August 2016 Orange County Real Estate Market Update
Good afternoon. I’m Jeb Smith, Real Estate Broker with ReMax Terrasol here in Huntington Beach with your Southern California Real Estate Market Report for August 2016. As we discussed last month, the summer season is usually a bit slower than the spring market as Buyers in Southern California have a lot of distractions like going to beach to the annual family vacation. This is a typical cycle that we experience here in Orange County where buyer demand drops and homes tend to sit longer on the market a little longer than just a few months prior. Today, we are going to discuss the recent rise in Buyer Demand, the shortage in inventory and historically low interest rates and how this might affect you as a Buyer or Seller in today’s market.
If you are interested in the actual market statistics, please go here http://www.jebsmith.net/market-stats/
While some areas in Orange County seem to be slowing down as we transition into the Fall/Winter market, The OC market as a whole has seen a recent jump in certain price points over the last month leading to a 5% spike in Buyer Demand as measured by the number of new pending sales. This is atypical for this time of year as last year this time we were experiencing a 2% drop in buyer demand. In fact, at this point in the year demand hasn’t been this high since 2005 if we strip out the short sale market of 2012. So why the unseasonably rise in Buyer Demand? I believe it has a lot to do with the recent drop in interest rates to all-time lows giving Buyers that extra little push they needed to jump into the market, coupled with our limited supply of homes for sale helping fuel the fire causing our local market to continue upward.
As I just mentioned, interest rates were recently down to all-time lows with 30 year fixed rates as low as 3.25%. There are a lot of talk from Mortgage Bankers to Economists speculating that we could see the 10-year treasury bond getting as low as 1%. While the 10 Year treasury isn’t a direct indicator of where interest rates will go they generally follow a similar path which if holds true could keep interest rates moving downward and our real estate market moving upward.
The question I hear the most often from potential buyers still on the sidelines is “Are we in a Real Estate Bubble?” The simple answer is No, our current market is based on the general economic principle of supply and demand. Which means you have a ton of buyers on the sidelines coupled with low interest rates and a very low housing supply which is creating the frenzy we have been experiencing for the last year or so. The other thing to keep in mind is that this market is a lot different than that of 2006-2007 as loans are based on stringent qualifying guidelines requiring buyers to prove their ability to repay AND have skin in the game with down payments. Back in the mid 2000’s the market shot up on 100% financing adjustable loans with no asset or income verifications where lenders could use any appraiser they wanted to help get the value they needed to make a loan work. Our current uptrend has generated a lot of equity for homeowners so even with a pullback in the market, most homeowners will be sitting equity positive on fixed terms loans with no unexpected rise in their payments and no need to sell their homes if the market does change. With that being said, I expect our real estate market to continue to move sideways to up barring no changes in the global market.
As you know, all Real Estate is local, so if you are a Buyer, Seller or Investor in Today’s market and you have questions, I would love the opportunity to help guide you in the right direction. If you would like more information about me, please go to my website www.jebsmith.net or check out my other videos on YouTube. As always, I appreciate you taking the time to watch and I look forward to seeing you again next month. Make it a great day.