2015 Orange County home prices: Second half looks even better than First. As the first half of 2015 winds down, it’s been a motherlode of riches for home sellers.
Register columnist Jonathan Lansner reported CoreLogic’s report on June 17 that the Orange County median home price hit $610,000 last month, the highest level in seven years.
Can this real estate revival come to an end anytime soon? That’s the current hot topic for those that have not yet made the decision to home shop. After all, there is plenty of recent boom and bust history for you to ponder.
So, when is Orange County going to hit a wall in terms of sales growth and price appreciation? What is our top-out price point? Or, what is the interest rate level that will stop us in our tracks?
What do the numbers say?
There were exactly 5,000 O.C. active listings on Jan. 1 and today there are 6,651 according to Steve Thomas of Reports On Housing. Today, there are 2,959 properties in the pending sales status. On Jan. 1, there were less than half the current number, 1,478 pending.
Although listing inventory is growing at an increase of 250 per month, we still have only a 2.25 month supply of inventory based upon the current sales pace according to Thomas.
Thomas thinks once mortgage rates hit 5.25 percent, appreciation ends. “How many people are going to want to move (up) with those (existing) low rates versus higher rates?” Thomas asked.
Fannie Mae’s senior vice president and chief economist Doug Duncan has a different idea about what might cause Orange County to hit a price wall. Duncan said, “The home price issue is a classic supply and demand issue. Regulation related to development is difficult (in Orange County). If there is no housing supply expansion, it just keeps going.”
Duncan thinks employers will be the home price game changer. “Organic demand not being satisfied creates an outflow of businesses when labor costs rise beyond sustainable levels,” he said. So, employers go elsewhere and the incomes will no longer be there to support our lofty prices.
Assuming Thomas is on to something we still have a long way to go. I do not foresee interest rates at 5.25 percent for a very long time – like three to five years.
Regarding Duncan’s thinking, This symbiotic relationship between rising housing costs and wage increases will not trigger a large enough number of O.C. employers to leave for other parts. Look no further than the Silicon Valley. Their wages and housing costs are through the roof and most employers have stayed anchored to California’s highly desirable climate.
Slow and steady economic growth is an awesome incubator for home price appreciation. No national or global whipsaw events are happening. No real crazy gyrations to the stock market are at hand. Interest rates are stable. Job growth and wage increases continue to gradually firm up.
Contact us at Integrated Realty Group for more answers to your Orange County Real Estate questions.