Lisa Mailhot | January 25, 2024
Buyers
After a historically slow year for home sales, every prospective homebuyer's question is whether to jump into the market now or await potential improvements. With varying opinions, risk factors, and economic uncertainties, the decision becomes a nuanced one. The decision to enter the Orange County real estate market requires careful consideration. From personal finances to market fluctuations, the factors influencing this decision are as varied as they are crucial.
Analyzing California home value trends since 1987 reveals that prices declined in 30% of 12-month periods. While waiting could lead to a bargain, the historical average of 6.1% one-year gains suggests the risk of missing out on potential appreciation. Timing is critical, as witnessed by the extremes of a 28% dip in 2008 and a 28% gain in 2004.
Considering the expected decrease in mortgage rates in 2024, it's crucial to examine historical trends. According to Freddie Mac's data from 1987, there is a prevalent inclination toward decreasing rates, occurring 64% of the time. Nevertheless, it's important to note that the typical annual rate adjustment is a minimal decrease of 0.1 percentage points. This highlights the understanding that although a reduction in mortgage rates is anticipated, the resulting financial benefit may be relatively modest.
The typical buyer focuses on monthly mortgage payments, which have fallen in 36% of one-year periods since 1987. Despite improved odds, payments have, on average, increased by 5.8% annually. Hoping for a significant drop akin to 2008's 34% collapse is optimistic, given that the largest 12-month increase was a staggering 63% in 2022.
Approaching this decision as a one-year waiting game resembles a parlay bet, banking on both loan rates and prices falling. History shows this bet succeeds 23% of the time, offering a 14% discount on house payments. However, if wrong, the average consequence is a 12% payment hike. It's a gamble that should be weighed carefully against personal circumstances.
Considering the historical correlation between falling interest rates, home prices, and a sour economy, it's vital to recognize the potential impact on job security. In periods when rates and prices were falling, California's unemployment averaged a 1 percentage-point increase to 9%. The affordability of housing might come at the cost of job stability.
In the dynamic landscape of Orange County real estate, the decision to buy now or wait demands thoughtful consideration. While historical trends offer insights, individual circumstances play a pivotal role. Are you ready to roll the dice, hoping for a strategic win in 2024?
Let's connect and navigate this journey together if you're contemplating a move to Orange County.
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