Orange County Housing Report: January 2022
Posted by Jordan Bennett on Tuesday, December 28, 2021 at 10:28 AM
By Jordan Bennett / December 28, 2021
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- Active Inventory – the year will begin with less than 1,000 homes, the lowest start by far since tracking began in 2004. It will be 60% less than the 2,522 start to 2021, the prior record low. With very few available homes to purchase, housing will be extremely hot on January 1. The theme for 2022 will be the same as 2021, not enough homes for buyers to purchase. Instead, they will all be in escrow. Expect the active inventory to peak around August eclipsing 5,000 homes, well below the over 7,000 home peak prior to COVID.
- Demand – with an anemic inventory and the historically low mortgage rate environment, buyer demand will be extremely strong from the start of the year through the Summer Market. With tremendous buyer competition, buyers will be willing to stretch above the asking price; so, expect appreciation around 8 to 10% for the year. Demand will be at its strongest, and most appreciation will occur from January through July, and then will downshift during the Autumn and Holiday Markets.
- Housing Cycle - the housing market will follow a normal housing cycle. The strongest demand coupled with plenty of fresh inventory will occur during the Spring Market. This will be followed by slightly less demand and a continued new supply of homes in the Summer Market. From there, demand will drop further along with fewer homes entering the fray in the Autumn Market. Finally, all the distractions of the Holiday Market will be punctuated with the lowest demand of the year and few homeowners opting to sell.
- Closed Sales - the number of successful, closed sales will decrease 3 to 6% compared to 2021, with around 33,500 (2021 had the most sales since 2005).
- Luxury Market – luxury housing will continue to be exceptionally hot, yet sales will drop slightly from 2021’s record year. The Spring Market will be the strongest for luxury and will become a bit more sluggish with more Wall Street volatility during the second half of the year.
- Interest Rates – look for mortgage rates to continue to remain at historically low levels until the pandemic improves dramatically, most likely during the second half of the year. Yet, rates will have a hard time surpassing 3.5%. Even with Federal Reserve reversing their MBS (mortgage-backed securities) purchases and raising the Federal Funds Rate (short term rates), and heightened inflation, long term mortgage rates will continue to bounce between 2.75% to 3.5%. If mortgage rates remain at these low levels, housing will be insane.
- Distressed Inventory – do not expect a wave of foreclosures. The number of active forbearances will dwindle to nearly none. As home values have surged, very few homeowners are under water, which is one of the main reasons the vast majority of forbearance exits are either performing on a monthly basis or paid off their loans. The foreclosure moratorium resulted in very few foreclosures in 2021, so expect slightly more in 2022. Nonetheless, the total numbers will be very low and undetectable in the broader housing market
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