As the Orange County real estate market moves toward spring, more homeowners are listing their properties than in recent years. This increase in supply is creating a more competitive environment for sellers, a shift from the tight inventory conditions seen throughout the past few years.
More Homes for Sale – A Significant Year-over-Year Increase
The housing supply has grown significantly, with 56% more homes on the market compared to this time last year. Currently, 3,033 homes are listed for sale, up from 1,939 one year ago—an increase of 1,094 additional listings. This is the highest mid-February inventory since 2020, when the market had 4,030 active listings.
The rise in available homes is due in large part to elevated mortgage rates. Since 2022, rates have climbed from 3.25% to over 7%, making many homeowners reluctant to sell and lose their lower-rate mortgages. This trend, known as "hunkering down," has kept inventory low over the past couple of years. However, as time passes, more homeowners are accepting that high mortgage rates are here to stay and are moving forward with selling their homes.
According to data from the Federal Housing Finance Agency, most California homeowners still have very low interest rates:
✔ 82% of mortgage holders in California have a rate of 5% or lower
✔ 65% have a mortgage at 4% or below
✔ 29% are locked in at 3% or less
This has discouraged many from selling, leading to a shortfall of over 16,000 listings in 2023 compared to pre-pandemic norms. In 2024, inventory remained 31% lower than normal, but more sellers entered the market compared to the previous year. In January 2025, the number of new listings was just 17% below pre-COVID averages, showing signs of recovery in seller activity.
More Sellers, Same Demand = A Growing Inventory
While the number of homes available for sale has increased, buyer demand has not changed significantly. With similar levels of demand but more homes on the market, the unsold inventory is accumulating.
In September 2024, housing inventory peaked at 3,695 homes, which was 48% higher than the 2023 peak of 2,496 listings. If mortgage rates remain around 7% or higher, inventory is expected to continue growing, and the housing market will resemble pre-pandemic conditions.
Market Times Are Getting Longer
When housing supply grows but demand remains steady, homes naturally take longer to sell. Currently, it takes an average of 61 days to sell a home in Orange County, up from 42 days last year. This is the slowest mid-February market since 2019 and is approaching the pre-pandemic average of 64 days.
By mid-March, the real estate market will transition into the Spring Selling Season, the time of year when buyer demand is highest and more new listings hit the market. However, because new listings outpace demand, inventory tends to rise rapidly through summer before peaking between July and August.
In recent years, inventory has continued increasing well into autumn, signaling a slower market. If this pattern continues, sellers will need to adjust their pricing strategies to attract buyers.
What This Means for Sellers
With more competition, pricing a home correctly is critical. Overpriced properties will linger on the market, while well-priced homes will attract buyers faster.
✔ The key to a successful sale is determining the Fair Market Value of a home, taking into account:
- Recent comparable sales (both closed and pending)
- Property condition
- Location and neighborhood demand
- Upgrades and curb appeal
This is not a market where sellers can “test the waters” with overly ambitious pricing. Homes priced too high will struggle to sell, while well-positioned properties will still attract interest.
Active Listings – Inventory Growing at a Fast Pace
In the last two weeks alone, the number of available homes jumped 8%, adding 212 new listings. This is the biggest mid-February inventory increase since 2017.
For the past two years, inventory declined in February, but this year is different. More homes are being listed than in previous years, while buyer demand remains steady. If mortgage rates stay high, this trend will continue, potentially returning the market to pre-pandemic inventory levels.
Although more homeowners are choosing to sell, the number of new listings is still below pre-2020 levels. In January 2025, there were 2,527 new sellers, which is 17% below the average from 2017-2019 but an improvement over 2024 and 2023
Demand is Rising, But Still Historically Low
Buyer demand, measured by pending sales over the past 30 days, increased by 12% in the last two weeks, jumping from 1,340 to 1,497 transactions. However, despite this increase, demand is still at its lowest February level since tracking began in 2004 (except for last year).
Unless mortgage rates drop significantly, demand is expected to remain muted, similar to 2023 and 2024. The Federal Reserve is closely monitoring economic data, as inflation trends will influence future interest rate changes. Key reports in the coming weeks, such as the Personal Consumption Expenditures (PCE) Price Index, will impact mortgage rate movements.
- Last year at this time, demand was 1,397 pending sales—7% lower than today.
- Pre-pandemic, the February average was 2,393 pending sales—60% higher than today.
Since demand has been increasing slightly faster than new inventory, the Expected Market Time has decreased from 63 to 61 days. However, it remains much slower than last year’s 42-day pace.
Luxury Market Seeing More Activity
Homes priced above $2.5 million are seeing a boost in demand, with 21% more pending sales in the past two weeks. The luxury market time has dropped from 178 to 156 days, meaning high-end homes are moving faster than before.
However, historically, the second half of the year is much slower for luxury sales. Sellers in this price range should list sooner rather than later to take advantage of peak buyer activity in the coming months.
Bottom Line: The Market is Changing
- More homes are coming to market, increasing competition for sellers.
- Buyer demand remains low, leading to longer selling times.
- Overpricing will cause homes to sit unsold, while accurately priced properties will attract buyers.
- As we head into spring and summer, expect inventory to keep rising, creating more choices for buyers.
If you’re thinking about selling, strategy is key. A well-priced, well-marketed home will always attract more interest. Want to know what your home is worth in this shifting market? Let’s talk.
