Wait. Is this what normal looks like?

I know, I know. People point out that I'm a real estate broker, so of course I say the market's going to be fine. And lying about this benefits me how? I'd much prefer prices fell so more people can actually afford to buy homes here. I'd sell more and, even at reduced prices, make a ton more money. Yet greed doesn't inform my opinions. Data does.

So cool it, armchair quarterbacks. You know who you are. You're the ones waiting to buy because you want to believe prices will fall dramatically enough to outweigh the added cost of rising mortgage rates. They won't. At least not here.

Here's why. First, homes are selling 17% faster this October than in pre-pandemic years, and at the same pace as October 2020. Only last year had a faster rate of sales. So the truly motivated buyers are still buying. There are simply a lot fewer of them. The 2021 market was a gross anomaly and insanely overheated. The current market's starting to look a bit, well, normal.

Median price in "OC" has ticked upward ever so slightly each of the past two weeks. And, even though it tapered off significantly relative to early this year, annualized median price is still well ahead of last year, in spite of weakened buyer demand.

So far MTD 22.5% of our active inventory has sold. 22.35% is historically normal. And there are presently 28% fewer active listings and 28% fewer sales than typical for this season. For the moment anyway, relative sell through has returned to normalcy. The greatest challenge is the volume of listings will not reach prior norms any time soon - if ever again.

Economic experts all agree that recent low mortgage rates will deter many who might have sold homes, before buying another, not to sell. Some won't move at all. This is already squashing listing inventory. According to FHFA, 65% of all mortgages have rates below 4% and 86% are below 5%. That's significant compared to the current average rate of 7%.

So much wealth is concentrated here that a shocking majority of locals won't need to sell before they move. They can afford to hold onto property, give it their kids, or keep it as a rental. With coastal home prices averaging $2-5 million, retaining them makes the most fiscal sense when financed with rates below the rate of inflation.

Anyone waiting for a wave of foreclosures really needs to rethink the logic of this. Fewer than 1% of California homeowners have negative equity, where their mortgages exceed their home value. If values do slide 9% next year, as some predict, this is still unlikely to trigger a significant increase in foreclosures. Short sales, may possibly tick up.

Irrespective, prices are less likely to fall within wealthier communities which includes most of Orange County. Because the affluent will ride it out as they always do. In fact, as in the great depression, there will likely be many more millions earned by the wealthiest among us, because they can afford to snatch up real estate and other bargains when a market is soft.

Even though mortgage rates will not likely fall below 4% again, this will not prevent home sales. People still need to live somewhere. Buyers will either adjust their target prices or their neighborhood criteria when approaching a purchase. With good credit and down payment several lenders have rates in the 4-5% range. Buyers need to know where to look.

However, one thing today's buyers universally will not do is buy a home they think looks dated or in disrepair. Gone are the days of pricing a home a bit below the competition to allow for updating paint colors or flooring. Buyers across all price ranges are suddenly really particular about this. Everyone now wants exactly what they want and they can't be bothered to write offers on anything else.

Local sellers must not make the mistake of not updating and staging homes prior to resale. They need to look like a model homes or they're not going to sell - possibly at any price. The good news is one can easily get this done now and pay for it later when escrow closes. So there's no excuse not to.

Is the market normal? Not according to historic volumes of homes sold or adjustments made presale for condition and finishes. However, this rate of sale and these interest rates are the new normal. We need to get used to it.

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