Housing Market Prediction 2020 – Orange County

Housing Market Prediction 2020 – Orange County


(upbeat music) – Hey, this is Josh Alexander and this is your Orange
County housing report for January 2020. Happy New Year! With the new year comes a
brand new housing market, especially compared to last year. Last year we started off
the inventory around 5,900 homes in Orange County. This year we’re looking at
only around 3,900 homes. So you’re looking at
about 2,000 homes less than what we started with last year. Inventory is extremely low this year. It’s one of the three lowest points that we’ve been to start a year in over the last 20 years. In terms of the other side, demand. Right now interest rates are
still hovering around the 3.75, which they’ve been at that for
about a month and a half now. I haven’t really seen any
significant changes over the last few weeks with those. And I don’t really see that changing significantly over the
next couple weeks either. So those historically low interest rates are keeping buyers in the market and many more buyers will be
entering the market this year starting in a few weeks. So speaking of, usually you’re going to
start seeing sellers place their homes on the market in large scale starting around March going through May and June. This year, I think it’s
going to be happening a little bit earlier because the pent-up demand has been so high over the last few months. Smart sellers are going to start placing their homes on the market before
the rest of the competition because there’s plenty of buyers looking for homes right now. So I expect over the
next two to three weeks you’re going to start seeing
a pretty significant uptick in the amount of homes that
you’re seeing on the market. And this is going to be
great news for buyers who over the last month
and a half have seen really no new homes hitting the market and you’re really left
with very little choices. It might be discouraging, but give it a few weeks you’re going to start seeing
the inventory pick up. Now buyers, although this is exciting news to see that inventory should
start picking up soon, you still have to remember
that inventory started the year extremely low. So even as the market
starts picking up as we move into February, you’re still going to have
fewer choices than you did last year and with the amount
of buyers looking at properties you’re going to have a lot more multiple offer situations. Especially for homes
under $750,000 right now because that’s where more
than 50% of the market, in terms of buyers, are looking at. If you look at the graph right up here average days on market
right now is around 57 days. Last year at this time you were looking at almost double that of 107 days. So the market is completely different starting this year than it was last year. And again, you’ve seen
some of my past videos, but that is due to last year we started off with a
much higher inventory. Also the interest rates were a lot higher so not a lot of buyers where in the market at the beginning of the year. This year is completely different. So if you’re a buyer you need to make sure that you
have your finances in order. Because over the next two to three weeks if you don’t have everything ready to go, as those flood of homes
start hitting the market, if you find that perfect place and you don’t have your pre-approval ready to go from your lender you’re most likely going to miss out. Because the amount of homes that’ll have multiple
offers on them this year will be significantly higher
than they were last year because the market this
year is more leaning towards a seller’s market than at
the beginning of last year. Which we were actually
slightly in a buyer’s market last year for the first few months because of those high interest rates. So make sure your finances are in order. Make sure you’ve talked to your lender. Get the pre-approval. Those pre-approvals are
usually good for 90 days. So there’s no harm in getting it now even if you’re not
planning on looking until the end of February or March because you’ll be able to put an offer in if one of those properties
does happen to come up earlier than you were expecting and you really like it. If you want to place an offer and that pre-approval hasn’t happened yet you’re going to have a
really hard time competing with the other buyers that are ready to go already. Now sellers, on the other hand, like I said before a lot of people wait until March to list. They want to wait until
Spring or Summer market because that’s when they
think they’re going to get the most offers and the most amount of traffic. This year, like I said earlier, I believe sellers need to
start thinking about placing their homes on the market probably the first or second week of February, which is only a few weeks away. So you need to be making
sure that everything is ready to go, prepped, painted, the house looks good, it’s been cleaned, everything’s been decluttered and you’re ready to
place it on the market. Because if you don’t want to have a lot of competition to deal with, but you still want a lot of buyers, mid February is going to
be a perfect time to start placing your home on the market to take advantage of all these buyers that have been sitting on the sidelines for the last month and
a half with no choices. Now is when they’re going to start looking to place those offers. So if you want little
competition with a lot of buyers you really need to start looking at putting your home on the market sooner rather than later this year. Now this is for both buyers and sellers. If you’re looking at the appreciation I expect the majority of appreciation will probably happen over the
first six months this year and that’s again due to
the supply and demand issue that we’re having to begin the year. So as these houses hit the market and you have multiple offers on it those prices are going to be driven up. Now they’re not going
to go up 5% overnight. So buyers when you’re placing offers you don’t need to go
crazy and place offers 10, 20, 30 thousand dollars over the latest comparable sale, but you do need to be prepared to be able to place
a few thousand dollars over. Because that’s where these
markets are heading right now and to compete with
multiple offer situations you have to be able to pay
a little bit of a premium, but you need to make sure you’re staying in fair market value. Because there’s no reason to overpay in this market right now, but you need to expect
that you’ll be paying a little bit more than the last sale. Now on the other end, sellers again, not expecting a five percent
appreciation in a month. So you can’t be overzealous
and price your home extremely high because that’s going to
drive the buyers away to someone else’s home, which was priced at fair market value. The better play here is
to make sure your home is priced at fair market value, get as many buyers in as possible and hope for a multiple offer situation because that will help drive the price up as high as it can go. So one final note for buyers. If you’ve been renting and
renting and renting for years you probably already know this but rental costs have been
going up significantly and actually in general Orange County and LA have been going up significantly faster in rental prices than the
rest of the United States. So every year as rental prices increase, especially over the last
seven to eight years, home prices have been also increasing, but not quite as fast. So we’re at a point now that a lot of times the median price of home ownership in Orange
County is actually less than what you’d be paying if you’re renting the medium rental
property in Orange County. So the only way to find out if financially it makes more sense for you to purchase a home
now versus continuing the rent and continuing to watch your
payments go up and up and up is to talk to a lender. And they’ll be able to tell you based on which programs
you might qualify for what your average mortgage
payment’s going to be. And you can take that number compared to what you’re
currently paying in rent and that way you can make
a good financial decision on if this is going to be the
year that you’re going to take that plunge and start looking for a home because it makes good financial
sense to start purchasing versus having your rent
go up every single year and continue to go up and not really know
when it’s going to stop. So yes they just passed
a bill that will cap the amount of rent
increase they can give you, but in Orange County that’s
still going to be anywhere from five to 10% every single year that they can raise rents. And you’re not going to know
how much that’s going to be until your month, year or 12
month rental agreement comes up and they raise rents again. So if you want to be able to
lock yourself into a payment you know is going to stay the
same for the next thirty years it might be worth talking to a lender to figure out which option
is going to be best for you. And the best part about
talking to a lender is it’s completely free. So you can talk to them give
them your financial information they’ll give you an
average mortgage payment of what you can expect to
pay based off of the loan that you qualify for and then you can take that information and decide is it time to purchase? Should I stay at my rental? They’ll be able to help you
through that process and again, if it ends up you’re better off renting you don’t pay anything to
find that information out. So it’s always worth at least checking to see where you stand because if there’s something
that you need to do over the next six to 12 months to
be in a better position to buy, let’s say maybe next year, the lender will also
be able to help you out with that as well. They can recommend different things to improve your credit score. How to save for a down payment. What type of down payment you might need. One of the biggest myths out
there right now for buyers is that you need 20% down to purchase a home and that’s completely false. In actuality most people in Orange County, especially first-time home buyers, are spending less than 10%
for their down payment. And a lot of them are spending anywhere from three to four percent, which are the most popular
mortgage loan options right now, like the FHA loan and other possibilities that you might be able to qualify for. So again, you’ll know none of
this information unless you actually talk to a lender and
get the information yourself because every person’s financial situation is a little bit different. So take the plunge, talk to a lender and at least figure out where you stand because that way you know
how to plan for the future. If you can’t purchase now and if you can purchase now great. You can start that pre-approval process and be ready for that wave of houses that will be hitting the market
in the next couple weeks. And be in the best
position to place offers and have a successful offer accepted and getting to escrow as quick as possible before appreciation starts
to catch up with the market and homes get more expensive towards the middle of this year. So what’s going to be happening
over the next few months? Well for sellers we already
went over that in terms of when inventory will
start hitting the market and the best time to place
your home on the market. But for buyers, one thing to note, is the feds have already come out and said they don’t want to
be manipulating interest rates any more than they have to
because it is an election year. So I’m thinking the interest
rates will probably remain about the same, 3.75
maybe up to four percent, over the next six to nine months. So that’s good news for buyers. Because if you’re not quite ready yet but you need to look for a
property a little bit down the line, yes homes will
probably be more expensive two or three months from
now than they are today, but interest rates are
going to remain low. Which is going to keep
mortgages affordable and keep those properties affordable for you to be placing offers on even through spring into summer. So it’s great news for buyers. Great news for seller. Overall we’re looking at a
healthy housing market this year. So I’m excited to see what the rest of the year is going to bring us. I hope you found this information useful. If there’s anybody else that you think might benefit from this please feel free to pass it along. Also if there’s any specific questions that you might have that
weren’t answered here, please feel free to DM me and I’ll get back to you as soon as I can. Until then I’ll see you next month. Bye. (upbeat music)