mild” mid-to-late year recession.
How Is the Market Forecasted to Change Over the Next Five Years?
Beyond 2023, buyers and sellers can look forward to a stronger real estate market in Orange County, CA, as things begin to normalize. Since the Covid-19 pandemic was the primary cause of high inflation, we can expect an extended return of stability in the market over a long period of time.
In conclusion, the high mortgage rates are predicted to impact home prices in Orange County, CA this year and, consequently, the buying power of prospective homebuyers. As seen last year, this will also bring about an increase on the number of available homes on the market.
The market can be daunting for some buyers, but it may also offer unexpected advantages for others. If you are interested in buying your dream home in the area, let’s make that happen! Give me a call at (949) 235-8614 so we can discuss your home options in Orange County.
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Frequently Asked Questions
Given the median home price in December 2022 of $1,131,760 and the predicted drop this 2023 of 7.3%, we can anticipate an average home price of $1,094,411.92 this year.
The market can be expected to rebound by 2024 and become stronger from there.
For now, the Orange County housing market is predicted to continue cooling off, as buyers no longer outbid each other, which led to inflated home prices and depleted home inventory during the first couple of years since the pandemic started.
With the environment having shifted from hot to a more balanced market, there is optimism that mortgage rates would drop and inventory would increase throughout the rest of the year.
Inventory, mortgage rates, inflation, and the buying power of potential home buyers are the major factors that shape the OC real estate market. Potential homebuyers who are hesitant to fulfill their home purchase this year will benefit from working with a realtor, who can provide expert guidance on how to get the best deal in the area.
Rates are already lower than they were at their peak, and depreciation is slowing down. So as 2023 goes on, we can anticipate less and less depreciation until, eventually, the 2nd quarter or 3rd quarter appreciation flattens.