OC Housing Report: End of the Seller's Market?
May 31, 2022
When escalating home prices are matched with much higher mortgage rates, home affordability dramatically weakens and results in fewer buyers able to make a purchase.
Many potential home buyers no longer qualify to purchase a home, or their purchasing power has greatly diminished. A payment on a $1 million home with 10% down at the start of the year was $3,917 at 3.25%. Today, it is $4,970 at 5.25%, a $1,053 per month rise in the first five months of the year.
However, it's only set to get worse. According to NPR, Fed policymakers said in March they expect rates to climb to nearly 2% on average by the end of this year, and close to 3% by the end of 2023. Fed Chair Jerome Powell said he and his colleagues would actively consider two additional half-point rate increases at their next two meetings in June and July.
With this dramatic change in demand, how is it affecting the market? There are fewer showings, fewer multiple offers, and homes are taking longer to sell. Overpriced homes are sitting, the inventory is rapidly growing, and price reductions are on the rise. In Orange County 22% of all available homes to purchase have reduced their asking price at least once.
The current active inventory continued to surge higher.
- +245 in last 2 weeks
- 2697 total--highest level since last December 2020
- At this rate, inventory will rise to 4500, peaking in Oct and Thanksgiving
- Expected Market Time went from 34 to 38 days--highest lvl since Jan last year
- Still Hot Seller's Market (less than 60) BUT things are changing
For Sellers: Still a Seller’s Market, but shifting. To find success, sellers will have to carefully arrive at their asking prices, taking into consideration the most recent comparable pending and closed sales.
For Buyers: Many waited for higher rates for a less crazy market. Well, here it is! Stay posted on June/July rate changes--rates expected to bump.
Excerpts taken from the Steven Thomas Report