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Ten years after the Great Recession, Orange County’s housing market still hasn’t fully recovered. Home sales volume remains low, as does job creation. Residential construction of all types continues to struggle in this region, leaving would-be homebuyers wanting for more.
As the next recession looms on the horizon — expected in 2020 — prepare for the slowdown in sales and prices to continue here in Orange County and across the state. The next 30 years are going to be an about-face of the past 30 years of repetitively declining mortgage rates. Homebuyers will face the pressure of these rising rates in the coming years, though a brief reprieve is to be had in 2019-2020 as the Federal Reserve allows rates to cool in preparation for the next recession.
View the Orange County regional charts below for details on current activity and forecasts for its local housing market.
Home Sales Volume Dips
Chart update 09/01/19
| Orange County home sales volume |
2018 | 2017 | 2016 | 2003: Peak Year |
| 35,100 | 38,400 | 37,900 | 53,900 |
Home sales volume in Orange County remains weak and somewhat stuck at just over half the heights seen during the Millennium Boom. Echoing state trends, Orange County saw a decrease in total home sales volume in 2018, ending the year 9% lower than in 2017. Worse, year-to-date home sales are 13% below 2018 as of Q2 2019.
A sharp bounce in home pricing following the speculator interference of 2012-2014 has held sales volume back from any significant increases. Buyers’ incomes, already insufficient to keep up with quickly rising home prices, were further decimated in 2018 as mortgage interest rates increased.
In review, 2009-2010 Orange County sales volume rose slightly with the introduction of the housing tax credit, falling back in 2011 for lack of end user demand. From the latter half of 2012 through most of 2013, speculator hyper-activity bumped sales volume artificially yet again, as it did in all of California. The speculator buying wave has since receded.
Looking forward, 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 labor force participation and normalized job levels, expected in the 2021-2023 recovery period following the next recession, anticipated by economists to arrive around 2020.
Low Turnover Rate to Continue
Chart update 03/06/19
| 2017 | 2016 | 2015 | |
| Orange County homeowner turnover rate | 6.8% | 6.7% | 7.3% |
| Orange County renter turnover rate | 17.8% | 18.5% | 20.0% |
Without turnover, homes do not sell. The homeowner turnover rate in Orange County has remained mostly level since the end of the recession in 2009. The renter turnover rate has declined since 2010 and was at 17.8% in 2017, the most recently reported Census year.
Renters rose at a more gradual pace in 2018, following years of escalating rents and declining rental vacancies. Homeowners are likewise struggling to compete with other homebuyers for a shrunken inventory of homes for sale, meaning the turnover rate remains relatively low today.
Turnover rates are likely to rise dramatically in the convergent 2021-2022 boomlet period raising rental vacancy rates. Then, members of Generation Y (Gen Y) will collectively rush to buy and Baby Boomers (Boomers) will retire en masse, selling and mostly buying replacement homes. International and domestic emigration into California will also play a significant role in suburban housing demand.
Construction Starts on the Rebound
Chart update 09/01/19
| 2018 | 2017 | 2016 | |
| Orange County single family residential (SFR) starts | 4,500 | 4,800 | 4,300 |
| Orange County multi-family starts | 3,900 | 4,800 | 7,700 |
The recovery picture is mixed for Orange County residential construction. After years of increased single family residential (SFR) construction starts, 2018 saw a decrease in the number of new SFRs started. In total, 19% fewer SFR starts occurred in 2018 compared to the previous year.
Multi-family starts in Orange County totaled 4,500 in 2018, decreasing about 6% from the previous year and continuing to fall in 2019. This downward trend in starts will likely reverse in the coming years, as legislative moves focus on adding more housing for the ever-growing resident population.
On the other hand, don’t expect SFR construction to recover fully anytime soon. The next peak in SFR construction starts will likely occur in 2021-2023 as renters shift to becoming homeowners following a statewide-push for more construction. 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 09/01/19
| Orange County jobs | June 2019 | Jun 2018 | Annual Change |
| 1,673,100 | 1,631,200 | +2.6% |
California regained all jobs lost at the end of 2014, but Orange County didn’t catch up until the last quarter of 2015. While total job numbers actually declined in 2018, the number of employed individuals in Orange County is 2.6% above a year earlier as of June 2019, still just 124,100 above the number of jobs held before the recession. However, since Orange County’s population has grown significantly since jobs previously peaked in 2006, the real recovery is still further down the line.
As seen above, job additions have been one-third slower to come about during this recovery compared to the 2000s recovery, and at half the pace of the 1990s recovery, echoing the secular stagnation of the 1930s. When will all of these jobs catch up with Orange County’s continuously growing population?
Orange County will likely catch up in 2020, just in time for the housing market to hit a major obstacle as economic factors set up for the next recession, expected by forecasters to arrive in 2020. These factors include the mitigating effect on home sales and the jobs market of increased mortgage interest rates, which began in 2018.
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