Orange County Real Estate Market Update: April 2024

The average home price in Orange County has soared by an impressive 16.3% from last year and a whopping 66.7% over the past five years. 
This is a phenomenon that is happening across the entire county. As you can see from the chart below where we took four cities in the county, one city from each corner, and the trend is the same across the board.

As you can imagine, such a steep rise in home prices is presenting both buyers and sellers with a new set of challenges. This substantial rise, combined with the current market conditions, higher mortgage rates and overall inflation has resulted in a complex and demanding real estate market for all involved. 

The April 2024 Orange County Real Estate Market statistics indicates that the housing market has seen some big changes. The usual balance between supply and demand has been shaken up. Homes are still flying off the shelf, and inventory is at record lows. One major factor at play is the “mortgage lock-in” phenomenon, which is now a key player in how buyers and sellers deal with the current market. 

In this market update, we will provide a thorough analysis of the various forces at work, presenting valuable insights for both buyers and sellers. By examining the latest market statistics, exploring the challenges and opportunities presented by the current conditions, and looking ahead to future predictions, our goal is to equip you with the knowledge and strategies you need in today’s real estate environment, regardless of whether you are a seller, buyer, or just a spectator!

Market Statistics: A Comprehensive Overview

We are going to start off by gaining an understanding of the Orange County real estate numbers for April 2024. This is the most current and complete data set available. Let’s dive into the key market statistics and explore the trends and implications the numbers reveal. 

Average Sales Price: 

The average sales price in Orange County reached $1,514,686 in April 2024, marking a 3.3% increase from the previous month, a 16.3% rise compared to the same month a year ago, a 25.3% increase from three years ago, and an astonishing 66.7% jump from five years ago. These percentages highlight the significant price appreciation that has occurred in the market over time.

Pending Sales: 

Pending sales stood at 1,867 in April 2024, representing a modest 1.2% increase from the previous month and a 2.2% uptick from a year ago. However, when compared to three and five years ago, pending sales show a sharp decline of 41.6% and 33.5%, respectively, suggesting that the limited inventory has constrained the number of homes going under contract.

Closed Sales: 

In April 2024, closed sales totaled 1,887, indicating a 10.3% increase from the previous month and a 16.5% rise from a year ago. However, when compared to three and five years ago, closed sales exhibit a significant drop of 44% and 25.3%, respectively, underscoring the impact of the inventory crunch on the market’s ability to maintain the sales pace seen in previous years.

New Listings: 

The number of new listings in April 2024 reached 2,418, representing a 9.5% increase from the previous month and a 17.7% rise from a year ago. However, when compared to three and five years ago, new listings show a notable decrease of 32.3% and 38.7%, respectively, highlighting the ongoing challenge of insufficient new inventory coming onto the market. We will explain why we have such a significant drop in new listings in a moment.

Active Listings: 

Active listings stood at 2,927 in April 2024, marking a 6.3% increase from the previous month but a 6.8% decline from a year ago. Comparing to three and five years ago, active listings show a significant drop of 23.4% and a staggering 63.4%, respectively, underscoring the severity of the inventory crunch.

Months Supply of Inventory: 

The months supply of inventory was 1.8 months in April 2024, representing a 5.9% increase from the previous month but a 5.3% decrease from a year ago. Compared to three years ago, the months supply of inventory shows a 38.5% increase, while it remains 50% lower than five years ago, indicating that the market remains firmly in seller’s territory.

Days on Market: 

In April 2024, the average days on market for homes in Orange County was a mere 23 days, highlighting the fast-paced nature of the market and the high level of competition among buyers.

These market statistics paint a picture of a market characterized by high demand, limited inventory, and rapid price appreciation. Buyers face the challenge of navigating a highly competitive market with limited options, while sellers benefit from strong demand but may face difficulties finding their next home due to the same inventory constraints.

The Ripple Effect of Mortgage Rates

Mortgage rates play a crucial role in shaping the housing market, and their impact on buyer affordability and market dynamics cannot be overstated. The significant increase in mortgage rates compared to just a few years ago has created a ripple effect that has altered the landscape for buyers and sellers alike.

To put this into perspective, let’s compare the current mortgage rates of around 7.25% in May 2024 with the rates from April 2021, which hovered around 3.0%. This stark difference has a profound impact on the monthly mortgage payments for homebuyers. Consider this real-world example: a buyer purchasing a home at the current average price in Orange County of $1,514,686, with a 20% down payment. At a 3.0% interest rate, the monthly mortgage payment would have been approximately $5,100. However, at the current rate of 7.25%, that same home would now come with a monthly mortgage payment of around $8,300 – a staggering increase of over $3,000 per month, or $36,000 per year.

Source: MortgageNews Daily

This drastic increase in monthly payments has a significant impact on buyer affordability, potentially pricing out many buyers or forcing them to reassess their budget and expectations. The higher mortgage rates also influence the purchasing power of buyers, limiting their options in terms of home size, location, or features. This, in turn, can further contribute to the inventory crunch and intensify competition in the market.

The “Mortgage Lock-In” Effect: A Seller’s Dilemma

In today’s housing market, the “mortgage lock-in” effect has emerged as a significant factor influencing seller behavior and contributing to the overall market dynamics. This phenomenon occurs when homeowners who have secured low mortgage rates through refinancing become hesitant to sell their properties as they face the prospect of taking on a new mortgage with a much higher interest rate.

Picture this: a homeowner who refinanced their mortgage during the low-interest rate environment of recent years, securing a rate of around 3.5%. Now, with mortgage rates hovering around 7.25%, that same homeowner faces a difficult decision. Selling their home would mean jumping into a much larger loan with nearly double the interest rate, resulting in a significantly higher monthly payment. This daunting prospect has led many potential sellers to feel “locked in” to their current homes and mortgages.

The consequences of the “mortgage lock-in” effect are far-reaching. As more homeowners choose to stay put, the already limited inventory of available homes becomes even more constrained. This reluctance to sell exacerbates the supply-demand imbalance, further driving up prices and making it increasingly challenging for buyers to find suitable properties. Moreover, the “mortgage lock-in” effect has a ripple effect on the overall market dynamics, leading to intense competition among buyers, rapid price escalation, and a sense of urgency in the market.

For sellers, the “mortgage lock-in” effect presents a unique dilemma. While the current market conditions offer the potential for significant profits, the prospect of taking on a larger mortgage at a higher interest rate can be daunting. This has led many potential sellers to reassess their plans, weighing the benefits of selling against the long-term financial implications of a new mortgage.

Inventory Crunch: The Primary Culprit Behind Slowing Sales

As we analyze the Orange County real estate market in April 2024, one factor stands out as the primary culprit behind the slowdown in sales: the inventory crunch. Despite the steep rise in prices and mortgage rates, it is the limited supply of available homes that has had the most significant impact on the market.

To illustrate this point, let’s examine the sharp decline in active listings and new listings compared to three and five years ago. In April 2024, there were only 2,927 active listings, representing a staggering 23.4% decline from three years ago and a whopping 63.4% drop from five years ago. Similarly, new listings have also taken a hit, with 2,418 homes coming onto the market in April 2024, a 32.3% decrease from three years ago and a 38.7% decline from five years ago.

These figures paint a clear picture of the inventory crunch that has gripped the Orange County housing market. The limited supply of available homes has created a highly competitive environment, where buyers are vying for a shrinking pool of properties. This scarcity has led to a paradoxical situation where sales have slowed down, not due to a lack of demand or affordability issues, but rather because there simply aren’t enough homes to meet the needs of eager buyers.

Statistical evidence further supports this claim. In April 2024, closed sales stood at 1,887, a significant 44% decline from three years ago and a 25.3% drop from five years ago. Pending sales tell a similar story, with 1,867 homes under contract in April 2024, representing a 41.6% decrease from three years ago and a 33.5% decline from five years ago.

The impact of the inventory crunch on buyer behavior and market competition is profound. With fewer homes available, buyers are facing intense competition for each listing, often engaging in multiple offers, bidding wars, and paying above the asking price. This intense competition has led to a sense of urgency and frustration among buyers, with many expanding their search criteria or considering alternative options to secure a home.

Navigating the Seller’s Market Paradox

The Orange County real estate market in April 2024 presents a fascinating paradox for sellers. On one hand, the combination of low inventory and high demand has created a strong seller’s market, where properties are in high demand and commanding top dollar. On the other hand, sellers who are also looking to purchase their next home within the same market face unique challenges and considerations.

One of the most striking indicators of the seller’s market is the narrow range of Days on Market (DOM). In April 2024, the average DOM was a mere 23 days, reflecting the rapid pace at which homes are being sold. This tight timeline highlights the intense competition among buyers and the need for sellers to be prepared for a swift transaction process.

However, the low DOM also means that sellers must be ready to act fast when it comes to finding their next home. In a market where homes are being snapped up quickly, sellers may find themselves in a race against time to secure their next property before their current home sells.

To navigate this seller’s market paradox, sellers must be strategic and proactive in their approachThis includes having a clear plan in place for their next move, being prepared to act quickly, considering rent-back agreements or contingent offers, working with experienced professionals, and exploring alternative options such as bridge loans or home equity lines of credit (HELOCs) to finance their next purchase without sacrificing their current favorable mortgage rate.

While the challenges are real, the opportunities for sellers to capitalize on the strong demand and potentially secure a substantial return on their investment are also significant. Ultimately, the key to success in this market is to be informed, prepared, and willing to adapt to the current environment.

Buyer Strategies in a Competitive Market

Buyers in the Orange County real estate market face a formidable set of challenges in April 2024. From high prices and limited inventory to the impact of the “mortgage lock-in” effect on seller behavior, the current environment demands a strategic and proactive approach from buyers.

Today’s buyers must be prepared, decisive, and willing to think creatively. This includes getting pre-approved for a mortgage, being flexible and open-minded about property criteria, acting quickly and decisively when a suitable property is found, crafting compelling offers, considering alternative buying opportunities such as off-market properties or new construction, and working closely with skilled real estate professionals.

Patience and persistence are also essential qualities for buyers in this competitive market. Buying a home in such conditions can be a challenging and sometimes lengthy process, requiring buyers to maintain a positive attitude, stay informed about market conditions, and be ready to adapt their approach when necessary.

Ultimately, success in this market requires a combination of preparation, flexibility, and strategic thinking. By understanding the market dynamics, being proactive, and staying committed to their goals, buyers can position themselves for success in Orange County’s Spring buying season of 2024.

Looking Ahead: Future Market Predictions

As we look to the future of the Orange County real estate market, we need to consider the various factors that may shape the market. While predicting market conditions with absolute certainty is challenging at best, examining key economic indicators, demographic shifts, and the lingering impact of the “mortgage lock-in” phenomenon can provide valuable insights into potential trends and changes.

The outlook for the Orange County real estate market remains positive. The market’s resilience, driven by strong demand and limited inventory, suggests that price appreciation may continue, although at a more moderate pace compared to the rapid increases seen in recent years.

Economic indicators, such as job growth and wage increases, will play a crucial role in shaping the future of the market. Orange County’s diverse and robust economy bodes well for continued housing demand, but shifts in the economic landscape could impact buyer confidence and purchasing power.

Demographic shifts, such as millennials entering the housing market and baby boomers looking to downsize or relocate, may also influence demand for specific property types and locations. Buyers and sellers alike will need to stay attuned to these shifting preferences to make informed decisions.

The “mortgage lock-in” phenomenon is likely to continue shaping the market in the coming months, potentially constraining inventory levels and sustaining the competitive nature of the market. However, its impact may gradually diminish over time as homeowners’ life circumstances change and the desire to move outweighs the hesitation to let go of lower mortgage rates.

To prepare for potential market changes and adapt to the evolving landscape, buyers and sellers should prioritize flexibility, patience, and strategic planning. Building a strong financial foundation, staying informed about market conditions, and working closely with experienced real estate professionals will be key to navigating the future of the Orange County real estate market successfully.

Final Thoughts

The Orange County real estate market in the 2nd quarter of 2024 is fascinating and challenging, shaped by the influence of the “mortgage lock-in” phenomenon, current mortgage rates, and low inventory. This unique situation has contributed to intense competition among buyers and a strong seller’s market.

Throughout this market update, we’ve looked at the various facets of the Orange County real estate market, from the shocking price appreciation to the challenges and opportunities faced by buyers and sellers alike. We’ve highlighted actionable strategies for both buyers and sellers to adapt and succeed in this unique market, emphasizing the importance of being proactive, flexible, and working closely with experienced real estate professionals.

One of the most crucial takeaways from this market update is the importance of seeking expert guidance and support. In a market as complex and competitive as Orange County’s, working with a trusted real estate professional can make all the difference in navigating the intricacies of the market with confidence and success.

Whether you’re a buyer searching for your dream home or a seller looking to capitalize on the strong market conditions, approaching the process with a well-informed, adaptable, and realistic mindset is important. 

What you can do next

If you’re considering buying or selling a home in Orange County, or if you simply want to explore your options and gain a better understanding of how the current market conditions may impact your real estate goals, we invite you to take the next step and reach out to our team of experienced local real estate professionals.

Our knowledgeable and dedicated agents are here to provide you with personalized advice and guidance tailored to your unique needs and circumstances. Whether you’re a first-time homebuyer, a growing family searching for more space, or a homeowner looking to maximize your property’s value, we have the expertise and resources to help you achieve your goals.

Don’t navigate this complex market alone. Let us be your partner in success and help you make informed, confident decisions that align with your unique needs and aspirations. Contact us today and let us help you navigate the April 2024 market with confidence, clarity, and success.


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