With mortgage rates at record-lows, a healthy pool of buyers and an inventory shortage of homes, Orange County home and condo prices have hit the June 2007 price levels which was around the housing boom peak.
In April, Corelogic Data said the median price of a home touched the $645,000 level, helping Orange County become the first county in Southern California to return to their prices prior to the recession.
That may bring back bubble fears, however, today’s housing market is very different from the housing situation of 2007. One big difference now are the monthly home payments are lower by $406 than in June 2007.
Another is the availability of financing such as 100% financing with an option arm or stated income product for someone with credit scores below 600 was ridiculous back then.
A third factor, is one has to factor in some inflation. This means, a home valued at $645,000 in 2007 would equal a home of $744,000 if calculated in dollars today.
One similarity back in the peak years was you had happy sellers and some discouraged buyers. There continues to be concern over the shortage of reasonably priced homes listed for sale.
Because interest rates are very low, a lot of people are trying to purchase a home. Even a home for sale at $600,000 will receive around 7-10 offers in a matter of days.
So, realtors say and know it’s very competitive for the buyers and advise them to stay the course. Some home buyers get so anxious that they are paying over the asking price just to finish the process.
With climbing home prices combined with a low inventory of homes for sale, buyers understandably get frustrated.
However, Orange County home sales have fallen year over year in the past 14 months possibly resulting from buyers who don’t qualify due to income and credit.
At the same time, Orange County’s growth in employment, larger households, and low interest rates are keeping the need for housing ongoing. As a result, entry-level home prices range from $500,000 to $750,000 which keeps a lot of first-time home buyers out of the single family market. They end up going for the alternative which is a condo or townhouse when they are squeezed out of the home market.
In comparison ot Orange County, the prices of home in Los Angeles and San Diego counties is still 5.5 percent less their peak prices from 2007. Further inland it is more noticeable with Riverside County home prices 23.6 percent under their peak level, and San Bernardino County is approximately 28.9 percent under its peak price point.
Although demand is high in Orange County, significant price appreciation is not expected year over year from the indicators mentioned above. Many economists are in agreement that any equity gains will be modest in the upcoming years.