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 17th 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. The phrase “the calm before the storm” dates back to the 17th 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 market 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.
Excerpt taken from Stephen ThomasACCURATE PRICING IS CRUCIAL
AS SELLERS ENCOUNTER THE SLOWEST SPRING MARKET SINCE THE COVID LOCKDOWN IN 2020, CAREFUL, DELIBERATE PRICING IS ESSENTIAL TO SECURE SUCCESS.
Time for spring cleaning and garage sales. Many homeowners participating in the neighborhood garage sale quickly realize the importance of careful, meticulous pricing. Most buyer activity occurs the moment items are strategically placed on the driveway. After the first hour or two, the crowds diminish and sellers are left scratching their heads and second-guessing their pricing. After adjusting the price lower, they know that the longer they wait, the fewer shoppers arrive, and the higher the probability they will not be able to move their used merchandise. Today’s sellers are also realizing the importance of careful, meticulous pricing. It does not feel like a typical Spring Market. There is much more seller competition, the market is slowing weekly, and sellers are left second-guessing their price. They realize that the spring clock is ticking. The longer sellers are on the market, the fewer buyer showings, and the more doubt sets in. Precise pricing is crucial in securing success, especially this year. It sets the stage for immediate buyer interest and is the most critical first impression before a buyer even sets foot in a home. Today’s buyers are educated and understand value after immersing themselves in the housing market for several weeks. They utilize their favorite real estate app and wait for the next home to hit the market. They look at every photo and soak in all the details: bedrooms, bathrooms, square footage, condition, upgrades, location, lot size, amenities, year built, garages, storage, view, etc. The price is most important. It is the differentiator between a buyer choosing to see the home in person or waiting for the next home to hit the market. After the initial 10 days of coming on the market, most seasoned buyers have seen a home. Even if they decide not to tour the house in person, they feel as if they have at least completed a “phone tour” and are ready to move on to the next one. The longer a home is exposed to the market, the less activity it receives. Many sellers mistakenly expect a giant boost in showing activity after adjusting the asking price lower. When a seller reduces the asking price, it is not met with eager anticipation and excitement like when it was initially placed on the market. Currently, 33% of all active listings in Orange County have reduced the asking price at least once. Sellers do not get a second chance at the initial first impression.
