Orange County Housing Report:

RATES RISE, HOUSING STALLS

SURGING MORTGAGE RATES ARE BRINGING AN ALREADY SLUGGISH HOUSING MARKET TO A CRAWL.

RATES IMPACT DEMAND

I N  T H E  P A S T  6  W E E K S ,

D E M A N D  H A S  P L U N G E D  B Y  1 8 % .

Nearly every kid has ridden a bicycle up a hill that felt nearly impossible to climb. The pedals get harder and harder to push. Doubt seeps in as every leg muscle burns. Suddenly, the hill becomes even steeper as the bike barely inches forward. For many kids, the hill proves too challenging, forcing them to climb off and walk their bikes to the top. Similarly, the Orange County housing market was already sluggish, struggling to gain momentum. Mortgage rates had climbed from 6% at the end of February to 6.75% in July, eroding affordability and dampening buyer demand. Then, over the past six weeks, the hill grew even steeper. Mortgage rates surged from 6.75% to 7.5%, placing even greater pressure on affordability, further squeezing demand, and slowing the housing market to a crawl.

Demand (a snapshot of the number of new pending sales over the prior month) peaked in May at 1,678 pending sales. From there, it slowly dropped, reaching 1,528 at the end of August, down 150 pending sales (-9%). Mortgage rates had climbed from 6.5% to 6.75%. Yet from the end of August to the end of September, rates jumped three-quarters of a percent, from 6.75% to 7.5%, and have remained there ever since. The last time 30-year mortgage rates climbed that fast in such a short period was in September 2022, when the Federal Reserve aggressively raised the Federal Funds rate. As a result, demand has fallen by 279 pending sales (-18%) over the past 6 weeks.

Excerpt from Stephen Thomas OC Housing