After an extremely cool start to the year, the Orange County housing market is heating up with spiking demand and a substantial drop in market time.

The Winter Market

With demand rising fast, the housing market is heating up, and the market time is plunging.

Going to an amusement park as soon as it opens is a considerable advantage. There are no crowds and the most popular rides have no line for those willing to scramble to the queue as quickly as possible. Yet, in the blink of an eye, the park is filled with people, and the wait times for everyone’s favorite rides grow longer by the minute. By late morning, the swarm of people is dizzying, and it’s the busiest time of the day.

That’s how the Winter Market feels for housing. It is still the Holiday Market in early January, which runs from mid-November through the first couple of weeks of the New Year. That is when there is very little buyer activity, demand, and the supply of homes available establishes a bottom for the year. The slow pace of the first couple weeks of January quickly fades as housing transitions to the Winter Market. 

The Winter Market runs from mid-January through mid-March. In mid-March, housing transitions to the busiest time of the year, the Spring Market. Winter essentially sets up the spring. This year’s Winter Market will be no different; the frozen housing market has already begun to quickly thaw, ramp up, and grow hotter from week to week. The season is characterized by the inventory increasing slightly, buyer demand surging higher, and the Expected Market Time, the speed of the market, dropping substantially. 

With the holidays in the rearview mirror, many buyers who placed their search for a home on hold due to their desire to enjoy all the festivities of the season, return and jump right back into the housing market. As a result, demand (a snapshot of the number of new pending sales over the prior month) increases rapidly. The 3-year average rise before the pandemic.

(2017 to 2019) was 47%. Last year, demand grew by 52% and soared by 67% in 2023. In the past two weeks, the start of the Winter Market, demand climbed from 988 to 1,340, up 36% or 352 pending sales. Demand will continue growing weekly in February and March, building momentum until it peaks in the spring. Expect demand to closely resemble 2023 and 2024 demand levels. 

In the meantime, the active inventory, the supply of available homes, increases slightly as many homes that come on the market, especially those priced right and in excellent, turn-key condition, are snapped up quickly, many times with multiple offers. These homes promptly become pending sales, accumulate, and add to the overall demand reading. The 3-year average rise in supply before the pandemic (2017 to 2019) was 11%. Last year, the inventory increased by 10%, and it dropped by 15% in 2023. In the past two weeks, the inventory has risen from 2,759 to 2,821, up 2% or 62 homes. In February and March, the supply of available homes will slowly increase. From there, as housing transitions to the Spring Market, the inventory will grow considerably faster as more homeowners opt to sell their homes during the springtime than at any other time of the year. 

The Expected Market Time (the number of days it takes to sell all Orange County listings at the current buying pace) takes into consideration both supply, the current active inventory, and demand, recent pending sales activity. With supply slowly rising and demand rapidly climbing, the Expected Market Time dramatically changes almost instantly in the blink of an eye, dropping substantially. The 3-year average before the pandemic (2017 to 2019) was a drop from 84 to 61 days, shedding 23 days. Last year, it plunged from 56 to 41 days. In 2023, it dove from 81 to 42 days, down an astonishing 39 days. In the past two weeks, the Expected Market Time has already declined by 21 days, from 84 to 63. It will continue to fall slightly and reach its hottest point of the year, the lowest market time reading, between March and April.

The winter thaw for Orange County housing has already begun. Many mistake winter as an extremely slow season for real estate, but that is not the case. Instead, it rapidly develops with a giant push in buyer activity and a subsequent spike in demand, new pending sales. More homes come on the market during the Winter Market than during the holidays, but it pales compared to the number of homeowners who opt to sell in the spring. As a result, the inventory has trouble growing as the number of pending sales surge.

 

Active Listings

The inventory increased by 2% in the past couple of weeks.

The active listing inventory increased by 62 homes in the past two weeks, up 2%, and now sits at 2,821, its highest level since the start of December. The inventory is slowly rising, typical for the Winter Market, from mid-January through mid-March. Many homes are immediately placed into pending status. Homes that are priced right, in excellent condition, nicely upgraded, in turn-key condition, ready for an immediate move-in, and have a good location do not last long and acquire the most attention, often selling very close to their asking price and with multiple offers. Homes that need work, have deferred maintenance, have a poor location, or are overpriced will linger on the market without success. 

Last year, the inventory was at 1,942 homes, 31% lower, or 879 fewer. The 3-year average before COVID (2017 through 2019) was 4,843, an additional 2,022 homes, or 72% more. 

Homeowners continue to “hunker down” in their homes, unwilling to move due to their current underlying, locked-in, low fixed-rate mortgage. It became a crisis once rates skyrocketed higher in 2022. For January, 2,527 new sellers entered the market in Orange County, 528 fewer than the 3-year average before COVID (2017 to 2019), 17% less. Last January, there were 2,054 new sellers, 19% fewer than this year. More sellers are opting to sell compared to the last couple of years. 

 

Demand

Demand surged higher by 36% in the past couple of weeks.

Demand, a snapshot of the number of new pending sales over the prior month, surged from 988 to 1,340 in the past couple of weeks, up 352 pending sales, or 36%, its largest two-week rise since the start of February 2023. The Winter Market is home to exploding demand as buyers return to the housing market to resume their home-searching efforts after pausing for the holidays. Demand is closely mirroring 2023 and 2024 demand levels due to 30-year mortgage rates remaining right at 7%. Until rates drop further with duration, similar to the levels from mid-August to the start of October when rates remained below 7%, expect 2025 demand to remain muted as it has been for the past couple of years. 

As the Federal Reserve has indicated, watching all economic releases for signs of slowing is essential. That is the only path to lower mortgage rates right now. These releases can move mortgage rates higher or lower, depending on how they compare to market expectations. This week is jobs week, which includes the number of job openings, wages, and the number of jobs created or lost, one of the month's most important economic data points. 

Last year, demand was 1,290, with 50 fewer pending sales or 4% less. The 3-year average before COVID (2017 to 2019) was 2,160 pending sales, 61% more than today, or an additional 820. 

With demand surging higher compared to the slight rise in supply, the Expected Market Time (the number of days it takes to sell all Orange County listings at the current buying pace) plunged from 84 to 63 days in the past couple of weeks. Last year, it was 56 days, noticeably faster than today. The 3-year average before COVID was 86 days, similar to today.

 

Luxury End

The luxury market has improved substantially in the past couple of weeks.

There has been a big change in Orange County’s luxury home market. Luxury is defined as the top 10% of an area. The high end has surged higher since COVID. Luxury has been a disproportionate number of home sales, and values have continued to rise. Consequently, the threshold for luxury changed from $2 million to $2.5 million. As of 2025, luxury will now be defined as $2.5 million and greater for Orange County. 

The luxury inventory of homes priced above $2.5 million increased from 737 to 829 homes, up 92, or 12%. Luxury demand increased by 43 pending sales, up 44%, and now sits at 140. The Expected Market Time for luxury homes priced above $2.5 million plunged from 228 to 178 days, shedding 50 days. The luxury market will continue to improve throughout the Winter Market. 

In the past two weeks, the Expected Market Time for homes priced between $2.5 million and $4 million decreased from 149 to 132 days. For homes priced between $4 million and $6 million, the Expected Market Time decreased from 272 to 183 days. For homes priced above $6 million, the Expected Market Time decreased from 595 to 333 days. At 333 days, a seller would be looking at placing their home into escrow around January 2026.   

 

 

Orange County Housing Summay

  • The active listing inventory in the past couple of weeks increased by 62 homes, up 2%, and now sits at 2,821. In January, 17% fewer homes came on the market compared to the 3-year average before COVID (2017 to 2019), 528 less. Yet, 473 more sellers came on the market this January compared to January 2024. Last year, there were 1,942 homes on the market, 879 fewer homes, or 31% less. The 3-year average before COVID (2017 to 2019) was 4,843, or 72% extra.
  • Demand, the number of pending sales over the prior month, surged by 352 pending sales in the past two weeks, up 36%, and now totals 1,340, its largest rise since the start of February 2023. Last year, there were 1,290 pending sales, 4% less. The 3-year average before COVID (2017 to 2019) was 1,2,160, or 61% more.
  • With demand surging compared to the slight rise in supply, the Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, plunged from 84 to 63 days in the past couple of weeks. Last year, it was 45 days, noticeably faster than today. The 3-year average before COVID (2017 to 2019) was 70 days, slightly slower than today.
  • In the past two weeks, the Expected Market Time for homes priced below $750,000 decreased from 68 to 52 days. This range represents 18% of the active inventory and 22% of demand.
  • The Expected Market Time for homes priced between $750,000 and $1 million decreased from 58 to 43 days. This range represents 14% of the active inventory and 21% of demand.
  • The Expected Market Time for homes priced between $1 million and $1.25 million decreased from 69 to 49 days. This range represents 10% of the active inventory and 12% of demand.
  • The Expected Market Time for homes priced between $1.25 million and $1.5 million decreased from 63 to 42 days. This range represents 10% of the active inventory and 14% of demand.
  • The Expected Market Time for homes priced between $1.5 million and $2 million decreased from 80 to 60 days. This range represents 13% of the active inventory and 14% of demand.
  • The Expected Market Time for homes priced between $2 million and $2.5 million decreased from 89 to 60 days. This range represents 6% of the active inventory and 7% of demand.
  • In the past two weeks, the Expected Market Time for homes priced between $2.5 million and $4 million decreased from 149 to 132 days. For homes priced between $4 million and $6 million, the Expected Market Time decreased from 272 to 183 days. For homes priced above $6 million, the Expected Market Time decreased from 595 to 333 days.
  • The luxury end, all homes above $2 million, account for 29% of the inventory and 10% of demand.
  • Distressed homes, both short sales and foreclosures combined, comprised only 0.1% of all listings and 0.6% of demand. Only one foreclosure and three short sales are available today in Orange County, with four total distressed homes on the active market, down two from two weeks ago. Last year, seven distressed homes were on the market, similar to today.
  • There were 1,634 closed residential resales in December, up 25% compared to December 2023’s 1,310 and up 3% from November 2024. The sales-to-list price ratio was 99.5% for Orange County. Foreclosures accounted for 0.1% of all closed sales, and there were no short sales. That means that 99.9% of all sales were good ol’ fashioned sellers with equity.