THE ORANGE COUNTY HOUSING UPDATE
With sky-high rates and a collapse in home affordability, many wrongly conclude that there will be a wave of foreclosures and it is just a matter of time before the housing market crashes. By Steven Thomas REPORTSONHOUSING.COM Steven Thomas has a degree in quantitative economics and decision sciences from the University of California, San Diego, and more than twenty years of experience in real estate. His bimonthly Orange County Housing Report is available by subscription and provides housing market analysis that is easy to understand and useful in setting the expectations of both buyers and sellers. His website is www.ReportsOnHousing.com.
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Fear. Worry. Uncertainty. These words describe how many people feel about today’s housing market. Home values have surged higher since 2022; and within the past couple of weeks, mortgage rates have climbed to heights not seen in twenty-three years. With home affordability at record lows, many argue that when the economy cools or slips into a recession, housing will collapse, and foreclosures will rise. After all, isn’t that how the Great Recession unfolded?
But just because mortgage rates have climbed toward 8 percent does not mean that values will go down and that many homeowners will lose their homes as a result of short sales or foreclosures. The Great Recession was fueled by a credit bubble inflated by loose lending practices, including subprime mortgages, pick-a-payment plans, teaser adjustable rates, zero down, and plenty of fraud. Because these high-risk borrowers were vulnerable to adjustments in their rates or changes in the economy, a wave of foreclosures ensued.
Members of the public often jump to conclusions without looking at all the facts and trend lines. They remember the burn from 2008 through 2011. Everyone either was burned or knew someone who was hurt by the collapse in home values. The economy ground to a halt, and unemployment grew to levels not seen since the beginning of the 1980s. Thus, everyone is jumping to the conclusion that housing will suffer.
At the start of October 2024, there were only four foreclosures and two short sales available to purchase in Orange County, for a total of six distressed listings. Distress demand, the number of new pending sales over the prior month, was at one. Foreclosures and short sales represented only 0.3 percent of the active listing inventory and 0.07 percent of overall demand. Compare that to January 2009, when there were 5,104 distressed listings, 44 percent of the inventory, and distressed demand was at 1,428 pendings, 67 percent of total demand.
NOVEMBER | DECEMBER 2023
OC REALTOR®
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NO DISTRESS
