Orange County housing report for August 2023

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Dar-Mardan-Realtor-CPA

Dar-Mardan-Realtor-CPA

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The Rising Tide of Prices from 2019 to Today: Prices have risen significantly from 2019 to today. Key items like bread, milk, and beef have seen substantial hikes. The cost of used cars and some fast food items, including the Big Mac, have also increased, and housing prices in the Los Angeles/Orange County metro area have gone up by 40%. Despite potential cooling, these high prices are expected to persist.

Item/ProductPrice Increase
Loaf of bread55%
Milk31%
Ground beef34%
Potato chips & 2-liter soda48%
Used cars41%
Big Mac38%
LA/Orange County housing40%

Insight into the Housing Market:As we peer into the future of the housing landscape, projections by Freddie Mac suggest that 30-year mortgage rates will hover just under 6% by the close of 2024. A noteworthy observation is that over 80% of homeowners in California currently enjoy mortgage rates below 4%. Given this data, it's improbable that we'll see a surge in homes being listed for sale. In fact, with such a limited inventory, there's a plausible chance of house prices escalating further. Sellers, this is your moment: ensuring your home mirrors the pristine, immaculate feel of a model home can be a game-changer. Price it right, and buyers will be at your doorstep. On the flip side, buyers should prioritize securing their financing in advance. And never forget the intrinsic value of an Orange County property. Over time, your investment is likely to appreciate handsomely. After all, there's an unmatched allure to OC – truly, there's no place like it.

The orange county market breakdown
This chart provides a breakdown of the real estate market in Orange County, segmented by price range and a 'market speed tester' column on the left side. Analyzing this data offers some compelling insights:

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  1. Lower-Priced Homes: Homes priced below $1.5 million constitute approximately 76% of the market sales and 55% of the inventory. This disparity indicates a higher demand than supply in this price segment. Further emphasizing this point, the blue arrow suggests that market timing - or how quickly homes sell - has reduced significantly for homes in the $0 to $2 million range compared to the previous year. Simply put, the more presentable and functional a home in this bracket is, the quicker it is likely to be sold.
  2. High-Priced Homes: In contrast, homes priced over $6 million are moving slower this year compared to the last. While they represent only 1% of the market demand, they account for nearly 10% of the inventory. This mismatch implies a surplus of these high-priced homes relative to buyer interest.
  3. Affordability: The general principle highlighted is that the more affordable a home, the higher the number of prospective buyers. Consequently, there's more competition among buyers, leading these homes to be sold faster.
In light of these observations and the predicted interest rates, there are no indications of an impending real estate market crash or a decline in property values. If anything, the market is expected to remain at least as strong in the upcoming year.

About the Author
Dar Mardan, a seasoned realtor at Pacific Sotheby's International Realty, is your guide to all things real estate in sunny Orange County. With an emphasis on informed decisions and an array of knowledge spanning real estate, tax strategies, trusts, and more. Dar alongside his talented wife, Vida, offer a comprehensive, personalized approach to serve clients' real estate needs.

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Anybody that trades stocks will tell you that this is not a good chart for OC/Irvine. The market has tested resistance over the Spring and failed to break through. Now rates are the highest they've been since December 2000. There is nowhere to go but DOWN. The Fall will be BRUTAL!!

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irvinehomeowner said:
Is this the new "pain" or "destroyed" quote?

Actual timeline this time (so you can't pull a 2018-2020 cherry pick) and of course if a pandemic emerges, you can have an out.
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Sorry you need to acknowledge my correct call in the June 2022 prediction thread before I give you anything else. And calling a multi-year downturn a cherrypick when the rest of OC was showing double-digit gains also shows a lack of sincerity on your part. You can actually see it on the chart above.
 
Liar Loan said:
Sorry you need to acknowledge my correct call in the June 2022 prediction thread before I give you anything else. And calling a multi-year downturn a cherrypick when the rest of OC was showing double-digit gains also shows a lack of sincerity on your part. You can actually see it on the chart above.
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Not when you are being insincere.

You didn't call a blip in Irvine while OC would see double digit gains in 2018... you called years of pain for Irvine housing (and probably all of OC) which that chart clearly does NOT show.

And what was your correct call in June of 2022 compared to June of 2023? I think you misread the poll... it was June to June and you were wrong... again.

Don't make me bust out the receipts again... in fact, why don't you also show me where you made this imaginary 2018-2020 call?

Have a nice day!
 
LL, I know that I sound like a broken record but there will not be any material price declines unless inventory levels increase significantly. Inventory levels are a tell where prices will be going, period end of story.
 
I don’t anticipate a price decline due to extreme inventory shortage.
The real estate inventory shortage will not go away until the interest rates decline significantly.
And when the interest rates eventually decline that might cause an increase the number of homes in the market, and I anticipate a real estate price appreciation of 10 to 15% at that point.
so Homebuyer’s need to make a decision which poison pill they would like to take. Buy a home at a lower price now and pay the higher interest rate or wait for the lower interest rates and pay for a higher price for a home.
 
Given the choice between stagnant and declining home prices at a median ownership cost of $8,000/month and renting at a median cost of $5,000/month, it makes more sense to be a renter at this moment in time.

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Liar Loan said:
Given the choice between stagnant and declining home prices at a median ownership cost of $8,000/month and renting at a median cost of $5,000/month, it makes more sense to be a renter at this moment in time.
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This holds if you're not already an owner,

If you financed at the record low rates, your current mortgage is probably less than prevailing rent.

That's why inventory is low, there aren't enough good reasons to sell if you want to stay in the same area.
 
irvinehomeowner said:
This holds if you're not already an owner,

If you financed at the record low rates, your current mortgage is probably less than prevailing rent.

That's why inventory is low, there aren't enough good reasons to sell if you want to stay in the same area.
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There’s a reason mortgage lending spreads have almost tripled in the past year - mortgage credit is being severely tightened. Banks don’t want low interest long duration assets on their books. Why are none of the RE professionals here being honest about the tightening of mortgage credit as a core element of the Fed’s strategy to deflate PCE? First stop the investment property lending, then address inflated home prices. Powell has a plan. Of course as long as FCBs view Irvine RE as the premier asset class in which to park $$$ it won’t make a difference in prices, but outside of Irvine is a different story.
 
OCtoSV said:
There’s a reason mortgage lending spreads have almost tripled in the past year - mortgage credit is being severely tightened. Banks don’t want low interest long duration assets on their books. Why are none of the RE professionals here being honest about the tightening of mortgage credit as a core element of the Fed’s strategy to deflate PCE? First stop the investment property lending, then address inflated home prices. Powell has a plan. Of course as long as FCBs view Irvine RE as the premier asset class in which to park $$$ it won’t make a difference in prices, but outside of Irvine is a different story.
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As long as the 10 year bond stays in the range, home builders can continue to offer buy downs. I'm not of the unlimited demand camp. I'm more of a demand is more than the limited supply camp. BUT those rates are not for low credit score people so who knows how long they can keep building for those people.

But if inflation keeps up, don't think prices will drop. I bought my first place in sept 1980 (yeah....................... REALLY young but we were determined to get something with inflation so rampant and housing going up up up). I didn't like the terms my hubby negotiated with his dad for our borrowed down payment so we sold it 14 months later for 25% more and rates were 13% when we bought and we sold at the peak! Of course we bought the second place at peak interest rates and ate lots of beans and used lots of coupons but we sold it 7.5 years later for almost 80% more. During the initial time frame, the house never came down in price but it went sideways.

Just paid my property taxes for both my houses, LL.................. $4500 for the entire upcoming year for BOTH together. Doing the happy dance. Ya all are crazy buying in California paying high property taxes with mello included, imo.
 
Ready2Downsize said:
Just paid my property taxes for both my houses, LL.................. $4500 for the entire upcoming year for BOTH together. Doing the happy dance. Ya all are crazy buying in California paying high property taxes with mello included, imo.
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I don't disagree about the ridiculous cost of housing in California.. it is crazy

Do you wish you moved to AZ earlier?
 
OCtoSV said:
There’s a reason mortgage lending spreads have almost tripled in the past year - mortgage credit is being severely tightened. Banks don’t want low interest long duration assets on their books. Why are none of the RE professionals here being honest about the tightening of mortgage credit as a core element of the Fed’s strategy to deflate PCE? First stop the investment property lending, then address inflated home prices. Powell has a plan. Of course as long as FCBs view Irvine RE as the premier asset class in which to park $$$ it won’t make a difference in prices, but outside of Irvine is a different story.
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Rates are only one part of the equation, supply/demand dynamics have a bigger impact of where prices are going. As long as the job market remains resilient, don't expect any type of material drop in prices in Irvine or the rest of Orange County because until rates drop supply will remain low.
 
usctrojancpa said:
Rates are only one part of the equation, supply/demand dynamics have a bigger impact of where prices are going. As long as the job market remains resilient, don't expect any type of material drop in prices in Irvine or the rest of Orange County because until rates drop supply will remain low.
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maybe but you already gave an example of the house in South OC you bought from your clients and you were the only cash buyer. Areas with mostly financed buyers will be impacted as pricing is always set on the margins.
 
OCtoSV said:
maybe but you already gave an example of the house in South OC you bought from your clients and you were the only cash buyer. Areas with mostly financed buyers will be impacted as pricing is always set on the margins.
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Yeah but the top financed buyer bid $910k and I got the home for $900k because I went all cash and closed in 10 days. There were 12 total offers on that home so it just shows what the effect that low inventory has on good homes. My client bought the home back from me at the price that I paid for it after I sold her Lake Forest condo.
 
zovall said:
I don't disagree about the ridiculous cost of housing in California.. it is crazy

Do you wish you moved to AZ earlier?
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Made really good money on my real estate here but missed alot of time with family. In hindsight, I probably should have kept the Irvine house, rented it out and moved to AZ instead of Legacy but renting large houses in that price range in 2015 was not easy.

I knew selling Legacy for a profit would take a mania and lo and behold we got one. Not regretting selling even if it goes higher. When the market stalls legacy will be a hard sell, imo
 
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