Orange County, CA is home to over 3 million people. It encompasses 948 square miles, many of which border the Pacific Ocean. It is probably best known for being the home of Disneyland and has world-famous beaches. Keep reading to learn more about how the Orange County real estate market is affecting the value of your home.
Like many other Southern California areas, Orange County has seen some sharp real estate price increases over the last few years. Some refer to this as the “pandemic boom,” where home prices have picked up thanks to a lack of housing inventory available on the market.
The inventory began to shrink in April of 2020 as we rode out the stay-at-home orders and wondered what the pandemic would do to our economy and society as a whole.
Orange County – It’s a Seller’s Market
There is no way to sugarcoat it. We are in an extreme seller’s market. Currently, home sellers are seeing homes go under contract within the first week of hitting the market, usually selling above list price.
With so many buyers trying to take advantage of low-interest rates, sellers can sell their homes with little out-of-pocket expense in things like repairs or concessions.
Buying a home in this market is challenging. Still, if you are able to do so, you will be rewarded with instant equity and an amazing place to call home. Still, the process of getting there will be full of challenges and compromises.
It isn’t easy and can be emotionally draining. If you are out there trying to buy a home in today’s market, here are a few things you can do to make your offer stand out from the rest:
- Include your preapproval letter from your lender along with proof of funds for your down payment.
- Try to discover what the seller’s needs/goals are. Maybe you could offer an extended escrow period to help the seller find a new place to live. Or maybe you could rent the house to them after closing.
- Be patient. There is so much that is out of your control in this seller’s market, don’t feel pressured to pay more than you feel comfortable with.
Orange County Rental Market
If you are an aspiring investor, Orange County is a great place to consider buying. Renters are drawn to the area because of its many employment opportunities along with gorgeous scenery and location.
While Orange County is very expensive, it is still in demand. The average rental price is just about $2,700, which is higher than most other Southern California areas.
The price again boils down to demand. There are a lot of people who want to live in Orange County. There are also many very high-end rentals, those that rent for upwards of $10,000 per month, which does skew the average.
Suppose you plan to rent a home or apartment. In that case, you may want to jump on that now since rental rates are expected to increase all across Southern California in the next year. If you are hoping to purchase an investment home, it would be wise to do so now before values increase even more.
Orange County Single Family Home Prices
If you are planning to make any of the Orange County cities your home, the good news is there are plenty of well-kept, yet cost-effective homes on the market. The bad news is that the average selling price of a home is $829,000, up 9.1% year over year.
What is remarkable is that, according to this report, only 1 out of every 7697 homes is labeled as a distressed home. This number is down 64% since this time last year. A distressed home is a home being sold either due to foreclosure or as a short sale.
Short sales are when a home does not have enough equity to pay off the mortgage loan when being sold. Since values are appreciating so quickly, more homes have positive equity, which prevents a short sale. Distressed homes tend to sell below market value price, which sometimes allows those who might not otherwise afford a particular neighborhood to buy there.
Orange County Real Estate Appreciation
Looking at all past activity and sales indicators, both buyers and sellers can expect to see real estate prices in Orange County continue to increase through the end of the year. Some experts do predict there will be a slight dip in values in 2022-2023, but that they will pick right back up again come 2024.
From February of 2020 to February 2021, the Orange County real estate market saw an explosion in home values with an increase of 9.1%. We do not expect to see such a sharp incline in the next year but are optimistic that values will continue to move upward.
What this means for you as a homeowner is that you probably have equity in your home. Equity is the difference between what you owe on your mortgage and what your home is currently worth.
If you owe $500,000 on your mortgage loan and your home is worth $650,000, you have $150,000 of equity in your home. A home’s equity increases in two ways; as you pay down your mortgage and your home’s value increases. If you sell your home, that is the profit you make.
If you have no plans to sell, you can still access that money in the form of a home equity line of credit. This is essentially a loan on your equity. Many savvy homeowners will use that money to pay for improvements on their property, increasing their property value.
What’s Next For the Orange County Market?
Experts are predicting that the California real estate market as a whole will continue to be one of the hottest, most in-demand markets in the country. Overall, homes have increased in value 108% since the bottom of the market in 2012 and are only expected to rise from there.
California home values have gone up 11% in the last year, and demand continues to rise.
Orange County is slightly lower than the state average but still holds its own. However, inventory is expected to remain low, which will challenge growth and make it difficult for entry-level buyers to enter the market.
Hopefully, more people will become comfortable moving around and listing their homes now that the COVID vaccine is more widely available and economic uncertainty is starting to die down.
If and when inventory increases, there will most likely be a very small dip in home values since buyers will no longer feel the need to offer over and above the list price of the home they want.
This would be a welcome relief for first-time homebuyers or people who are financially impacted by the pandemic since it is currently a challenge for them to get into a new home.
Choice Home Mortgage is here to make the process as simple and easy as possible. Give us a call. We will keep all your information private and confidential.