How Mortgage Rates are Impacting Orange County Homebuyers and Sellers in 2024

Mortgage rates have been on a rollercoaster ride over the past few years, and their impact on the housing market in Orange County, CA has been profound. With rates currently hovering around 7%, both homebuyers and sellers are feeling the effects in different ways.

Illustration of money and graph showing mortgage rates in orange county in 2024

Mortgage Rates Impact on Orange County Homebuyers

For prospective homebuyers, higher mortgage rates mean reduced purchasing power. Around the country, the national average amount of home someone can afford has dropped significantly—from around $501,000 in Q3 2021 to just $332,000 in Q3 2023 for a typical buyer putting 20% down.

This has made the median priced home unaffordable for many buyers. In Orange County, where the median home price was about $1.1 million in February 2024, many buyers can afford more thanks to our great job market and years of building home equity. Here too, however, the affordability issues remain prevalent.

In addition to the affordability challenge, higher rates have also led to a lack of inventory as many would-be sellers decide to stay put rather than list their homes in a tough market. This supply shortage is keeping Orange County home prices elevated even as demand cools off.

Homebuyers receive their keys, illustrating the impact of mortgage rates in Orange County

Mortgage Rates Affect Orange County Home Sellers Too

For some, the competitive market with low supply and high demand makes it the perfect time to sell your home in Orange County, cashing in on years of price appreciation. However, this is a case-by-case judgment which we make with our clients.

While it may seem like a great time to sell with home prices still near record highs, some homeowners are reluctant to list right now. The main reason? They see that their own purchasing power as a buyer has diminished with rates around 7% (as of this writing in March 2024).

In other parts of the country, sellers who do decide to list are facing a higher probability of price cuts, less negotiating leverage, and homes sitting on the market for longer. In 2022-2023 when rates initially jumped, the share of listings with a price reduction soared as high as 43%. Here in Orange County, however, the median home sale has received 100% of its list price every month for a year (March 23-March 24).

If you have a solid plan for where you’ll go next, or if you are simply selling an investment property rather than a primary home, right now is an extremely good time to sell a home in Orange County.

House for sale in Orange County California

The Outlook for Orange County Real Estate

Despite the challenges posed by high mortgage rates, the Orange County housing market has remained relatively resilient thus far. The sharp decline in homes for sale has propped up prices even as affordability has plunged.

However, industry analysts predict that meaningful improvements in the market are unlikely until mortgage rates fall back below 6% - a level that currently seems far off with the Fed poised to keep rates elevated to combat inflation.

Orange County real estate and mortgage rates, drone photo

Navigating the Orange County Housing Market and Mortgage Rates

For now, both buyers and sellers in Orange County will need to navigate these tricky waters and adjust their expectations. Some buyers may need to get creative with financing or widen their search criteria. Sellers should work with a skilled local agent to price and market their home properly for the current conditions.

As always, we'll be keeping a close eye on mortgage rates and their impact on our local Orange County market in the months ahead. If you have any questions about buying or selling a home in Orange County, please reach out to our team of specialists at the Brad Feldman Group for guidance.

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