Orange County housing indicators

As California’s housing market exits the chaotic pandemic economy not now an issue in 2026, and we gradually enter the next economic phase, it is important to note Orange County’s housing market never fully recovered from the 2008 recession. Home sales volume remained low throughout the elongated recovery of the 2010’s to present, as has job creation.

Residential construction of all types continues to lag behind the needs for the region, directly disabling willing homebuyers since 2013 by pushing all real estate pricing into double-bubble territory.

The pandemic economy of 2020-2021 briefly distorted sales transactions further, inflating both sales volume and pricing for sales and rentals of all types of property until peaking in mid-2022. To abate pandemic damage to the economy, mortgage rates were set at historic lows backed up with readily abundant funding during the pandemic period.

The high-octane, low-cost mortgage funds were rocket fuel for home sales volume — and prices — until the pandemic economy abruptly ended. By early 2022, mortgage rates more than doubled from the prior year as funding returned to private Wall Street bond market managers.  

But low mortgage rates and fast rising prices in 2020 and 2021 did induce homeowners to refinance, but not to sell in light of pandemic-era job losses and extensive uncertainty about the economy. A legitimate caution swept through the county’s homeowners out of concern for finding a replacement home. Caution and uncertainty caused turnover of ownership and tenancies to dwindle, which in turn caused new home construction sales to lag badly.

The lack of ownership turnover and tenant demand to buy a home strangled MLS inventory, forcing property prices to even greater unsustainable heights before buyer demand was forced to recede. Now into 2026, the years of low levels of inventory for sale or rent is steadily rising — more days, weeks and months on the market — while buyer demand is flat at best. In tacit acknowledgement, seller pricing has begun the inevitable decline.

Today’s trends in for-sale inventory, mortgage rates and economic conditions now deeply rooted in worldwide confusion, suggest prices in the next couple of years will continue to drop. Annually, real estate sales volume and prices peak and decline as part of the cyclical spring home buying season. Consumers are just nesting up.

Going forward, expect sales volume in all types of property to continue to slip annually, the enduring downward trend in sales volume since the peak in mid-2022. As a necessary result, prices will decline then bottom most likely around 2028, brought on by the arrival of speculators and investors who produce a short-term pick up in sales volume and a price bump. When prices start to rise consistently over several months, buyer-occupants return to buy, as they do in every recovery period.

However, mortgage rates are expected to trend upward in the decade ahead. A rise in the cost of mortgage money puts immediate downward pressure on prices for all types of property as buyers lose purchasing power and are unable to pay profit-seeking asking prices.

Soon, sales volume decreases and inventory for sale starts to pile up unsold. After several months of decreasing sales volume, asking and sales prices start to decline in tandem.

For today’s pricing, consider that mortgage rates are roughly double the mortgage rates in 2013, the mid-point of a 60-year cycle of interest rates when rates hit their zero lower-bound level.

View the Orange County regional charts below for details on current activity and forecasts for its local housing market.

Updated December 26, 2025. Original copy posted March 2013.

Home sales volume dips

Chart update 12/26/25

Home sales volume in Orange County, now seriously weakened by the post-pandemic economic fallout, is presently stuck at just over half the heights seen during the recent Great Recession period of 2008.

The rising sales action of the pandemic years ended with a sales volume crash in 2023. In total, 20% fewer sales closed escrow in Orange County during 2023 compared to 2022.

Dragged down by the double whammy of rapidly rising mortgage rates and fast rising property prices during the pandemic, homebuyer enthusiasm waned significantly. Today, sales volume is trending flat-to-weak and influencing a downward trend for 2026-2027.

That said, home sales volume for 2024 inched up 6.4% above 2023 in a dead-cat bounce. Year-to-date, 2025 is roughly level with 2024 as of October 2025, but weakening. Until builders get sufficiently incentivized to build and release residential units at an increased rate in multiple housing developments, sales volume is likely to remain mostly flat.

A complete recovery with annual sales volume of around 46,000 in Orange County will be reached only after end user demand is buttressed by increased labor force participation. Expect a 2027-2028 recovery period from the California real estate recession that commenced in 2022.

Related article:

The Fed bumps up rates again — the undeclared recession is here

Inventory climbs

Chart update 12/26/25

Inventory of homes available for sale has risen from the historic low reached at the end of 2021. After plateauing in 2023, for-sale inventory during 2025 in the Los Angeles-Orange metro areas averaged an increase of 14% more properties over the prior year. However, today’s inventory is lower than pre-pandemic levels but not due to an overabundance of buyers.

Rather than increased buyer demand for ownership, it is owner reluctance to sell which holds back the growth in inventory for sale. A buildup in inventory is needed to cause prices to drop sufficiently to offset today’s high cost of mortgage funds. The winter months typically see the lowest inventory of homes for sale, peaking around mid-year as the cyclical return of buyers takes place.

Looking forward, expect for sale inventory to force sellers to make critical decisions in 2026. As for-sale inventories grow and the average length of time on the market is extended, sellers are forced to either:

• withdraw their property from the market as no longer available for sale; or
• reduce their asking price to induce mortgage-funded homebuyers to contact their buyer agents and acquire the property.

The Federal Reserve’s fight to reduce consumer inflation while maintaining current employment levels is progressing irregularly. Fed activity also points to a continuing downturn in housing market transactions until the 2028 period.

Further, the seller’s market experienced since 2013 fully reversed in 2022 and continues. The gradual shift from a seller market to a buyer market was introduced by the beginning of a roughly 30-year half cycle of generally rising mortgage rates.

Today, homebuyers increasingly take a wait-and-see approach to buying as they become more aware of the market conditions for future price reduction. Declining prices only intensify the wait-and-watch routine of today’s ready and able buyer, until suddenly they all become willing to jump in as prices bottom and hold.

Low turnover rate to continue

Chart update 12/26/25

Without ownership and tenancy turnover, homes do not sell. The homeowner turnover rate in Orange County remained mostly level during the 2020-2022 pandemic period, around 7%. However, the homeowner turnover rate then dropped to 5.3% in 2024, a difference of an average homeowner selling every 20 years, not every 14 years as is more favorable for brokers, their agents and builders and existed during the pandemic.

Increased mortgage rates initiated most of the turnover attitude shift. Homeowners with a low-rate mortgage found selling and acquiring an upgrade with new mortgage funding was way too expensive. The uncertainty of the general economy was also triggering caution against taking on debt.

The renter turnover rate has also generally declined since 2010, running at 16% of all residential tenants moving in 2024, the most recently reported Census year. Tenant turnover behavior indicates they are staying put, increasingly content with their living quarters. Great for landlords as vacancy rates decline and operating costs are reduced; not good for agents dependent on leasing, sales and MLO fees.

Expect a consistent increase in the frequency of turnover to arrive when the present undeclared recession ends, likely in 2028. Legislative efforts to force cities and counties to greatly increase the permitting of residential construction will eventually increase housing starts, which will contribute to increased turnover.

Further, after we pass through the remainder of the current real estate recession, which started in mid-2022 and persists into 2026 and likely into 2028, Orange County will experience an economic recovery for real estate sales and leasing transactions for all types of property.

This upturn will also be fueled by a Great Convergence of first-time homebuyers (Millennials and members of Generation Z forming households), retiring Boomers buying replacement homes and increased for-sale inventory generated primarily by construction starts. Short sales and REO resales due to mortgage defaults will be in the mix as job losses and mortgage forbearance agreement resets appear in 2026.

Homeownership remains low

Chart update 12/26/25

Orange County’s homeownership rate has fallen since its 2007 peak of 62.7%. The most recent homeownership data shows a 56.5% homeownership rate in Orange County. Statewide homeownership has historically been about two percentage points below Orange County’s, a condition related to a greater aging of the county’s population.

The state average is 55% as of Q3 2025, thus — more recent, local homeownership reports are not yet available — Orange County’s homeownership rate in 2025 likely remained around 57%. The future of homeownership rates depends primarily on whether it is cheaper to rent or to own, an issue controlled by the level of new residential housing, personal savings and mortgage rates in the coming years.

Expect Orange County’s homeownership rate to remain near its present low level until around 2028. By then, the housing market will begin to bounce back from the real estate recession currently underway since 2022. A loss of jobs, retirements and the ownership of second homes are expected to put homes on the market through the 2026-2027 period. By 2028, a return of jobs, higher wages and increased confidence will give the homebuyer population traction.

However, don’t expect the rate of homeownership to fully return to the inflated heights seen in 2007 anytime soon. The 2007 rate was greatly elevated by unfettered tenant access to easy money, much of it predatory, which mortgage regulators tamped down in 2010 with enforcement of ability-to-pay (ATR) rules and government mortgage guarantees only for ATR qualifying mortgages.

The underlying objective remains to protect society from financially destabilizing types of mortgage lending, though greatly weakened by the federal administration in 2025. The ATR rules still limit mortgage funding to homebuyers with the financial capacity to actually repay their debts in recessions.

Though ATR rules translate to a slightly lower homeownership rate in the near term, they foster a long-term stability in the housing market in Orange County and the state to avoid a 2008 foreclosure repeat.

The repeated pattern of a first-time homebuying generation remains as an alternative primarily for skilled and well employed tenants. However, as tenants they rent for longer periods of time and are aging more before buying a home than in past generations, due primarily to:

• excessive debt taken on at an early age;
• the lack of routine savings;
• high mortgage rates likely to trend higher; and
• no personal adjustment experience in a normal business recession.

Construction starts fall back due to shortages

Chart update 12/26/25

After years of decreased single family residential (SFR) and multi-family construction starts since 2018, 2024 saw an increase across both SFR and multi-family construction starts.

Multi-family starts in Orange County totaled 4,700 in 2024, up 35% from the previous year. SFR starts were up 30% in 2024. 2024 construction starts are partly the result of increased confidence in the Orange County economy from lenders and builders.

The next peak in multi-family and SFR construction starts will likely occur in the post-2028 period due to a boost from recent state legislation. Even then, SFR starts are unlikely to return to the mortgage-driven numbers seen during the hyperactive Millennium Boom.

Jobs are recovering, too slowly

Chart update 12/26/25

Orange County has recovered the historic job losses of 2020, but barely, and it’s been six years since the pandemic first hit Orange County. However, the growth in the number of jobs is stagnant to weak, with no growth in sight as of September 2025, now 1% below one year earlier. Now, compared to the pre-pandemic peak, Orange County is actually 7,300 jobs below the number of jobs held prior to the 2020 pandemic period (and falling).

Jobs in the real estate industry

Chart update 12/26/25

2020 job losses have nearly been recovered in California’s real estate and construction industries. However, the number of individuals employed in both the real estate and construction industries has decreased in 2025. Caution about anything real estate, and mortgage funding, is on the minds of a constantly increasing percentage of Californians.

Over the next several years, Construction jobs are likely to rise. State zoning and permitting legislation and enforcement by the OAG have been and are aggressively focused on adding more housing inventory in Orange County.

The clarifying legislated rules in 2025 for consumer representation by real estate brokers will foster better bonding with buyers. But compliance requires the big brokerage offices to advise their agents to comply, and compliance will cut into profits for the brokers.

The real estate industry will see jobs appreciably increase beginning in 2028 energizing the property market recovery from the very real (but unspoken) real estate recession currently underway.

Related article:

Buyer Representation Agreements: The end of the “gold standard”

Per capita income plays catch up

Chart update 3/24/25

The average income earner in Orange County made $88,900 in 2023 (the most recent data from the federal Bureau of Economic Analysis).

Sustainable home price increases are limited to a ceiling set by growth in personal income, the annual rate of income increase from 2022 to 2023 in this region being 5.7%. Buyer and tenants are only able to pay what their incomes allow them to. However, mortgage borrowing during the pandemic did leverage increased personal income, fueled by record-low interest rates which caused buyer purchasing power to jump in 2020-2021.

Yet, as interest rates reversed course in 2022 — which now are plateaued at double their recent lower level — buyer purchasing power fast lost steam. Homebuyers taking out a mortgage to fund a purchase now must rely on income increases to borrow great sums without a boost from lower mortgage rates. Lenders are no longer at the buyer’s back.

Home sales now stand on their own absent the 2020-2021 government stimulus support in the form of cash and artificially low mortgage rates. Thus, going forward, real estate price increases will not set in until an optimal jobs level is attained and maintained, and then future increases in property pricing will run close to the annual rate of consumer inflation.

Through the fog of international trade chaos, look to 2028 for the starting point of the next rise in property sales volume and prices. When world trade issues remain in conflict as we experienced in 2025, we will see job losses and in turn forced sales of property to avoid foreclosures for lack of personal income.

The next recovery period for real estate sales, leasing and mortgage originations will be driven by the shifting demographic trends of retiring Baby Boomers and their Millennial and Gen Z counterparts who will at the same time become homebuyers en masse. Investors will return when they sense they can fill their boots with cheaply priced income property, which is what real estate recessions are about.