Another Month, Another Missed Opportunity in OC Real Estate

March ended with a perfectly average number of homes sold here in Orange County despite utterly abnormal market conditions.

Instead of selling 33-35% of the active inventory, we sold 77%. Nope, the lack of housing supply didn't dissuade buyers from steamrolling their way into escrow. In contrast, their commitment to this painful process was awe-inspiring.

Although we all know — at least we used to know — that increased interest rates should deter buyers and slow appreciation, it hasn't manifested yet. At the end of March, OC's median price continued its upward swing with a 23% gain over March 2021.

Egress, Exaggeration and Echoes of a Familiar Refrain

Hopefully, higher interest rates will push some buyers onto the sidelines and cool the frenzy just a tad. And this reduction in competition may just persuade a few would-be home sellers to get into the market before they can't afford to finance their own replacement home. Some sellers, too few in my opinion, will decide to sell and move out of the area altogether.

Reports have abounded about Californians migrating out of state, but the evidence doesn't support this. According to Ben Verde's recent?Inman article, OJO Labs' study indicate,

"Reports of great migration may be greatly exaggerated."

it was a small sampling of only 514 participants; however, it supports what we see on the front lines. Too many homeowners are simply staying local or worse, staying put and not mIt goes without saying that selling a home now — with the prospect of receiving top dollar — is a nearly irresistible proposition. Yet, all that glitters is not gold, as sellers will feel the sting of capital gains slapped on their massive growth in appreciation. It's a decidedly double-edged sword. Sell now and reap the profits. Oh right,

Added to this is the burden of finding somewhere else to live, and their new mortgage rate will probably be higher than the one they just paid off. And the icing on the cake in many cases is their property tax bills will be double what they were before. All this makes it easy to understand why staying put has become the solution of choice for many locals.

Morgan Stanley researchers write,?

"While home price appreciation should decelerate, we believe it will remain supported by tight supply. In fact, rising rates themselves will contribute to keeping supply subdued as homeowners will be locked in [and less likely to sell] at their current, lower rates,"

According to the?San Jose Spotlight, In 2000, the typical homeowner moved every seven years. Today, homeowners stay in their properties for an average of 11 years.?

So why would anyone compete to buy homes here when homes cost more than ever, loan rates are projected to increase through year-end, and remote work is instituted as the new normal?

Location, location, location! According to?WorldPopulationReview.com, downtown LA and the South Coast Metro areas are the two most significant business districts within Southern California. That's why.

This is one of many reasons we're seeing an unrelenting supply of well-qualified buyers continuing to compete for homes here. And it's why we don't expect this to change for another 12-15 months, even with more than twice the typical consumption of available homes.

The Cost of Waiting Is Too Great

If you've read this far, you're seduced by data as I am, but I must remind you that beyond the data lies real people and lives interrupted.

• First-time buyers soon will be priced out by increased loan costs, competition from better-funded investors and reduced opportunity to save for down payments as their own rent payments rise.
• Statewide rent control caps won't be enough to keep a lid on affordability during an inflationary period where it's costing renters more for pretty much everything.?
• The decline in first-timers and lower-income buyers will be offset by investors. When other markets become less predictable, investors will redeploy cash into real estate. This is absolutely happening. I have clients who are actively looking for new homes to live in and have no intention of selling their departure homes. They'll be kept as rentals instead.

And speaking of rentals: California's first-in-43-years proposed?renter tax credit?increase could take the sting out of not buying, making renting even more attractive. If passed, married couples could now get a $1,000 credit, which can be refunded, instead of the current $120 maximum non-refundable credit. This could help stabilize many households that would welcome an extra $1,000 annually as life-changing.?

Last but certainly not least is that virtually no new homes are being built to offset resale homes that are no longer entering the market. More people are fighting over less. So the moral to this month's story is woefully familiar. If you're planning to buy or sell, do it now.

Waiting will only cost you.

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