The Orange County Real Estate market has softened and sales volumes are stagnant. According to the OC Register, CoreLogic homebuying stats show 2019’s first six months were Orange County’s slowest-selling first half in over 8 years, since just after the Great Recession ended. Quarter 2 reflects a 13% drop in home sales from 2018. Many expect that Quarter 3 will show an even larger drop. This indicates that home prices are high and due for a correction, which means opportunity is on the horizon.
A component of this slowdown is the trade war between the United States and China as new tariffs lead businesses to scale back on investing and hiring. See Trump’s China tariffs are already hitting the housing industry. Furthermore, Chinese cash that previously flowed into Southern California’s economy, driving up real estate, could dry up.
Although the nature of real estate is cyclical and we may incur a standard recession, there is good news for buyers. Economists have stated that even if there is another recession, the housing marketing will not bring about housing bargains like in 2008. Specifically, “The 2008 recession didn’t cause the housing market to go into freefall. The housing market going into freefall caused the recession.”
It would be a fairly standard recession that has nothing to do with mortgages or the housing market, and its severity is not expected to rival the one in 2008. An upcoming recession would also, encounter a housing market that’s almost the inverse of what it was in 2008: tight mortgage credit instead of loose mortgage credit, housing supply shortage instead of a housing surplus.
Also, keep in mind historic precedent: As far as home prices dropping in the wake of a recession, 2008 is the exception to the rule. During two mild recessions in the early 1980s, for example, home prices actually increased, just as they did in the early 2000s after the dot-com bust. Home prices are less responsive to recessions because housing is an absolute need, and because buyers tend to come from better financial situations that aren’t as damaged by a recession.
The 2008 Great Recession hit the housing market due to mortgage lenders issuing bad loans that were projected to fail and did. Since then, lending guidelines have tightened up, consumers' best interest is standard practice and integrity is the name of the game. Therefore, waiting for prices to drop to 2008 prices is highly unlikely.
It has been a buyer’s market in 2019, and we will continue to see a buyer’s market moving forward in 2019 through 2020