The first quarter of 2021 is behind us, so today we’ll be talking about what happened in our real estate market from January to March and how it compared to last year.
Interest rates are going to be affecting the market. The rates of 30-year fixed mortgages have gone from 2.65% to 3.09%, which is a 16.6% rise. If a person buys a home, their mortgage costs will have increased by that same amount. Rates may be slightly higher in some areas as well.
It’s been a strong seller’s market since around June 2020. Still, we saw that inventory decreased by another 1% to 2,349 homes available throughout Orange County. In February, there were 209 homes on the market. At the same time last year, there were 4,159 homes on the market — that’s 77% more than we had this February. Needless to say, there’s a huge lack of inventory.
Rising interest rates are affecting buyers slightly, especially those searching in lower price ranges. However, we’ve seen little change in the luxury market (homes priced at over $1 million). We saw high demand from buyers in our listings, which allowed sellers to reach prices they never thought they could get before.
Here’s an example of a home we sold in Irvine. A home like it had recently sold for around $692,000, but we sold the Irvine home for $750,000. The only reason the other property sold for $692,000 was that they went with a cash buyer and there was no appraisal. Remember that when you need an appraisal when you get financing, and they’ll only give you a loan that covers the appraised value.
In Costa Mesa, one home had sold a while ago for around $850,000. Recently, it sold for $922,000 with 21 offers. It didn’t end up appraising at that price, so the buyer paid $47,000 to bridge the gap. It’s not happening everywhere, but it’s not uncommon.
Going forward, a few things may affect the market. Interest rates could rise, inventory could increase as sellers get comfortable with listing, and job growth could continue to stagnate. These factors may pull us out of this aggressive seller’s market. For now, demand is decreasing slightly due to higher rates.
If you have any questions or would like more information, feel free to reach out to me. I look forward to hearing from you soon.