As the real estate market transitions into the holiday season, we're witnessing significant shifts in inventory and demand that merit closer analysis. The "late housing peak," marked by an increase in active inventory across many markets, signals an important turning point. Here's a comprehensive look at the current state of housing, backed by the latest data and insights.

Understanding the Late Housing Peak

Seasonal Trends in Inventory

Historically, November and December bring the lowest levels of new home listings. This trend is tied to the holiday season when sellers often pull their homes from the market or delay listing.

According to the National Association of Realtors (NAR), December consistently records the fewest new listings each year, followed closely by November. This year, the holiday market started in mid-November, a week before Thanksgiving, and is expected to last until the second week of January.

Comparing Inventory Levels

The Southern California housing market provides a representative snapshot of broader trends:

• Current Inventory: Southern California’s housing inventory has increased compared to the same time last year, with Orange County, San Diego, and Riverside seeing year-over-year growth of approximately 40%, 52%, and 31%, respectively.

• On a national scale, while inventory levels have risen slightly from recent lows, they remain below pre-pandemic averages. This reflects ongoing challenges in balancing supply with demand, influenced by higher mortgage rates and cautious seller activity.

Although there has been progress in inventory recovery since the lows of the pandemic, the market has yet to return to the more stable conditions seen before 2019.

Key Insight: Although inventory levels have risen compared to the pandemic lows, they remain significantly lower than pre-2019 averages, highlighting a persistent imbalance between supply and demand.

Interest Rates: The Market’s Throttle

The Current State of Mortgage Rates

As of November 20, 2024, mortgage rates are slightly below the 7% threshold, marking a modest decline from previous weeks:

• 30-Year Fixed-Rate Mortgage (National Average): 6.88%, down from 6.99% the previous day (Wall Street Journal).

• 15-Year Fixed-Rate Mortgage (National Average): 6.13%, compared to 6.25% the previous day.

• California-Specific Rates: The average 30-year fixed mortgage rate in California stands at 6.58%, slightly below the national average (Zillow).

Market Implications

• Demand Sensitivity: Even slight decreases in rates have already sparked a moderate increase in buyer interest. Earlier this year, a brief drop below 6.2% triggered noticeable demand surges, demonstrating the market's strong correlation with rate movements.

• Frozen at Higher Rates: When rates sit above 7%, the market tends to stagnate, with fewer transactions and reduced buyer activity.

• Future Projections: While rates remain elevated, they are trending downward. Should rates drop further below 6.5%—or even approach 6%—a significant thawing in market activity is expected.

These current trends emphasize the critical role interest rates play in shaping buyer behavior and overall market momentum, particularly in high-demand areas like Orange County.

What to Expect in the Coming Months

Holiday Market Dynamics

As we enter the heart of the holiday market:

• Inventory will likely decline sharply as sellers withdraw unsold listings.

• Demand traditionally dips as buyers focus on the holidays, but any drop in mortgage rates could spur unexpected activity.

Spring 2025 Outlook

The first half of 2025 is poised to bring:

• A modest sellers’ market if rates stabilize between 6.5% and 7%.

• A more balanced market later in the year as inventory grows and buyer activity moderates.

Orange County Market Update

Focusing on Orange County, the housing market has seen a notable 40% increase in inventory compared to this time last year. While this represents a significant year-over-year jump, it’s important to contextualize this within broader historical trends:

• Current Inventory Levels: Inventory remains below pre-pandemic norms, reflecting a persistent supply challenge.

• Seasonal Decline Expected: As we move further into the holiday market, the number of active listings is projected to decrease sharply, aligning with traditional seasonal patterns.

• Buyer Sensitivity: Mortgage rates hovering near 7% have continued to temper demand, but any downward movement could quickly reinvigorate buyer activity.

These trends highlight the unique challenges and opportunities present in the Orange County market as we close out 2024. Accurate pricing and strategic marketing will remain key for sellers looking to make the most of the current conditions.

What This Means for Buyers and Sellers

For Sellers

Pricing your home accurately from the outset is critical. Overpricing often leads to longer market times and eventual price reductions, which can result in netting less than if the home had been priced competitively from the start.

For Buyers

Opportunities for negotiation may expand in markets where inventory levels are rising. However, affordability remains a key concern with higher mortgage rates limiting purchasing power.

Final Thoughts

The late housing peak underscores a market in transition. While inventory levels are rising, they remain constrained relative to historical norms. Mortgage rates, meanwhile, continue to dictate the pace of activity. Buyers and sellers alike should prepare for a dynamic market influenced by economic shifts, seasonal trends, and evolving consumer behavior.

Stay informed, and consider working with us your local experts who understand the nuances of your market. Accurate data and strategic planning will be the keys to navigating this evolving landscape.