The South Orange County luxury housing market began 2023 with its typical post-holidays housing slowdown. The period from just before Thanksgiving to the end of January is usually the time of the lowest levels of listing and sales of the year, so it is difficult to determine any definitive conclusions about market trends from its numbers. However, one standout factor at this moment is the continued historic low inventory of houses available for sale. The greater Newport Beach market, which includes Eastside Costa Mesa, Newport Coast and Corona del Mar, has 232 properties listed for sale in the MLS currently (at the time of this writing), which is a fraction of 1 percent of the 30,000+ homes that comprise that area. Laguna Beach has 98 active listings in the MLS of the over 8,000 houses that are in that demographic. A normal inventory for this time of year in Newport Beach is about 500 listings and in Laguna Beach would be about 185.
Although the overall market cooled significantly in the last four months of 2022, largely due to a number of economic factors including inflation being at 40-year highs, volatility in financial markets and most significantly the Federal Reserve systematically raising interest rates; 30-year Jumbo fixed interest rates were at 3% in January of 2022 and now are at 6.1% in January of 2023, the overwhelming lack of inventory has largely held pricing at the historic highs of 2021-2022, the average price of a single family home in the Newport Beach market is presently near $4.6 million and conversely $4.3 million in Laguna Beach. This continued lack of homes for sale may provide a seller an opportunity to still sell at record high prices.
The early Spring market, which typically begins after the Superbowl, in early February, will typically provide the next indicators of market direction, but for the time being the market remains in a period of adjustment, with major economic conditions in flux.
The South Orange County luxury residential housing market has now entered the two-month-long Thanksgiving to New Year holiday period, which historically is the time of year with the least number of sales and lowest listing activity.
Many sellers, especially those who have not had success selling, start pulling their properties off of the market to wait for the more vibrant Spring market. Yet it is still important to remember that the buying and selling of luxury homes continues at this time of year, albeit at lower levels, and this can be an excellent time to purchase for buyers who wish to submit lower offers or offers with terms, since there is less buyer competition and many sellers hoping to sell before the end of the year.
2022 will likely go down in the “residential real estate history books” as one of the most unusual years on record.
We started the year with a pandemic frenzy of buying, largely fueled by very low interest rates, the intent of the Federal Reserve to raise interest rates, historic low levels of homes available for sale, and extraordinarily high buyer demand. However, even at the start of the year, despite all of the craze in the market, there were severe economic headwinds that were looming: the highest inflation in four decades, by May, mortgage interest rates had already increased 69% in 2022, the stock market had declined; the S&P 500 was down 14% and the Nasdaq, 22%, and overall, there was anticipation of a slowing economy and a possible recession. The first effects of these market factors were seen in buyer demand; fewer buyers translated to fewer offers and fewer listings going under contract, and by July, the number of homes for sale had doubled and nearly one-third of the listing inventory had experienced at least one price reduction.
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