House prices have climbed statewide consecutively for many months now, leaving Californians wondering, “How high will the market go?” But like the recent scorching heat waves of summer, there are faint signs of cooling down in the near future.
According to Redfin.com, home prices in Orange County are 18.6% percent higher than they were a year ago, and houses are going fast. The average time on the market is 29 days, down from 46 just last year.
In other words, houses are in demand and in short supply, so they’re being snatched up quickly at a premium. The median sale price for houses in Orange County ranges from around $800,000 to $900,000. Yet despite these record highs, projections for the year indicate that the number of homes sold will be the highest tally in a decade or more.
What’s Causing the Frenzy of Real Estate Transactions?
There are tons of factors that are colliding to create this current boom in real estate buying. Among them are:
- Mortgage rates at record lows
- A drop in the number of homes on the market, making buyers willing to settle for whatever they can get, at whatever price they can afford.
- An uncertainty about the economy and how long it will be before bubbles begin to burst.
- A newfound freedom to stay put or move somewhere else that many are experiencing due to the increase in work-from-home situations.
Due to COVID, many jobs moved from the workplace to the home office, increasing demand for homes with more space, and eliminating location restraints based on commute time.
But economists predict that as we move into the end of the year and on into 2022, the market will begin normalize—to a degree.
What Does That Mean for Me?
Understanding that home prices are currently high and are likely to reach their peak soon, what might that mean for your current situation?
For potential sellers, it’s a great time to sell. Chances are, if you’ve been in your home for a year or more, you are sitting on some equity. For those who have been toying with the idea of moving out of the area to try something different, this may be the most opportune time for you to pull the trigger.
For potential buyers, while you will not be getting the bargain of a lifetime in today’s current market, find solace in the fact that real estate is nearly always a great investment in the long run. While home prices are likely to go down in the next few years, they never stay down, so as long as you plan to stay in your new home for a while, you’ll most likely be in good shape. Bite the bullet and pay the premium if that’s what is needed for your family or career; just make sure you can truly afford what you’re buying.
For flip investors, if you are planning to flip, you’d better be a fast flipper. Houses are selling like hotcakes, and a quick flip is sure to earn you fast cash in the current market. But there’s no sure way of telling how the market will look in six months to a year, and you don’t want to be stuck in an upside-down situation because you took too long to spruce up a property.
For rental investors, rents are high because of the current shortage of houses on the market, so buying a house for rental purposes is most likely still a good move in the current atmosphere, despite high prices. The trick is in finding steady, reliable tenants who aren’t looking to take advantage of COVID rules meant to help those who are truly struggling. Do your homework and get lots of good advice if you’ve never been a landlord before.
There’s No Place Like Southern California
Despite the news stories of certain celebrities packing up and moving to other states, or even the fact that, for the first time ever, our state’s population actually declined, anyone in Southern California can tell you that there’s certainly no cause for alarm that there will be a mass exodus. In fact, relieving a bit of tension from overcrowding may be a good thing.
It’s unlikely that a drop in population will ever be severe enough to affect Southern California in a dramatic way, because SoCal is a region unlike any other. With surf, sand, and temperate, arid conditions all year round, it has been and always will be a sought-after place to live. There is every amenity imaginable available at your fingertips here— for leisure, business, recreation, and creativity.
While all of Orange County is beautiful, among the best places to live and invest—in my humble opinion—are Irvine and Newport. Both are fantastic places to raise a family, enjoy retirement, and spend gorgeous days and nights during those years in between.