With Mortgage Rates Below 6%, Why Isn’t Demand Surging?

With mortgage rates dipping below 6% for the first time in over two years, you might expect a surge in the housing market, right? Yet, in Orange County, we're witnessing something very different this fall. What’s really going on? Here’s your October 2024 Housing Market Update for Irvine and Orange County—designed to help potential sellers and curious homeowners alike understand the trends shaping our market.

Orange County Market Overview

This fall, we’re seeing a significant shift in Orange County’s real estate market. While active listings have seen a modest increase of 1% in recent weeks, bringing the total to 3,694 homes on the market, this is a notable 53% jump compared to last year’s 2,408 homes. However, increased competition is making strategic pricing more critical than ever. In fact:

• 34% of homes currently listed have reduced their prices at least once.

• 21% more homes have been pulled off the market entirely, likely due to being overpriced and not attracting offers.

Meanwhile, demand is steady, with 1,598 pending sales—a 3% increase from two weeks ago. Although the market isn’t as frenzied as it was earlier in the year, sellers should note that market time is now at 69 days, up from last year’s 54 days.

Zooming In: Irvine’s Current Market

Let’s focus specifically on Irvine, where market dynamics are evolving:

• Median Sales Price: Over the summer, the median sales price was $1,524,000. As of fall, it has increased slightly to $1,550,000, indicating stable home values.

• Inventory Growth: Active listings in Irvine have nearly doubled since summer, from 231 to 449, providing buyers with more options and leading to longer listing periods.

• Days on Market: The median days on market has increased from 8 days in the summer to 16 days, aligning closely with the county-wide average.

Despite these shifts, the upward trend in Irvine’s median sales price suggests strong buyer interest and confidence in the market.

Mortgage Rates and the “Lock-In Effect”

One of the most significant factors influencing the market today is mortgage rates. With recent dips below 6%, many experts expected a surge in buyer activity. Surprisingly, demand has remained steady rather than spiking. What’s the cause? It’s what economists call the “lock-in effect.”

According to Mark Palim, chief economist at Fannie Mae, many homeowners are “locked into” historically low mortgage rates secured during the pandemic—some even below 3%. These homeowners are hesitant to give up these advantageous rates, even if their current homes no longer meet their needs. Publications like Marketwatch and NerdWallet have noted that this phenomenon is keeping supply tight, despite the increase in active listings.

Looking at the broader trend, October 2023 marked the highest point in mortgage rates since 2000. Since then, rates have gradually declined to around 6.3%, with experts predicting further reductions as we move into 2025. If you’re one of those experiencing the “lock-in effect,” this trend could mean an eventual opportunity to buy at an even more favorable rate.

Advice for Sellers: Why Pricing Is Critical Right Now

For those considering listing their homes, pricing accurately has never been more important. With 34% of listings already reducing their asking prices, it’s clear that overpriced homes risk longer market times or, worse, failing to sell altogether.

At The Monica Carr Real Estate Group, our strategic pricing and targeted marketing have helped sellers not only sell faster but often for more than anticipated. For instance, one of our recent clients had been looking at estimates around $3.8 million for their property. After implementing our proven system, we sold the home for $4.5 million—a difference of $700,000 in just 10 days. Strategic pricing and a robust marketing plan can make all the difference in this market.

Advice for Buyers: Is Now the Right Time to Move?

If you’re a buyer holding off due to your current low mortgage rate, consider whether that rate is truly benefiting your lifestyle. Perhaps you need more space, better amenities, or a more convenient location. While today’s rates are higher than those locked in during the pandemic, they’re on a downward trend. Plus, our preferred lender, Ryan Purpero, offers competitive rates and can help you explore your options for an upgrade that suits your needs.

Connect with The Monica Carr Real Estate Group

Curious about the market in your specific Irvine neighborhood or around Orange County? Now’s the time to reach out for an expert consultation. Whether you’re seriously considering selling or just exploring possibilities, the right guidance can make all the difference.

Contact Monica Carr and The Monica Carr Real Estate Group to discuss your options and make the most of today’s market dynamics.