2022 and 2023 Housing Price Forecast
The best way to see what’s going to happen moving forward is to see what has happened in the last two or three or six months compared to last year. So I belong to the CRMLS, which is a California Regional Multiple Listing Service in Orange County, and I’m going to analyze these facts from the Orange County, California numbers. So let’s look at the active listings: There were approximately 20 listings for sale in Orange County as of January 2021. As per the CRMLS, as of July 9, July 2022, there were 40 active listings, which tells us that the listings have gone up significantly, almost doubled, which is a trend where there was a shortage of homes.
There’s still a shortage of homes, but the number of homes to see and to visit has gone up. So that will affect the housing market, maybe the price and maybe how much they get for the house. Where there’s a shortage, there are multiple offers: $510, $1520 offers. We’re not seeing that anymore, especially in Orange County. So this is a big factor to look at because the more there are homes, the less competition there is for the sellers, and it’s more advantageous for the buyers to have a choice of homes. But just a warning, even though the listings went up by almost double, they’re still low compared to the norms.
I remember times when there were 10,000 homes for sale in the OC MLS, so 4000 is still short. The second thing I want to look at is if you look at this chart, and this is just for Anaheim Hills. I noticed as I was looking, that as of August 5, there were 86 homes on the market in Anaheim Hills. And this gives you a trend in Orange County, possibly nationwide. And out of the 86 homes, I notice, as you see on this chart, all those arrows pointing down at price reductions, and almost 30% of all the homes in Anaheim Hills have a price decrease from the listing price. This tells us, as agents and as buyers, that because buyers find out when the price is dropped, the sellers have to price the homes right. If it’s not priced right, they have to drop the price. And that’s why you’ve seen the price drop on this chart.
Now, it doesn’t mean that just because there’s a drop in listing price, there’s a drop in home sales price as well. In a normal market, 30% to 40% of all the homes listed for sale in the Multiple Listing Service don’t sell because they’re usually overpriced. It could be marketing; it could be located; it could be other factors. But mostly it’s the price. So in this market, when this price drops, it’s telling the seller and it’s telling the market that these homes are generally overpriced for the market and they won’t sell at that price. They have to drop the price to the market value, and then they’ll sell. So, this is another important factor to monitor to see if prices continue to fall or if home prices continue to fall. Are there? One of the other factors to look at, and I’ll show you in just a minute, in the next chart, is the number of homes that actually closed. If you look at this chart, it shows that as of July 2021, there were 35,471 homes that had closed in July 2021. And in July 2022, there were approximately 2000 homes that closed. That’s a drop of 40%.
But remember that this year, when interest rates went up, there was still a shortage of homes. So some of the factors in the reduction in home sales are due to the fact that there was a high-interest rate and a shortage of homes, and people just took it back and relaxed and wanted to wait. So that could be a factor. Nonetheless, a drop in sales from July 2021 to July 22 is down 40%, which is also a significant number to look at. And also, let’s see how that affects the next trend in the next four, five, or next years. One of the best ways to see what is happening currently is to look at how many homes are actually in escrow.
How many homes that were sold are in escrow? Maybe they are at least the price. Maybe they were list prices. Maybe they’re under the list price. We don’t know that yet. But here are the facts, and a chart to prove it. This is what we call “pending home sales.” If you look at this chart, in July 2021, there were 3000 homes in all of Orange County for sale in escrow. And if we compare that to July 2022, that number is 1256. That is down 60%, which means that the number of homes in escrow is also down 60%. Compared to the July months, which is also a significant drop. Again, that could be because of the high-interest rates. It could also be because of the high prices. It could also be because of the shortage of homes. We’ll find out as we go along.
The trend is that the market is slowing down. Buyers are cautious; rents are high; rates have gone up; so buyers are holding off. Buyers feel like this is enough; prices are so high, that they need to come down.