[00:00:00] : owning a home is still the american dream but it comes with plenty of emotional and financial challenges, join real estate broker Ron Evans each week as he shares the latest industry and local real estate market news through interviews with other agents and industry professionals. If you're confused about today's real estate market or just want to understand the home buying and selling process. This show is for you, here's your host, Ron Evans. Well, Hello Everybody and happy new year. It is 2022 and we are kicking off this new year in fantastic style. As you heard, I'm Ron Evans your host and today I've got a special treat for you. I'm going to be going through our Orange County housing market update But focusing on a 2022 forecast. Now a little housekeeping, our office is being moved currently. So I am coming to you remotely great. I cannot get my web camera working. So unfortunately you're just going to be seeing a static picture of my beautiful face today. And also I hope the sound quality is good. I'm using some remote sound equipment, not my normal studio equipment. So I apologize in advance if you're listening or watching and you're not getting the same sexy voice and image that you're used to Okay with that. As always. I use Stephen thomas's reports on housing for all of my information when it comes to housing forecasts and reports here in Orange County, I'm going to be giving you information that is Orange County specific, but also just Orange County in entirety. If you would like to have something specific to a neighborhood or city that you are interested in or that you live in. You can contact me via email At Real Estate 101 at Ron Evans Realty.com or Text me at 9499-9 2270. You can also leave a question or comment in either the podcast format that you were listening or on Youtube if you happen to be watching today and let's get going. So hopefully everyone had a good celebration, had a good end of 2021. If you want to know how 2021 was going, housing wise, especially fourth quarter with how we ended. I encourage you to go back and listen to the last couple episodes. Um you can look it up pretty easily. It's just all about marking uh forecast and housing forecasts that we had going on In 2021. I am going to specifically just be going over his Forecast for 2022. Today, I'm not gonna be talking much about 2021 unless it's a comparative analysis. So here we go, The 2022 forecast. It's going to be another hot year for housing. So the shock of going into a pandemic may have disrupted the housing market in 2020 for a few months, which it did, But there was absolutely zero disruption in 2021. In fact, it was a crazy, crazy year for real estate here in Orange County. And quite frankly nationwide demand surged despite Covid's winter wave. The summer delta wave and the current omicron wave, if anything, it has kept a lid on mortgage rates. And that is true. While we did see a little bit of fluctuation there in fourth quarter with rates Coming up to about 3 3.1%. Um it that was about it. Other than that it stayed between like about 2.8 and three Throughout all of 2021. The only thing that will slow housing down at this point is going to be rising rates. But as long as Covid continues to be a threat, rates will have a hard time rising much from their current record lows. So if you listened to some previous episodes, You'll note that we are expecting rates to rise a little bit here in 2022 throughout the year, incrementally. Excuse me, We may see it by the end of 2022, hit about, I think they're they're forecasting about 3.65, Somewhere in that range. And quite frankly, as these rates start to rise, that may finally grease the wheel of inventory and I'll get into more of that As I go through this report, housing is one of the strongest sectors of our economy yet the overall U. S. Economy has been on the mend as well, retail sales have soared despite what you've seen with supply chain issues that we had over the summer, unemployment has dropped substantially, despite what you may have seen or heard, job openings are surging, that's nothing new. The job market has been going crazy, The number of homeowners and forbearance dropped below 600,000 by the end of December And the vast majority of the nearly seven million exits are either performing or paid off their mortgages and four. Now, let's circle back on the forbearance issue. You heard throughout a lot of 2020 after they came out with four barrettes for covid that this might lead to a wave of foreclosures and distressed properties for sale once people realized that for barracks was not forgiveness and they were going to have to make a lump sum payments to catch up. Now, two things have happened that everybody should have expected from the very beginning, but for some reason, panic set in early and caused a lot of confusion. The first thing that people should have understood is that banks today, Just like in 2007 when the market actually did crash due to housing issues, do not want to have homes on their balance sheet, that they are now responsible for selling and taking a loss on. So they will do what they can today, which they wouldn't do back in 2007 to keep a homeowner in their home. They don't want to foreclose number two In 2007 when the housing market crashed due to housing. I'm sorry when the economy crashed due to the housing market leading the way it was because so many people were overextended on home loans And owned multiple homes either on interest only notes, 100% financing or even negative amortization loans. They had no equity, there was no way they could refinance out as the market started to crash to keep up today, even with forbearance. Mhm 99% of the homeowners out there that have bought homes since 2007 have a ton of equity in their homes because most people are putting 20% down, 15% down, 10% down. There are very very very, very few. 100% financing loans happening today. And even fewer negative amortization loans happening today. And a lot of those are being used as just stopgaps maybe to get someone in and then they refine it out of it. It's not being used as a primary means to own a home. So this means that if you took four barons and you took six months or nine months or whatever the term was that your bank gave you and now they're asking for it. $15,000 Balloon Payment. $20,000 Balloon Payment. Well you likely have $600,000 in equity in your home because the market has gone up 20% especially here in Orange County in that same year, you can just refi out of it, pay that up and you might even be in a lower payment than you were before because the interest rates are lower today than they have been when you, when you bought your home before. So it's a win win win all the way around. So for those two reasons, the forbearance thing um, should have never been used as a key indicator that we are going to have foreclosures and distressed properties coming for sale. And the data that Stephen is providing us today backs that up. The economy has dramatically improved. Overall inflation may have risen to highs not seen in decades, but mortgage rates have not budged, Which indicates that investors are competent that the inflation pressures will subside and eventually retract sometime in 2022. Mm hmm. Everything we're going through right now is temporary, folks. The low interest rate environment will continue and will be a tailwind that will continue to fuel the incredible run on housing. As a result, the local housing market is going to be hot In 2022. Here is steven's forecast, let's start out with active inventory. The year will begin with less than 1000 homes. This is the lowest start by far since tracking began in 2004, It will be 60% less than the 2500 plus homes. We had to start 2021, which was the prior record low to start a year With very few homes to purchase. Housing will be extremely hot on January one. The theme for 2022 will be the same as 2021. Not enough homes for buyers to purchase. Instead, they will all be in escrow Expected active inventory to peak around August eclipsing 5000 homes, which is still well below The over 7000 home peak that we would see at that time. Prior to COVID demand, let's move on to demand with the anemic inventory, Stephen rights and the historically low mortgage rate environment, buyer demand will be extremely strong from the start of the year through the summer market with tremendous buyer competition buyers will be willing to stretch above the asking price. So expect appreciation around 8-10% for this year, demand will be its strongest and most appreciation will occur from january through july and then we'll downshift during the Ottoman holiday markets. So we're gonna go back to like a normal cycle of how real estate works. But we're still gonna see really strong appreciation. Now, typically before Covid here in Orange County, we would average 4.95% year over year, like clockwork with annual appreciation of home values. I think the rest of the rest of the United States averages around 3 3.5%. We've always outperformed here in Orange County. I know there's some other areas in the country that also outperformed the national average. We're not alone in that, but that's just where we are right now. Last year we were up almost 20 and this year they're predicting us to have another 10% increase, which is still two X what we normally see, so it is going to remain extremely crazy and hot. Don't worry about the price of the house, worry about the house payment, that's what you have to budget today. Okay, the housing cycle, the housing market will follow a normal housing cycle this year. The strongest demand coupled with plenty of fresh inventory, will occur during the spring market. This will be followed by slightly less demand and a continued new supply of homes in the summer market from their demand will drop further along with fewer homes entering the fray in the auto market. Finally, all the distractions of the holiday market will be punctuated with the lowest demand of the year and few homer homeowners opting to sell, Moving on to close sales. The number of successful closed sales, he's predicting will decrease 3-6%, compared to 2021 with around 33,500 closed sales for 2022 and 2021, we had the most closed sales since 2005 Luxury market, luxury market for luxury housing will continue to be exceptionally hot. Yet sales will drop slightly from 2021's record year. The spring market will be the strongest for luxury and will become a bit more sluggish with more Wall Street volatility during the second half of the year. Interest rates overall, look for a mortgage rates to continue to remain at historically low levels until the pandemic improves dramatically, most likely during the second half of this year. Yet rates will have a hard time surpassing 3.5% I mentioned earlier. 3.65-3.8. That's what we've heard on a national level from the Fed. He's predicting they may not go above 3.5%. So let's keep an eye on that. Even with the Federal Reserve reversing their N. B. A. S, which is mortgage backed securities purchases and raising the federal funds rate, short term rates and heightened inflation. Long term mortgage rates will continue to bounce between 2.75 and 3.5%. If mortgage rates remain at these low levels, housing will be insane, distressed inventory. Here we go, folks circling back. Do not expect a wave of foreclosures. The number of active forbearance is will dwindle to nearly none. As home values have surged, very few homeowners are underwater, which is one of the main reasons the vast majority of forbearance exists, There are exits are either performing on a monthly basis or paid off their loans. The foreclosure moratorium resulted in very few foreclosures in 2021. So expect slightly more in 2022. Nonetheless, the total numbers will be very low and undetectable in the broader housing market. Bottom line. 2022 will continue. We're housing and 2021 left off insanely hot. It will be an insane seller's market, which is an expected market time below 40 days from the start of the year through the summer market multiple offers and bidding wars will be the norm for home prices priced below two million. Once again, the market will heavily favor sellers and buyers will have to pack their patients to isolate their piece of the american dream and take advantage of record low mortgage rates from mega oughta from mid august on the beginning of the auto market, housing will evolve into a hot seller's market Which is a 40-60 day expected market time with a bit less activity, not quite as many multiple offers and fewer homes selling above their asking prices. That's it folks buckle up. It's gonna be a wild and zany ride. I hope you'll stick around with me weekly to hear all of the updates on housing in Orange County again, this is Ron Evans. My contact information is real estate one oh one at Ron Evans realty dot com Or 9499-9-270. Please don't forget to subscribe and like take care. Okay