Orange County home prices could fall 14%, says Chapman forecast – Orange County Register

Chapman University forecasters are asking the same question many in Orange County ponder: Who can afford to buy a house here?

The school’s semiannual economic outlook, released Thursday, June 23, calls for a 14% drop in the local median selling price to June 2023 — one of the first projections of significant declining home values. The forecast says Orange County’s median home price will go from $1.03 million in 2022’s first quarter to $891,000 by mid-2023. Sales counts will fall 20% this year alone.

The formula for home depreciation relies heavily on pricier mortgages creating huge affordability problems after prices soared 30% in the pandemic era’s first two two years. Mortgage rates will have ballooned from under 3% in 2021 to Chapman’s forecast of 7% before a looming national recession.

Yes, the county’s overall economic rebound from business challenges created by coronavirus business is progressing. Chapman expects local bosses to add 81,000 jobs this year — swift 5.1% employment growth — after hiring 47,000 (3.1% growth) in 2021.

But Orange County’s forecasted 1.66 million workers for this year will still be 14,000 short of pre-pandemic 2019’s staffing. And Chapman economists worry that roughly half of recent hires are at leisure and hospitality businesses where paychecks are typically nowhere near homebuyer levels.

And don’t forget the county’s slipping population — four down years in a row, averaging 6,000 fewer residents — as another limit on housing demand.

“Look at the number of days it’s taking on average to sell a home,” says Jim Doti, Chapman’s veteran Orange County economy watcher. “It’s more than doubled in just a couple of months, right? So the market is definitely shifting and the major reason is mortgages and the impact on payments and why affordability is dropping.”

Chapman’s previous forecasts were one of the few outlooks nationwide that saw problematic inflation emerging from a robust economic rebound out of the pandemic’s business chill. How did so many “experts” miss that fallout from an overly stimulated economy — and the obvious next step, surging interest rates?

“I can’t answer that other than to say people don’t know history and don’t believe in history,” Doti says. “It gets you to this tulip mentality, Bitcoin mentality, that the markets are just going to keep going up.”

The Federal Reserve’s cheap money policies were going to end. Mortgage financing was going to get pricier. Homebuying had to slow.

“We’ve been saying we’ll get out of the 2020 recession quickly with strong growth,” Doti says. “But that kind of rapid increase in spending and COVID-19 relief checks going out to businesses, states, and individuals — that’s going to lead to higher inflation. It wasn’t a tough call to make.”

Rising rates should also nudge real estate investors to consider the safety of government bonds now paying 3% vs. a suddenly dicey housing investments possibly paying 4%. Doti says if investors want real estate deals to increase yields to 5% to compensate for added risks — that translates to a 12% drop in rental property prices.



Read original article here

Denial of responsibility! WebToday is an automatic aggregator of the all world’s media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials, please contact us by email – [email protected]. The content will be deleted within 24 hours.

Leave a comment