"Busting Common Myths" Orange County, California, Real Estate Market Update (June 2024) Tim Smith

Tim Smith, Founder and CEO of Tim Smith Real Estate Group, offers an Coastal Orange County market update (June 2024).
Let's dive into the latest market data, bust some common myths, and give you the facts you need to know.
Myth 1: Housing is in a Bubble and About to Crash
Many social media channels push the idea that we're headed for a market crash, similar to the Great Recession. This couldn't be further from the truth. Unlike 2006, when housing inventory exceeded 4 million homes, today we have a significantly lower inventory of 1.21 million homes. Our current market is backed by strong credit, stable jobs, low fixed mortgage payments, and substantial equity. The housing market is much healthier and more resilient than it was back then.
Myth 2: Housing Inventory is as Bad as Last Year
While there's no denying that inventory has been tight, we're seeing positive changes. In Orange County, active listings have risen from 1,785 at the start of the year to 2,620 today - that's a 47% increase. Nationally, inventory has also grown to 1.21 million homes from last year's 1.04 million. Although we still have a way to go to reach pre-pandemic levels, the trend is moving in the right direction.
Myth 3: When Rates Drop, Prices Will Drop
There's a misconception that falling mortgage rates will lead to lower home prices. However, lower rates actually increase buyers' purchasing power, creating more demand. For example, a buyer aiming for a $5,000 monthly payment could afford a $940,000 home today with a 7% interest rate, compared to $851,250 when rates were 8%. When rates fall further, more buyers will enter the market, likely increasing demand and stabilizing prices.
Myth 4: Rising Unemployment Will Lead to More Foreclosures
Even though the unemployment rate has slightly increased to 3.9%, it's still historically low. Unlike the easy credit environment before the Great Recession, today's lending standards are much tighter, thanks to the Dodd-Frank Act. In April, only 0.2% of sales in Orange County were foreclosures or short sales, indicating a robust housing market able to withstand economic fluctuations.
Let's wrap up with a quick summary of the recent market activity. In the past two weeks, Orange County's active listing inventory increased by 6%, bringing us to the highest level since December 2022, and over the past eight weeks, it’s increased by 30%! Today, we stand at 2,228 Coming Soon and Active Single Family Residences. Despite this growth, our current inventory is still less than half of what it was pre-pandemic. Homeowners are largely staying put, thanks to their locked-in, low fixed-rate mortgages.
On the demand side, we've seen a 6% drop recently, with new pending sales decreasing by 109 to 1,650. This is slightly below last year's demand of 1,665 pending sales. The Expected Market Time, which indicates how long it takes to sell all current listings, has increased from 42 to 48 days. This is a bit slower than last year but faster than the pre-pandemic average of 70 days.
The bottom line? Don't let the negative narratives on social media mislead you. Stick to the facts and data. The Orange County housing market is strong, and there is plenty of opportunity in the market. Thanks for tuning in, and as always, if you have any questions or need assistance, call, text, or DM me on IG@timsmithrealestate.
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