[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. Hey everybody welcome to this week's episode of market updates here in Orange County. I am Ron Evans your host as you've already heard before we get started. If you could, please, don't forget to subscribe and ring the bell over here and if you want to go back and always keep up on all the market updates right here, That's your link. You can go back and listen or watch previous ones and kind of see what the market has been doing over the last several weeks and months compared to what's going on now and have a good education on buying or selling a home here in Orange County. So let's get started. As always. Everything comes from Stephen thomas, a local economist here in Orange County, he's got his business reports on housing. He releases our Orange County Housing report every two weeks or once a fortnight. Mhm. And we're going to go over this current one that just came out last night. This is hot off the presses this week's title is rising rates versus no inventory. That is what we're dealing with today. There are two opposing economic forces impacting the housing market right now, rising mortgage rates and a record low supply of homes available to purchase. Almost sounds like a broken record if you've been paying attention over the last weeks and months and actually a few years it's kind of been heading this way. There simply are not enough homes available for buyers and rising rates have not yet had an impact on an insanely hot housing market. Thought process behind it is we were told A few weeks ago that the Fed was going to incrementally raise rates this year in 2022 as a way to ease demand and allow inventory to catch up flip side of that. It would also um possibly slow the growth in prices and housing costs and rising rents by doing all of this because the supply and the demand is what's fueling everything we've got going on right now in housing housing feels like it is suffering from supply chain was seemingly nothing available to purchase. This is exactly what we had going on last year. The inventory in Orange County started With an all time low of 2633 available homes that's last year, that's 2021, The beginning of 2021, It got down 20-14 on June 10. So halfway through the year, it had actually dipped, it rose And peaked in June and then continued to plunge until only 954 homes were on the market January one of this year. So less than half of the amount of homes we had in 2021 is what we started 2022 with. Today, it's gone up just a tad, we've got 1000 and 80 homes, so we've added 100 and 26 homes over the last couple of weeks. Um The difference between this year and last year's record low is striking. He writes There are 1547 fewer homes today. So 59% less every price range has been similarly impacted. Check out this graph Comparing today to the three year average between 2017 and 2019. Prior to the pandemic is mind blowing. There are 30 667 fewer homes available and impressive 77% less. That means there were over four times as many homes available prior to the pandemic at any given time to start out a year than there are today. Today there are fewer homes at every price range, especially in the below $750,000 category. This is like our uh first time home buyer or maybe first time move up buyer depending on what you started with price range for homes, less than 500,000. There are 150 today, 150 homes under $500,000 in Orange County. This time last year there were 817 and that's still low Between 500,000 and 750,000. There was 153 homes today, compared to 1,147 homes this time last year, 87% fewer. So if you're a first time Homebuyer or you're buying on a very limited budget you are getting your head bashed in right now on the market. 100%. It is tough and it is toughest on you. It's tough across everything, but it is toughest on you. Since ringing in the new year, mortgage rates have been steadily climbing, eroding home affordability. According to Freddie Mac's primary mortgage market survey Rates have risen from 3.05% on December 23 2, 3.5, 6% as of January 20 Up 0.5% in just four weeks. Now. I think in the last couple of days it kicked back down just a tad but you get an idea of where we're at. It has many speculating that even higher rates are coming. I believe we have said previously that by the end of 2022 we expect rates to be somewhere between 3.65 and maybe 3.85. I don't know that they'll hit 4%, but you never throw in a volatile stock market and many are beginning to wonder if these changes are just the beginning of the end to the pandemic run on the housing market. Could it be we'll see investors in Wall Street had already digested the fact that the Federal Reserve was tapering their purchases of mortgage backed securities and we're going to be raising the short term, Excuse me, short term federal funds rate, which is tied to automobile loans and credit card debt, not to the 30 year mortgages starting this march. And at the end of this, I'll share another thing. Just got an alert. This is a little side piece. Just got an alert today right before beginning to air this, that yes, the Fed has come out today and confirmed that coming this March rates are going up and they're doing it specifically to try to ease further demand on housing and lower inflation because they've got to get the supply chain figured out. Additionally, they announced that they were going to be draining their balance sheets, which was unexpected. The Federal Reserve went from calling inflation transistor transitory or temporary and doing nothing just a few months ago to acknowledging that it was an issue like I just said on the, on this current news break and that they were going to do everything in their power to slow inflation's grip on the economy. It was as if the Fed acknowledged that they made a mistake and that they were behind the eight ball and now they are engaging in a hurry up offense still to try and make up for lost time. The markets reacted and rates rose by 0.5% in the last four weeks. See this chart, Why has the rising rates not yet affected the housing market? The answer is, simple rates have not climbed high enough to materially slowed down demand. Mortgage rates climbed considerably in both 2013 and 2018, which caused a shift in the market, demand cooled, the inventory increased. Market times grew and the market slowed from a hot seller's market to a much more balanced market. 2013 Rates rose from 3.3, to 4.5, And in 2018 they rose from 3.99 to 4.94. I don't know that they're going to go that high this time, but we need to be prepared and look at history to understand why they did it and what it did. Their recent run up in rates is much smaller. If they continue to climb, then the market could cool. But for now, Wall Street and investors have digested future Federal Reserve moves and they most likely will not rise much more from here. Like I said, 3.65-3.85. don't know that we'll hit four Rates would need though to climb to 4% or higher to slow housing. We don't know if we're going to get that high At 4%. The difference in payment for that same $900,000, mortgage example would be $478 more per month Or 57 39 per year at 4.25%. It would increase your payment by $608 per month. Now this is compared to the 3.56 that we're at today Or 70 - 99 per year. We just don't know if they're going to pull the trigger and go quite that high. We know they're going to go up a little bit. It should have at least a slight impact. But for them to have a tremendous impact, they do need to crank it to 4% or higher. Just don't know if they're gonna be willing to do that over the full summary of Orange County housing. The active listing summary. Active listing inventory shed 20 homes down 2% and now totals 1080 homes, as I have mentioned previously, which is the lowest level for this time of the year since tracking began 18 years ago In December, there were 2% fewer homes that came on the market compared to the three year average prior to COVID Last year. There were 2,627 homes on the market. 1547 additional homes or 143% more. That's the last year. Today Demand which is the number of pending sales over the prior month surged by 131 pending sales In the past two weeks up 10 1426 last year there were 2,055 pending sales, 44% more than today due to the impact of COVID on housing and due to the fact that there was inventory, I truly feel that if the inventory levels today were what they were last year, that demand that we have right now would be even higher because the homes are just going bonkers, Man surging and supply slightly dropping the expected market time, which is the number of days to sell. All Orange County listings at the current buying pace decreased from 25 days to 23 days in the past couple of weeks, which is an insanely hot seller's market. It was at 38 days last year slower than today but still insanely hot. Want to point out that that's what I just talked about is across all price points. So beginning first time Homebuyer move up And luxury across all points, price points. That averages to 23 days. Now we're going to get into some price point specific Homes priced below $750,000. The market is of course a hot seller's market with an expected market time of just 19 days. This range represents 28% of the active inventory and 33% of the demand For homes priced between $750 and $1 million. Our first move up level. The expected market time is even shorter at 16 days. This range represents 18% of the active inventory and 26% of the demand For homes priced between a million and 1.25 million. The expected market time is 14 days. This range represents 7% of the active inventory and 12% of the demand For homes priced between 1.25 million and 1.5 million. They expected market time is 20 days. This range represents 8% of the active inventory and 8% of the demand For homes priced between $1.5 and $2 million. The expected market time is 25 days. This range represents 8% of the active inventory and 8% of the demand as well. Now we're gonna talk about luxury. It used to be luxury was defined by homes Under $1 million 1.25 million. Now we have the threshold at $2 million. So now we're going to go over some luxury numbers For homes priced between two million and four million. The expected market time Has gone down over the last couple of weeks from 55 days to 34 days. That's right. If you have a $4 million dollar home that you want to sell today, it will be gone by the end of february. Roll this back to pre covid, you were looking at at least six months if not closer to a year at that price range and may sometimes even higher and longer for homes priced between four million and eight million. The expected market time also decreased from get this 100 and 59 days or almost six months to just 74 days or 2.5 months. So if you had an $8 million home that you wanted to put on the market right now, it would be gone by april, you would be moving before school's out. Let that sink in. There was a time not that long ago where that would be a year and a half to two years. You would have market times of 500 days, 700 days, 800 days in those price ranges. That's where we're at For homes priced above $8 million. Yes, we have those, we have quite a few of them in orange county, The expected market time decreased from 210 days. So eight or nine months, 272 days less than six months. Again, if you have a $10 million dollar home, it's gone by summer. You listed today gone by summer. That's the world. We're living in here. The luxury end all homes above two million accounts for 31 Of today's inventory and 14% of the demand. So listen to that. It accounts for a third of our overall inventory, but only less than 1/5 of our demand and yet it's still yielding numbers like that stressed homes. It's a combination of both short sales and foreclosures Made up only .2% of all listings And .6% of demand. There is only One foreclosure and one short sale available to purchase today in all of Orange County. To total distressed homes on the active market down one from two weeks ago, two weeks ago, there were three this time last year There were a whopping eight side note for all those people. They keep saying, oh well forbearance is over here. Come the short sales don't listen to him. It's not happening, not happening here said it at nauseum the days homeowner has something that the previous homeowner when the market did get depressed have that's equity. Everyone buying a home today with some exceptions, of course Is not buying a home at 100% financing, negative amortization, etc or multiple homes and 100% financing and negative amortization. Everybody has 20%, 10%, 5%. They're putting down. The competition has been so fierce for the last few years. It's hard to get a lower down payment offer accepted. It can be done. It's just really challenging and difficult. Therefore, the people that took advantage of forbearance even if they needed it or not and when the bank now comes calling, They are able to just refi out of it. They've got probably a better rate than they had in 2015 or 2013 when they bought their home. Anyway, they've got plenty of equity they can re fly out of it, get out of their forbearance, make it all up and stay in their home. We didn't have these options in 2007 and 2008 when the market crashed and everyone was trying to refinanced their home um and do all kinds of crazy things to stay in their homes. There was not enough equity for the bank to want to work with you. That's why we had a lot of foreclosures then why we're not going to have the foreclosures today. Don't listen to what you see on facebook with all the ads that are rolling up about about forbearance etcetera. Look at the numbers and understand what the math says For 2,486 closed residential resales in December which is 20% less than December of 2020 for the year through december. There have been 35,180 closed sales. So that's what we sold In 2021 16% higher than in 2020. And the most sales sense. 2005 December marked a 3% drop. However, compared to November 2021, The sales to list-price ratio was 101.1% for all of Orange County. It doesn't matter where you live, doesn't matter what your price point. If you listed your home chances are you're getting at or just slightly above your list. Price Foreclosures accounted for just .2% of all closed sales and there were no closed short sales in the month of December. That means that 99.8% of all sales were good old fashioned sellers with equity. Just giving you the summary and some information that covers all of Orange County housing. Obviously I have more detailed information on a city by city basis. I'm happy to send it to you. Send me a text message at 9499 to 9 to 270. Send me an email at real Estate one oh one at Ron Evans realty dot com. Let me know where you live. What kind of information do you like about your neighborhood if you just want general pricing or if you want some specific pricing information about the neighborhood and I'm happy to send it right over to you. No obligation, don't need to work with me. I'm not going to come calling. I'm not going to add you to some mailing list or database list. I genuinely just want to help people see you again very very soon. Thank you for watching folks. I appreciate your continued support if you haven't already done so please don't forget to subscribe and share this podcast with your friends, leave your comments and questions below and I'll get back to you when I can have a great day. See you soon