The Orange County 2022 Real Estate Forecast
2021 was a crazy year for real estate. No one could have predicted the tremendous value increases real estate would experience while the world went through a pandemic.
The median sales price in Orange County as of October 2021 is still $944,343 according to Zillow, which is almost a 20% increase year-over-year.
But what does it look like for 2022? Will the increases keep happening and at such a fast pace?
The good news is home values will keep increasing. The bad news is it’s not predicted to be at the same incredible pace. As the housing market settles a bit, experts have the Orange County 2022 real estate forecast at a 12.5% increase, which is still amazing!
Another change we’ll likely see in the housing market is the days on market. As prices increase and competition dies down, the days on market may average higher than its current 32 days. Experts don’t believe we’ll see a tremendous increase in how long it takes to sell a home, but don’t expect same day offers or selling your home faster than you can find another one.
What does the 2022 Orange County Real Estate Forecast Mean for Buyers?
This year was tough for buyers. If you were pushed out of the market because of the fierce competition, you might find it easier to buy a home in 2022 for a few reasons.
- More listings – California listings have been on the rise in the second half of 2021 and are predicted to keep the pace in 2022. This means less pressure for buyers with more options on the market should you get pushed out of one potential sale.
- Less competition – The homebuying hype has died down slightly, which is good for buyers. With less competition on the market, you have more time to make decisions and bid on homes rather than feeling pressured to outbid other buyers and potentially go over your budget.
- Price increases are leveling out – The Orange County 2022 real estate forecast still predicts an increase in prices, but at a much slower pace than 2021, making it more affordable for buyers.
Another factor to consider is that more millennials will be able to enter the housing market as generational wealth transfer occurs.
Will Buyers Keep Paying More than a Home is Worth in 2022?
A large problem the real estate industry faced in 2021 was the willingness of buyers to pay more than the home’s appraised value. A borrower’s mortgage is dependent on the appraised value but with low inventory and high demand, millions of borrowers waived the appraisal contingency and paid the difference between the sales price and appraised value in cash when necessary.
With the Orange County 2022 real estate forecast predicting demand will slow down, this may no longer be necessary, which is good news for borrowers. Paying more for a house than it’s worth isn’t good practice since you’re entering an investment ‘upside down.’ It could take a few years or more to get back on track.
What will Mortgage Rates do to the 2022 Orange County Real Estate Predictions?
A big part of a buyer’s ability to buy a home is mortgage interest rates, which also affects the 2022 Orange County real estate predictions.
If interest rates are too high, demand will fall because buyers simply can’t afford the payments.
So far Fannie Mae and Freddie Mac, the largest mortgage investors, predict mortgage rates may increase slightly, but nothing that makes mortgage financing unaffordable yet.
No one can predict 100% what will happen to interest rates, of course. It depends on many factors including inflation, home inventory, and the Fed’s monetary policy.
Will the Orange County Real Estate Bubble Burst?
Anyone that was in the real estate industry in 2008 can’t help but worry if we’re about to see another real estate bubble burst before our eyes.
With Orange County real estate appreciating at such rapid rates, it’s common to worry whether values will fall dramatically again causing the real estate bubble burst we saw in 2008.
But the 2022 Orange County real estate forecast doesn’t show this happening.
The reason for increased demand and higher prices in Orange County is much different from the years leading up to the real estate crash of 2008. Plus, lending requirements are much stricter than they were in the years leading up to the great recession.
Today, most home buyers are purchasing primary residences instead of second homes to use as investment homes or vacation homes.
The construction of new homes has also slowed significantly during the pandemic due to inflationary prices and the pandemic itself. This also puts more pressure on the Orange County housing market.
The 2022 Orange County prediction for new construction is that it will pick up again. When this happens, there will be more homes available, and home price increases will slow down even more.
Is 2022 a Good Year to Buy a Home in Orange County?
Even if the Orange County 2022 real estate forecast rings true and prices continue to increase, 2022 good be a good year to buy a home in Orange County.
Inventory will be higher which could mean more price flexibility. Fewer buyers will be ‘priced out’ of the industry including the millions of millennials who are ready to buy a home but haven’t been able to jump on board yet because of the stiff competition.
Loan limits are also increasing for 2022, making it even easier to buy a home with a smaller down payment. In 2021, the Orange County conventional loan limit was $822,375 but in 2022 it increases to $970,800.
There may also be less competition. Since millions of people already moved in 2020 or 2021, there will be more room for ‘new buyers’ in the industry.
So far, buyers don’t have to worry about crazy high mortgage rates either. While rates are predicted to increase in 2022, they will still be lower than what we were used to pre-pandemic.
Is It Smart to Buy a Home In Orange County?
This all boils down to – should you buy a home in Orange County?
Many people think it’s a ‘bad idea’ because of the high cost, but it can be a great investment. With things settling down somewhat in the coming year, setting down roots in Orange County now can be one of the best financial moves you make.
Lenders continue to be flexible with their underwriting guidelines and most borrowers have multiple options for loans including conventional, FHA, or VA loans. Without the need for jumbo financing with higher loan limits in Orange County, it’s easier and more affordable to get financing.
Of course, you should look at your financial situation and make sure you’re ready to take on the mortgage payment. Since most people won’t be paying inflated rates or inflated prices for homes anymore, it can be a great time to jump on board the homeownership bandwagon.
Final Thoughts on Orange County 2022 Real Estate Forecast
2022 will continue to see price increases, low-interest rates, and high demand for real estate in Orange County, but not at the level you saw in 2021.
The Orange County 2022 real estate forecast shows things will start settling down for buyers. Sellers will still sell their homes fast, but not at the inflated and unrealistic prices they were getting in mid-2021.
Buyers will have a more relaxed experience and have a better chance at loan approval with higher 2022 loan limits. There will be a lesser need for a lot of cash out of pocket outside of the typical down payment and closing costs with lower prices.
If you have any questions about the current real estate market conditions or are ready to explore your mortgage options in Orange County, start here. We are happy to partner with you, helping you navigate the 2022 real estate industry successfully.