Some of my clients are asking about the possibility of a housing price correction
Category : Laguna Beach Real Estate
Some clients say the prices have gone up too fast and the median price is within 6% of the record established in June of 2007 and a price correction is near.
The last time prices were this high it lead to a major housing price correction. Logically, prices are about to drop again, right? Not necessarily.
The prior OC median sales price record was established in June 2007 at $645,000. The median sales price last month was at $610,000. During the Great Recession, the median low hit $370,000 in January 2009. So, August’s level is 65% above the recession low and just 5.4% away from matching Orange County’s record height.
The prior height was established 8 years ago. Even though inflation has been extremely mild, the Consumer Price Index in Orange County has been positive for years. Taking into consideration the slower, mild growth in overall prices, Orange County is closer to 15% off the prior peak, not 5%. Buyers are mistakenly comparing today’s prices to 2007, that’s 8 years ago, a long time ago.
And that’s with minimal wage increases which now are getting upwards pressure. Also, most of the loans made over the past 6 years have been strictly underwritten and foreclosures/short sales are incredibly low. Lastly,the inventory is the lowest in September since 2012 which keeps it a sellers market.
BUT if you are buyer there is a niche to explore for a good price. Many Laguna sellers are now doing a price correction on their prices since they set prices in ‘anticipation’ of Spring time’s higher pricing continuing. This resulted in many homes to be still on the market for a much longer time then desired which makes the seller anxious.
It’s not a 20% drop or anything but you’ve some leverage in a weakened seasonal sellers’ market.
Laguna active ‘for sale’ properties that have decreased their prices:
- 85 homes (or 36% of 235 homes for sale) have had price reductions of at least 5%: See properties here
- 31 homes (or 13%) have had price reductions of at least 10%:See properties here
- 16 homes (or 7%) have had price reductions of at least 15%: See properties here
- Interesting to note that Laguna Niguel had only 38 homes (18% of 214 homes for sale) drop prices by 5%: See properties here
So in a way there has been a price correction or slow down but not to the major levels that some were hoping for. Will the increase in interest rates impact prices? We’ll see, but with inventory is still low and I don’t see it happening unless it goes a couple points up.
Up to the Minute Year to Year comparison of Laguna Market activity
Summery information on the dynamic Laguna Beach market
Closed sales in September popped back up to 34 homes which is right on par for the last few years.
However, homes going into escrow, which show the true sales activity for the month, was down to a 6 year low of 48 homes (tying 2013).
But when the New Year started in 2014 the sales activity increased dramatically.
Lastly, the inventory is at 236 homes the lowest since 2012.