ORANGE COUNTY — “FOMO,” “on fire” and “starved” are some of the words real estate agents used to describe Orange County’s hot real estate market in 2021.
Despite the ongoing coronavirus pandemic and government-related restrictions starting in 2021, Orange County’s home prices and demand skyrocketed due to a lack of inventory and historically low-interest rates.
“There was a lot of FOMO (Fear of Missing out),” said Tim Carr, a broker and co-owner of the Tim Carr Group in Newport Beach. Carr said his company did $200 million in sales in Newport Beach and across Orange County this past year.
“We’ve seen prices in every segment of our market escalate at rates that we’ve never seen before,” Carr said. “And there is truly almost nothing for sale.”
One of his team members, Linda Duffy, a certified real estate specialist for seniors, said the housing market was on fire this past year.
“Anything $2 million and below, there was at least a dozen offers for every home,” Duffy said.
Orange County’s lack of housing inventory and coupled with historically low-interest rates were the main storyline this past year that led to higher than usual demand, home prices increasing, and bidding wars amid the coronavirus pandemic.
According to Reports on Housing, a company specializing in analyzing Southern California’s housing market, Orange County had a housing inventory of 2,522 at the beginning of the year – the lowest level of homes in the area for sale since the data company began tracking in 2004.
In standard pre-COVID years, the housing inventory would rise toward the end of spring and summer months before cooling off again during the fall and winter holiday season. No one likes to move when their kids’ school is in session.
But that wasn’t the case this year.
Reports on Housing noted that the county’s housing inventory peaked on Jan. 8, when there were 2,633 homes in the Orange County market. At the beginning of June, inventory dropped to about 2,200 before increasing to 2,537 at the end of July.
“The five-year average peak prior to COVID was 7,077, an astonishing 179% higher than this year,” said Steven Thomas, chief economist at Reports on Housing, in his monthly newsletter.
The second half of the year didn’t fare any better regarding inventory and the number of active listings.
“From August through year’s end, the number of available homes continuously dwindled down to unprecedented levels,” Thomas said. “The year finished with 1,072 homes, 60% lower than last year’s 2,675 records low level. The five-year average end of December reading prior to COVID was 4,414, a mind-blowing 312% higher than 2021, quadruple today’s level.”
Thomas said by the end of this year, Orange County’s housing inventory is set to drop below 1,000.
With such low inventory, the 30-year fixed mortgage rate dropping to as low as 2.78% in July, and fierce demand, house prices countywide skyrocketed.
According to the LA Times, citing real estate firm DQNews, the median home price in the county was $799,000 in January. By November, the median home price jumped 15% to $919,000. The December numbers don’t come out until January.
Local real estate experts said the sellers benefitted the most this year – only if they had found another place to live.
Unless there was a life event – downsizing, divorce, promotion, etc., Edwin Baloloy, a real estate specialist at Newport Beach-based Residential Agent, said most Orange County homeowners didn’t want to sell.
“They see how hard it is on the other side,” Baloloy said. “They are going to have to move somewhere else.”
Duffy said there was so much price appreciation across the board that it’s hard for people downsizing to sell and buy another lower-priced property.
“After capital gains taxes, Obamacare tax, and transaction fees, you can’t go buy something else, especially if they were going to stay in California,” Duffy said. “For a lot of people, it was stay where you’re at and remodel what you got.”
As the year went on, demand in the county had also dropped. Many prospective buyers, especially those who could work from home, fled inland to the Inland Empire or San Bernardino. Others discouraged from being on the losing end just gave up.
“It’s hard for first-time homebuyers who are using FHA loans to compete in this market,” said Abby Ronquillo, the owner of NetRealty, a real estate brokerage based in Corona. “They are losing to people that have more money for the down payment, to all-cash buyers and investors. They get their hopes up on finding and buying a dream home, only to get rejected. It takes an emotional toll on them. I tell them, we have to go somewhere else where they are not going to get rejected.”
Ronquillo represented several clients who lived in Orange County and moved out and have either bought a home or looking to buy in the Inland Empire.
But housing affordability isn’t just an Orange County problem. Unfortunately, Ronquillo said there are bidding wars for homes in Riverside, Lake Elsinore, and every county in Southern California.
“For me, I have to stay cool, calm and collected,” she said. “A lot of homebuyers are emotional, and I have to help them make a rational decision based on value, not on emotions.”
As the year comes to an end and 2022 arrives, real estate experts said people shouldn’t expect a housing downturn anytime soon.
On behalf of a client, Baloloy made an offer of $200,000 over the asking price for a home in Irvine last week. Usually, the listing agent would immediately acknowledge the offer with that large sum above asking.
Baloloy didn’t hear back from the agent for days.
“Irvine is like ground zero for bidding wars,” he said.
Carr, the Tim Carr Group co-owner, said perhaps another Black Swan event could end the housing industry’s momentum.
“I don’t think this market is going to cool down unless there’s a reason for it to cool down,” Carr said. “With inflation, the feds will probably raise interest rates this year, and people will back off. But no major catastrophes or events are happening on the horizon that will push us off the cliff. I think demand will calm down as money gets more expensive, and we’ll see a little bit of a cooling off.”
Ronquillo said she doesn’t see a real estate bubble bursting despite the potential of interest rates going up next year.
“There are still so many buyers in SoCal,” she said. “We’re not running out of buyers. If you’re waiting for a bubble, it’s not going to happen. There is so much scarcity, and the OC is beautiful. You’re close to everything – the food and beach, and that’ll never get old.”