- This has been an incredible year for the housing market in Orange County. Many people are wondering if it will continue in 2022. We will be discussing a few reasons to be optimistic about next year, several factors that could cause a housing market slowdown, recent Fannie Mae forecasts, and how inflation can impact the housing market. I’m Tim Hamilton with StellarQuest Real Estate. I hope you had a great Thanksgiving, and I wish you all a Merry Christmas and happy holidays. If you’re thinking about buying or selling a home please feel free to call or text me personally at (714) 486-4086. I’m happy to answer your questions and help you out in any way that I can.
- Inman News recently published an article titled “5 Reasons to be Optimistic about the 2022 Housing Market” in which the author interviewed Lawrence Yun, Chief Economist at the National Association of Realtors. Yun does not believe that we are on the verge of a housing market crash. His reasons are that we have better controls around subprime lending, robust buyer demand, and low interest rates that are fueling the market. Rates are expected to go up, but he believes it will be manageable. He is also expecting more homes to come on the market due to ending forbearance and other hardships brought about over the prior year. This could also cool the market, which is why he is expecting minimal price growth over the next year. He also states that inflation is not something for homeowner’s to worry too about. During the 1970’s period of high inflation, home values rose faster than inflation inflation, and homes have generally been a good hedge against inflation for decades.
- Inflation has been a major topic of discussion recently, and it is an important factor to consider when looking at interest rates. According to a recent Fannie Mae news release, the federal reserve is expected to start hiking interest rates in Q4 of 2022. Fannie Mae is expecting mortgage rates to average 3.3% in 2022 and to drift up to about 3.5% by 2023 which are still incredibly low interest rates. If inflation continues to worsen it could cause more dramatic rate hikes by the federal reserve, and they could start earlier than anticipated. Higher interest rates impact home affordability, and are a cooling factor in the housing market. If they rise too far, too fast, it could have a dramatic effect on the housing market.
- Now we are going to take a look at the supply and demand dynamics that are currently taking place in Orange County. We currently have an extremely low level of supply (homes listed for sale) vs. a very strong level of buyer demand. You can see on this chart that the supply of homes is extremely far below the prior 3 years. We have had fewer homes coming on the market since 2017, which has become more extreme in 2020 and 2021. You can see on this graph that there have been significantly less homes hitting the market over the last 2 years. There are currently about 1,457 homes on the market in Orange County. The 3 year average from 2017-2019 was 5,359, which is more than triple of where we are today.
- Demand is dropping slightly but remaining strong. It is currently sitting at very similar levels to the prior 3 years. There are several primary factors contributing to the strong demand. The first being historically low interest rates. They have been slowly working their way back above 3%, but it is still a phenomenally low rate that many buyers want to take advantage of. The second reason is demographics. More and more millennials are reaching prime first-time buyer age and are entering the market quickly. It is the strongest first-time buyer demographic patch on record, and it will likely continue over the next few years. As a result of a record low number of homes for sale with strong buyer demand, the market has picked up speed over the past few weeks. The expected market time dropped from about 23 days down to 20.
- If you want to receive any of the reports or articles we refer to in this video please call or text me at (714) 486-4086, or email me at the email address in the video description. If you want to buy or sell a home please feel free to contact me anytime. I am happy to go into more detail with you about the market and let you know what I can do to help. Thank you for watching and I hope you have a merry Christmas and happy holidays.
StellarQuest Real Estate – Lic. # 02077900
Tim Hamilton
Broker Associate – Realtor®
Lic. #01959966
(714) 486-4086
timsellsca@gmail.com
www.StellarQuest.com