Higher Mortgage Rates vs. Low Inventory
Homes in Orange County are continuing to sell quickly and above the asking price due to bidding wars. The main reason the housing market remains in a very HOT seller’s market is because there are not enough home for sale, and there are many buyers competing with each other. In our market update we talk about rising mortgage rates, the extremely low number of homes for sale, and what could cause the housing market to slow.
As of March 21st in Orange County, the sales price to list price ratio for detached homes is 103.5%. That means a home listed for $1,000,000 would sell for $1,035,000, or $35,000 over the asking price. Even more amazing is the fact that 73.5% of closed detached home sales sold above their list price. Until more homes come on the market, we can expect more of the same in Orange County.
The major recent change in the housing market is the rapidly rising mortgage rates. As interest rates go higher monthly mortgage payments increase, purchasing power decreases for buyers, and housing becomes less affordable. This is why higher interest rates typically result in slower housing markets in the long term. However, sometimes rising rates causes a short term boost on buyer demand. This is because some buyers will scramble to buy a home today if they expect interest rates to continue rising.
Steven Thomas, the author of “The Orange County Housing Report”, believes the housing market could slow if rates remain at elevated levels for a few months. This would reduce buyer demand and allow the number of homes for sale to grow. As purchasing a home becomes more expensive, buyers will be less willing to stretch the asking price and over-priced listings will start to sit on the market.
Below are a few interesting charts related to housing market values:
Stocks vs. Home Values: https://www.longtermtrends.net/stocks-to-real-estate-ratio/
Home Values vs. Median Income: https://www.longtermtrends.net/home-price-median-annual-income-ratio/
Home Values vs. Inflation https://www.longtermtrends.net/home-price-vs-inflation/
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StellarQuest Real Estate – Lic #02077900
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By: Tim Hamilton
Broker Associate
Lic# 01959966
(714) 486-4086
timsellsca@gmail.com