The Appraisal Report – Volume 1
Real Estate News from a Local Appraiser, Mark Buhler
Volume 1, January 2023
Welcome to The Appraisal Report
My vision for this report is to provide information to the real estate community from an appraiser’s perspective. As alicensed appraiser working in Orange County for over 25 years, I have gained valuable insight into market trends. I want to share market data and information about the Orange County real estate market that is relevant to where you and I work. We all get frequent emails and newsletters in our inboxes about the market. Some are from sources that paint a picture that may differ from what is happening here in Orange County. Real estate is local, and I want to be your source for local information. The narrative in Orange County is different than other parts of the country or the state. My goal is to provide valuable information and analysis to help Realtors® and other real estate professionals improve their businesses. I intend to keep it short and deliver the news once a month. I hope that you enjoy it.
What is REALLY happening in the Orange County market?
The headlines from the national press have been grabbing attention with dire reports about interest rates and real estate prices tanking across the country. While this may be true of some markets, the Orange County market does not appear to be experiencing precipitous declines in value. A very important part of every appraisal report is an analysis of the market. First, an appraiser must define their market. For example, when appraising in downtown Hunting tonBeach, the market area boundaries should include only the areas where a buyer interested in downtown HB would consider buying.
For this edition of The Appraisal Report, I want to focus on the entire county to get an idea of what is happening in ALL of Orange County. In future editions, I will analyze statistics for a city or zip code. This analysis of all of OC will give us an idea of which direction the market is headed on a macro level.(Note: My statistics are for Detached SFRs only, the largest market segment)
I would like to share some of the things that happen in the life of an appraiser in this section. It may be some photographs or an anecdotal story, but the purpose of this section is to have some fun. There is a LOT going on in this room. A range/oven, shower with a toilet inside of it? This, my friends, is the definition of‘ Functional obsolescence’. That is an appraiser term that we will cover in another edition. If this were a motor home and not a single-family home, it would be a typical feature, but it is not!
Thanks for reading my Appraisal Report. This something that I have wanted to do for quite awhile. I appreciate you reading and hope you found value in it.
See you next month
Mark Buhler, CMP Appraisal
(949) 388-4943 Office
(949) 283-0975 Cellular
What is REALLY happening in the Orange County market?
In the chart on Page 1, I have included statistics from two time periods. Comparing December 2021 to December 2022 yielded some predictable data that we are all feeling in our businesses. I want to analyze the market from a specific point in time, April 2022 to December 2022, to illustrate how increasing interest rates may have affected certain statistics in the market. 2021 was a year of rapid price increases. Low inventory, coupled with high demand and record low interest rates led to a home feeding frenzy. 2022continued the same trajectory until the Fed started to raise interest rates. There were two small, and relatively quiet rate increases of 25 basis points in March and50 basis points May. The market was still very active until mid-2022, these rate hikes did not slow demand. Comparing the statistics of April 2022 and December 2022 helps to illustrate the effect rising interest rates had on certain statistics. The April numbers account for the market before rising interest rates changed the pace of the OC real estate market. In the spring of 2022, we smelled the brake dust, but the market was still strong. Interest rate increases in June and July of 75 basis points each put the brakes on the local market. January 2023 feels like the brakes are worn out and the car has been in the shop for a couple of months. The stats that stand out to me are the declines in active listings, median sales prices and pending sales. Listings declined almost 20% between April 2022 (2142 actives) and December2022 (1725 actives). It is also notable that December 2021 had only 1251detached SFRs on the market. Spring of 2022 brought out sellers that wanted to cash in on the high prices of 2021.The Orange County median sales price in April hit a high point of $1,345,000 for2022. Since that point, the median price has fallen almost 15% to $1,144,000.Although the median is down, overall the median price is significantly higher than it was in 2019. The fact that prices fell between April 2022 and December 2022does not negate the gains between 2020 and 2022. Many homeowners still have significant equity. Pending sales are an important market indicator that should monitored. Why are pending sales important? They are an indicator of the number of closed sales the market will have in the next 30 +/- days. Pending sales help to show market trends. Appraisers report and analyze trends based on historical data. Predicting the future is not in the job description. Suffice to say that the current market is slowing, but there are encouraging signs in the statistics. The seller’s market is over. Buyers now have a selection of listings to choose from. The market is based on supply and demand. Those are moving toward equilibrium, a very good sign!