Forseen Wave

For now, the conditions are perfect for home buyers with a lot more choices, improving mortgage rates, and a slower pace than prior years, yet that is not the forecast down the road.

Now is a Great Time to Buy

Mortgage rates do not need to improve much for a wave of buyer activity to develop quickly.

The phrase “the calm before the storm” dates back to the 17^th century when sailors observed how the air and the sea became unusually calm right before stormy weather started. The winds stopped howling, and the waves diminished. Today, the phrase calls attention to a period of quiet or stillness before something significant changes.

Today’s housing market pace is the “calm before the storm.” After years of a brisk, instantaneous speed, Orange County housing is much more balanced. The active inventory has blossomed. More homes are coming on the market, and they have accumulated since the spring of last year. Home buyer demand has been subdued since mortgage rates spiked higher in 2022, eroding home affordability. Pairing the increased supply with low buyer demand has resulted in longer market times and fewer multiple-offer situations. It is the best time to be a buyer in spring since 2019.

While it may be a great time to be a buyer, that does not mean collapsing values. In fact, according to the Freddie Mac Home Price Index, the Los Angeles/Orange County metro has grown by 5% year-over-year through January and up 0.5% month-over-month.

For now, the conditions are excellent for home buyers. It is the best market in years. Yet, it is crucial to understand that right now is the calm before the storm. Down the road, a foreseen wave of buyer activity will result in a substantially hotter housing market than what everyone is experiencing today.

It is best to look at supply and demand to understand how the market can change suddenly. Everyone talks about how the U.S. housing supply has grown considerably since last year. According to the National Association of REALTORS®, the inventory has averaged 1,137,000 since 2021. The U.S. housing market has endured a chronically low inventory and supply scarcity. In January, it was at 1,180,000, up 17% year-over-year. Yet, it is far below where it was before the pandemic. Between 2012 and 2019, the inventory averaged 1,980,833, slowly declining from year to year (white arrow). From 2006 through 2011, during the Great Recession, the inventory averaged 3,347,500. The housing marke

Mortgage rates do not need to improve much for a wave of buyer activity to develop quickly.

experienced a supply glut, 184% more homes than today, nearly triple. Since the latter half of 2022, when rates skyrocketed higher and home affordability collapsed, demand dropped to Great Recession levels and has remained there. Home values have not collapsed because low demand is contrasted with a low supply.

In Orange County, there are only 3,419 homes available to purchase today, up 64% compared to last year’s 2,084 ultra-low inventory. The 3-year average before COVID (2017 to 2019) was 5,286, 55% higher than today, or an extra 1,867 homes, and home values were still appreciating from year to year. The inventory has grown because of an accumulation of extra homes coming on the market. Homeowners have been unwilling to move and give up their underlying low fixed-rate mortgage. In 2023, 41% fewer homes came on the market compared to the 3-year pre-pandemic average. In 2024, it fell to 31%. So far in 2025, it’s off by only 20%. The inventory will continue to grow as more homes accumulate on the market and rates remain close to 7%.

Orange County demand (a snapshot of the number of new pending sales over the prior month) has been hovering at low, anemic levels since the summer of 2022. Today’s demand is at 1,665 pending sales, 8% higher than last year’s 1,538 pending sales. The 3-year average before COVID was 2,517, 51% higher than today, or an extra 852 pending sales.