The New Home Boom (Nationally): But What Does this Mean for Orange County?
In the current real estate climate, there’s an obvious trend shaping the market: homeowners are increasingly reluctant to sell. This could largely be due to the fact that most mortgage rates in Orange County are below 5%, and 1 in every 4 are below 3% — making it very hard to let go. But if these homeowners were to sell and buy something else, even if it was in a less expensive area, the rates are hovering around 7% and not attractive to those already satisfied with their cushy monthly payments.
This shift in homeowner behavior, in turn, has spurred an unexpected boom in the market for brand-new homes across the country. But what does this surge in new home developments mean for Orange County, and can it help address the current low inventory issue?
Homeowners’ Reluctance: Fueling the New Home Market
There are many parts of the country (and state) that have room to build large, new developments. But what about Orange County? For the most part, we’re built out. In some OC cities, they’ve been built out since the 70s and 80s. Sure there are still new developments being built in Irvine and Rancho Mission Viejo, but is it enough? No, it’s not. Occasionally you may see a smaller development pop up, but we need to almost double our inventory to be back at what’s considered a “neutral” market.
Can Smaller Developments Help the Low Inventory Issue?
While occasional smaller developments do pop up, it’s worth questioning whether these can effectively alleviate the low inventory issue. While each new development, regardless of its size, contributes to increasing the inventory, the pace at which these homes can be built and come onto the market may not be enough to significantly affect inventory levels or satisfy the surging demand.
A Comparison with Other Regions
Contrast this with other parts of the world or even other states where land availability is less of a challenge, and it’s clear that Orange County faces a unique situation. The high demand for living in Orange County combined with the finite amount of available land for new builds results in a distinct market dynamic that sets it apart from many other regions.
The boom in the new home build market, driven by the reluctance of homeowners to sell, brings a unique set of challenges and opportunities for Orange County. While new developments, regardless of size, help increase the housing inventory, addressing the inventory issue in a significant way will require innovative solutions, potentially reshaping the landscape of Orange County real estate. The only way we can go now is up. There’s an appeal to being in a suburb of Orange County and an attraction… we don’t want to lose sight of that.
As we navigate this shifting landscape, understanding these dynamics is more crucial than ever for homeowners, buyers, and real estate professionals alike.
Keeping a close eye on these trends will not only provide insights into the future direction of the Orange County real estate market but also potential strategies for those looking to buy or sell in this highly competitive market.