New Trends Emerge

April 5, 2022

WITH RATES INCHING THEIR WAY UP TO 5%, THE HOUSING MARKET IS SLOWLY CHANGING AND TRENDS ARE EMERGING THAT ILLUSTRATE A SHIFT IN THE INSANELY HOT HOUSING MARKET.

The scent of orange tree blossoms is captivating. It is just the beginning of the slow metamorphosis from flower to fruit. After the flower blooms, it takes navel oranges seven to 12 months to mature. It is far from instant, but as the petals drop, it reveals a tiny, green fruit that will eventually become a juicy, ripe orange. 

Similarly, the evolution of the housing market is far from instant. It does not change like a snap of the fingers. Higher rates are like the orange blossom, just the beginning of a slow metamorphosis from an insane, out-of-control housing market to a slower, more balanced, normal housing market. It takes time, but new trends are already emerging. 

1.Rapidly rising rates mean affordability has taken a dramatic hit so far this year. According to the Mortgage Bankers Association®, interest rates have risen from 3.31% on December 29th to 4.8% on March 30th, representing a 45% increase. The purchasing power for buyers has rapidly eroded in such a short period of time. For a buyer looking to put 10% down and desiring a $4,000 per month payment, at the end of December they were looking at a $1,013,333 home. Today, that same buyer is now looking at homes just below $850,000. Another way of looking at it is how much more the payment is on a $1 million home. At 3.31% with 10% down, the payment would be $3,947 per month versus $4,772 per month at 4.8% today. That is an additional $884 per month, or $10,608 per year. Persistent higher rates will eventually diminish demand and, ultimately, throttle back the housing market. The pool of buyers able to purchase shrinks as rates rise.

 

2. Significantly fewer homes are being placed on the market this year compared to the average prior to COVID. Last year there were 2,368 missing FOR-SALE signs in Orange County compared to the 3-year average between 2017 to 2019, 6% less. Yet, through the first three months of 2022, there are 1,866 missing signs, down 18%. Originally, the extremely anemic inventory was preventing homeowners from entering the fray. Today, it is more than that. Owners are more than happy staying put in their homes. They are acutely aware that home values are continuing to rise, that mortgage rates have substantially climbed, and that the underlying mortgage loan on their home is substantially lower than today’s 4.8% rate. In doing the math, homeowners are opting to stay put. Many homeowners who purchased several years back have refinanced to below 3% and have realized substantial appreciation. Yet in calculating their monthly mortgage payment and property taxes if they sell and purchase a larger home, the monthly difference can be staggering. As a result, many homeowners are opting to stay.

 

3. Demand, a snapshot of the number of new escrows over the prior month, has been substantially muted this year. Today’s demand is at 2,286 pending sales. So far this year demand has risen from 1,295 during the first week of January to 2,286 today, an increase of 991 pending sales. The 3-year average rise in demand prior to COVID (2017 to 2019) was 1,277, or 29% higher than today. Last year’s demand reading was at 3,162 pending sales, 38% higher than today. Today’s level is the lowest reading to start the 2nd quarter of a year since 2007. Demand has been muted all year. A big reason for muted demand readings is the acute lack of homes available to purchase. Simple economics: “You cannot buy what is not for sale.” True demand, the number of buyers in the marketplace, is considerably higher than tracked demand based upon escrow activity, yet is impossible to gauge other than home showing activity and the number of offers generated on homes today. Anecdotally, reports from the real estate trenches detail a reduction in the number of multiple offers real estate agents are receiving. Over time, if mortgage rates persist at these higher levels with duration, then demand will continue to remain muted compared to prior years even with more homes coming on the market. It is important to note that the strongest demographic patch of first-time home buyers ever, millennials, is making its way through the real estate market right now. The surge of prime first-time home buyers aged 32 years old occurs between 2020 and 2024. That demographic was added on top of an increase in buyer activity during COVID thanks to record low mortgage rates. Those record rates are gone, but there are still an astonishing number of millennials contributing to demand. The Orange County housing market has been running at an insane pace since July 2020. Yet, with mortgage rates climbing from 3.31% at the end of December to 4.8% today, new trends have emerged that will ultimately lead to a market downshift as long as higher rates endure.

A C T I V E L I S T I N G S

The active listing inventory decreased by 4 homes in the past couple of weeks, nearly unchanged, and now sits at 1,552 homes, its lowest level for this time of year since tracking began in 2004. The 3-year average change in the inventory prior to the pandemic (2017 to 2019) for the same two-week period was up 5%. The limited number of homes coming on the market has substantially impacted the ability for the number of available homes to rise. In March, there were 685 fewer new FOR-SALE signs compared to the 3-year average, 18%less. Thankfully more homes are coming. On average, May is the number one month for homes coming on the market and April is a close second. It remains elevate through July. There is relief coming in the weeks and months ahead. Now that the Spring Market is underway, expect the inventory to rise with diminished demand, as long as higher mortgage rates persist. Last year, the inventory was at 2,240, 44% higher, or an additional 688 homes. The biggest complaint last year was that there were not enough homes on the market, yet there were more homes available compared to today. The 3-year average prior to COVID (2017 through 2019) is 5,533, an extra 3,981 homes, or 257% more, more than three-an-a-half times today. There were a lot more choices back then.

D E M A N D

Demand, a snapshot of the number of new escrows over the prior month, increased from 2,284 to 2,286 in the past couple of weeks, up 2 pending sales, nearly unchanged. The current demand level is still the lowest reading for this time of the year since 2008 when it was at 2,285, nearly identical. The muted demand is due to not enough available homes to sell, but is also due to a steep rise in mortgage rates since ringing in a New Year. As buyers digest the higher mortgage rate environment, they will not be as willing to stretch above asking prices and they will begin to overlook and ignore overpriced homes. These overpriced homes will sit and accumulate over time. Expect this to occur and be a lot more discernable during the second half of the year. 

Last year, demand was at 3,162, 38% more than today, or an extra 876, and was 2021’s peak. The 3-year average prior to COVID (2017 to 2019) was at 2,668 pending sales, 17% more than today. In Orange County, current demand readings have clearly been muted by a lack of available homes and not enough coming on the market. 

With both supply and demand not changing, the Expected Market Time (the number of days to sell all Orange County listings at the current buying pace) remained unchanged at 20 days, an insane, Hot Seller’s Market (less than 60 days) where there are a ton of showings, sellers get to call the shots during the negotiating process, multiple offers are the norm, and home values are rising rapidly. Last year the Expected Market Time was at 21 days, similar to today. The 3-year average prior to COVID was at 63 days, substantially slower than today and a Slight Seller’s Market (between 60 and 90 days).

L U X U R Y  E N D 
L u x u r y  s l o w e d  s l i g h t l y  i n  t h e  p a s t  c o u p l e  o f  w e e k s .

In the past couple of weeks, the luxury inventory of homes priced above $2 million increased from 420 to 448 homes, up 7%, or an additional 28 homes. Luxury demand decreased by 5 pending sales, down 2%, and now sits at 253. With supply increasing and demand falling, the overall Expected Market Time for luxury homes priced above $2 million increased from 49 to 53 days, still an extremely hot market for luxury. 

Year over year, luxury demand is down by 35 pending sales or 12%, and the active luxury listing inventory is down by 233 homes or 34%. The Expected Market Time last year was at 71 days, exceptionally hot for luxury, but slower than today, indicating just how unbelievably hot the luxury market is right now. 

For homes priced between $2 million and $4 million, the Expected Market Time in the past two weeks increased from 33 to 34 days. For homes priced between $4 million and $8 million, the Expected Market Time increased from 75 to 91 days. For homes priced above $8 million, the Expected Market Time increased from 195 to 267 days. At 267 days, a seller would be looking at placing their home into escrow around December 2022.

Orange County Housing Summary 

  • The active listing inventory decreased by 2 homes, nearly unchanged, and now totals 1,552 homes, its lowest level for this time of the year since tracking began 18 years ago. In March, there were 18% fewer homes that came on the market compared to the 3-year average prior to COVID (2017 to 2019), 685 fewer. Last year, there were 2,240 homes on the market, 688 additional homes, or 44% more. 

    Demand, the number of pending sales over the prior month, increased by 2 pending sales in the past two weeks, nearly unchanged, and now totals 2,286. Last year, there were 3,162 pending sales, 38% more than today, and the peak for demand in 2021. The 3-year average prior to COVID (2017 to 2019) was 2,668, or 17% more. 

    With supply and demand unchanged, the Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, remained unchanged at 20 days in the past couple of weeks, an insanely Hot Seller’s Market (less than 60 days). It was at 21 days last year, similar to today. 

    For homes priced below $750,000, the market is a Hot Seller’s Market (less than 60 days) with an Expected Market Time of 14 days. This range represents 19% of the active inventory and 28% of demand. 

    For homes priced between $750,000 and $1 million, the Expected Market Time is 17 days, a Hot Seller’s Market. This range represents 23% of the active inventory and 27% of demand. 

    For homes priced between $1 million to $1.25 million, the Expected Market Time is 17 days, a Hot Seller’s Market. This range represents 10% of the active inventory and 12% of demand. 

    For homes priced between $1.25 million to $1.5 million, the Expected Market Time is 16 days, a Hot Seller’s Market. This range represents 9% of the active inventory and 12% of demand. 

    For homes priced between $1.5 million to $2 million, the Expected Market Time is 20 days, a Hot Seller’s Market. This range represents 10% of the active inventory and 10% of demand. 

    For homes priced between $2 million and $4 million, the Expected Market Time in the past two weeks increased from 33 to 34 days. For homes priced between $4 million and $8 million, the Expected Market Time increased from 75 to 91 days. For homes priced above $8 million, the Expected Market Time increased from 195 to 267 days. 

    The luxury end, all homes above $2 million, accounts for 29% of the inventory and 12% of demand. 

    Distressed homes, both short sales and foreclosures combined, made up only 0.2% of all listings and 0.2% of demand. There are only 3 foreclosures and no short sales available to purchase today in all of Orange County, 3 total distressed homes on the active market, up 1 from two weeks ago. Last year there were 8 total distressed homes on the market, similar to today. 

    There were 1,774 closed residential resales in February, 22% less than February 2021’s 2,283 closed sales. February marked a 2% drop compared to January 2022. The sales to list price ratio was 103.7% for all of Orange County. Foreclosures accounted for just 0.2% of all closed sales, and short sales accounted for 0.3%. That means that 99.5% of all sales were good ol’ fashioned sellers with equity.

February Market Report May 17, 2022
209
Listed
42
Avg. DOM
$1,992.80
Avg. $ / Sq.Ft.
$4,950,000
Med. List Price
209 Properties
Page 1 of 18
$69,800,000
Neighborhood: Crystal Cove Estate Collection (CCEC)
7
Beds
13
Baths
15,500
Sq.Ft.
2021
Year Built
107
Days on Site
NP21118313
MLS
Commandingly perched atop one of Southern California's most desirable parcels of land, this custom designed crown jewel securely nestled at the pinnacle of Crystal Cove offers unobstructed views of...
$59,800,000
Neighborhood: Crystal Cove Estate Collection (CCEC)
7
Beds
10F21/2
Baths
15,000
Sq.Ft.
2014
Year Built
94
Days on Site
NP21124827
MLS
Located within the custom gates of Newport Coast's premiere private community, Crystal Cove this estate offers timeless elegance and seclusion nestled on one of the largest custom parcels showcasing...
$47,500,000
Neighborhood: Lido Island (LIDO)
4
Beds
4F21/2
Baths
8,868
Sq.Ft.
2018
Year Built
23
Days on Site
NP22033404
MLS
An immersive sensory experience at every turn. Behold 309 Via Lido Soud, a mesmerizing waterfront retreat peerless in quality, privacy, and scale. Situated on 3.5 lots with approximately 105' of...
$39,950,000
Neighborhood: Other (OTHR)
5
Beds
8F11/2
Baths
12,000
Sq.Ft.
2023
Year Built
22
Days on Site
NP22084117
MLS
No description available...
$36,800,000
Neighborhood: Crystal Cove Estate Collection (CCEC)
4
Beds
6F21/2
Baths
15,743
Sq.Ft.
2011
Year Built
57
Days on Site
OC22056691
MLS
Spectacular custom-built masterpiece nestled on the very top of the ultra prestigious Crystal Cove Community in Newport Beach/Coast! Unobstructed views of Pacific Ocean, Catalina Island, Newport...
$35,000,000
Neighborhood: Cameo Shores (CSHO)
5
Beds
5F11/2
Baths
7,000
Sq.Ft.
2018
Year Built
418
Days on Site
NP21034222
MLS
Located in the highly exclusive Cameo Shores neighborhood, this 7,000 square foot architectural masterpiece was designed to impress. The jaw-dropping panoramic Pacific Ocean views throughout are...
$35,000,000
Neighborhood: Crystal Cove Estate Collection (CCEC)
6
Beds
7F21/2
Baths
14,809
Sq.Ft.
2022
Year Built
85
Days on Site
OC21023166
MLS
Crystal Cove's newest custom home is a masterfully-designed hilltop estate prominently positioned on a private front-row lot behind the community's prestigious second gates. Stunning architecture is...
$31,000,000
Neighborhood: Linda Isle (LIND)
4
Beds
4F11/2
Baths
5,500
Sq.Ft.
2020
Year Built
355
Days on Site
NP21115600
MLS
Just completed, this bay front home occupies the most sought-after location on Newport Harbor. Set behind the manned gates of Linda Isle, this 5,500 square foot residence of contemporary design is...
$27,995,000
Neighborhood: Cameo Shores (CSHO)
4
Beds
4F11/2
Baths
6,867
Sq.Ft.
2001
Year Built
58
Days on Site
NP22055676
MLS
This magnificent estate sits in the prestigious community of Cameo Shores. It has more than a half-acre of unobstructed views of Catalina, the Newport Jetty, and the California coastline. One enters...
$27,600,000
Neighborhood: Crystal Cove Estate Collection (CCEC)
8
Beds
8F31/2
Baths
13,787
Sq.Ft.
2022
Year Built
35
Days on Site
OC21011334
MLS
Amazing custom build to suit opportunity in one of the most exclusive enclaves in Crystal Cove. Perched atop the ultra prestigious Crystal Cove Community in Newport Beach, 6 Waves End is one of the...
$27,000,000
Neighborhood: Pelican Crest (NCPC)
5
Beds
6F41/2
Baths
11,605
Sq.Ft.
2005
Year Built
86
Days on Site
NP22023776
MLS
An enchanting palatial estate behind the guarded gates of Pelican Crest. Reminiscent of an Italian villa, the five-bedroom residence is set on an appx. 300' deep parcel over 29,800 square feet...
$26,500,000
Neighborhood: Crystal Cove Estate Collection (CCEC)
6
Beds
6F51/2
Baths
11,451
Sq.Ft.
2022
Year Built
35
Days on Site
OC21011374
MLS
Perched above the highly coveted community of Crystal Cove, the exclusive custom home lots of Crystal Cove is the epitome of luxury and exclusivity. Behind a second set of gates, all custom home...
Based on information from California Regional Multiple Listing Service, Inc. as of May 17, 2022. This information is for your personal, non-commercial use and may not be used for any purpose other than to identify prospective properties you may be interested in purchasing. Display of MLS data is usually deemed reliable but is NOT guaranteed accurate by the MLS. Buyers are responsible for verifying the accuracy of all information and should investigate the data themselves or retain appropriate professionals. Information from sources other than the Listing Agent may have been included in the MLS data. Unless otherwise specified in writing, Broker/Agent has not and will not verify any information obtained from other sources. The Broker/Agent providing the information contained herein may or may not have been the Listing and/or Selling Agent. IDX provided by Sierra Interactive.
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“We would like to thank Weir Properties for doing such an outstanding job in both the sale of our Newport Coast home and the purchase of our Corona del Mar home. Both transactions went flawlessly and we were extremely satisfied with how quickly and seamlessly both transactions occured. Your entire team was a pleasure to work with and we will highly recommened you to anyone in the future. “
Eric and Adrianna Olsen
“The Weir Team represented me in bothe the sale of my previous home in Harbor View Homes area of Newport Beach and the purchase of my present home in Irvine Cove in Laguna Beach. They were wonderful! Based on my experience, I would not buy or sell a property through any-one other than the Weir Team
John and Sue Murphy
“My husband and I were lucky enough to land not only fantastic agents but also true friends. The Weir Team made our buying experience the best that it could be. We started looking for homes in January of 2013. After 7 offers and who knows how many previews we found our dream home in October 2013. The Weir Team was patient, informative and honest. They had the answers to all of our questions and gave us the guidance when we needed it most. They made sure we kept our heads up when we weren’t sure we could handle another let down and kept searching for our perfect home. There is no doubt in my mind that down the road when the time comes, The Weir Team will be our go to.”
Christine and Eric Ferentz
“I recently closed on a new property in Corona Del Mar.  I had some very specific criterion for my new home.  We had been looking for more than a year.  The Weir Team patiently worked with me showing me only properties than would interest me.I am very pleased to have found my new home with their help.  The property I purchased is a modern design and truly unique.  The Weir Team made certain that didn’t miss out on the op-portunity.  She made the entire transaction process a pleasant experience, easily the best that I have ever had in real estate.”
CJ Rolfs
Prior to the transaction described below, I had not worked with The Weir Team. However, for many years I had heard of them and that they were excellent real estate brokers in the area. Several years ago one of my clients was the trustee of her deceased mother’s trust. My client had retained the Weir Team to handle the rental of the trust’s real property in Corona del Mar. The rental arrangements continued for approximately ten years. My client was very pleased with the service she recieved from the Weir Team as their leasing agents.The real property was ultimately sold. The Weir Team was the selling broker, representing my client. I participated in the sales activities and negotiations, including drafting my own forms of Listing Agreement and Sales Agreement, and reviewing and advising with respect to offers. Both my client and I were pleased with the services and results obtained. Since the transaction I have from time to time consulted  with the Weir Team on other real estate matters. They have always been cooperative, willing to go out of their way to provide service, and very helpful.I am pleased to recommend The Weir Team as being reputable and first class real esate brokers in our area. 
Peter C Bradford _ Attorney at Law
I recently sold my house in Newport Coast and purchased a house in Newport Beach using The Weir Team as our realtors for both transactions.  They could not have done a better job with both deals and I would highly recommend them for anyone in need of a residential realtor.  They excelled in both transactions.  On the sale side, they were very professional, created an excellent brochure and were constantly available for showings and questions.  Ultimately, we sold our house in a timely manner for the highest price ever in the neighborhood.  On the purchase side, The Weir Team was extremely well-connected, knew Newport Beach and the surrounding areas extremely well and was willing to show us endless houses as we tried to turn over every stone looking for a dream house.  At the end of this process, we were able to buy the perfect house that never even made it to a “pocket listing” because of his connections.    It is impossible to express in this short letter how valuable The Weir Team was during this very important and personal process of selling and buying a house.  They are incredible realtors and even better people and I cannot recommend them highly enough if you are thinking of buying or selling a house.  
Brian Murphy _ President Athletes First

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