By Gary A. Miller
In 2019, the average sale price for a home in Southern Orange County* was $437,916 (median $385,050). By 2021, that average grew to $534,791 (median $473,000). Low inventory and historically low mortgage rates continued to drive home prices in the first eight months of 2022, which saw an average sale price between January and August of $665,279 (median $555,000).
Mortgage rates climbed as we entered fall, and many anticipated that sales would slow, inventory would rise, and prices would decline. In this article, I will examine whether or not that has occurred by looking at average sales prices and the presence of price drops during time on market and comparing sales to a pre-pandemic year for context.
Between the first of September and the end of November, there were 180 closed home sales in Southern Orange County. The average sales price was $603,097 (median $517,500). On the surface, it would appear that prices did recede from that peak of $665,279 between January and August. Further analysis indicates that it is not quite that simple.
Among homes listed after Sept. 1, 2022, there were 55 remaining in active status as of Nov. 28. Only 19 of those were priced below the average of the closed sales during the same period. The average asking of all currently active properties listed since September was $984,672. Only eight of the currently active homes were priced below $400,000.
As such, the initial appearance of a drop in sales prices is primarily a result of the slowing of sales among higher-priced homes.
Another method of determining a slowing market is to examine price drop activity.
Within the currently active homes in Southern Orange County, 36% adjusted the asking price downward at least once, with an average adjustment of $48,147. Comparatively, only 19% of homes that sold between Sept. 1 and the end of November adjusted their pricing downward.
For context, during this same period in 2019, 33% of closed sales made at least one price adjustment before going under contract—nearly identical to those that are currently active and well above those that have sold so far.
Where 62% of the homes selling between September and November 2022 sold at or above asking price, the average sales price among the 2019 homes of $401,223 was actually lower than the average asking price of $408,561.
Additionally, the impact of seasonality cannot be overlooked within these figures. The table below shows a comparison of the first eight months to the September to November period for the past five years, as well as the percentage difference in average sales price. All but one year has shown a decrease during the period. However, the drop associated with the current season is larger than the others, which may indicate that prices have fallen further than is typical for the time of year.
|Sept-Nov Avg Price||$416,610||$435,609||$488,381||$521,461||$603,097|
|% difference||1.79% decrease||3.75% decrease||7.36% increase||3.98% decrease||9.34% decrease|
When all these factors are combined, a few narratives emerge.
- First, while a typical seasonal curve accounts for some of the current price regression, the percentage difference in pricing seems larger than recent years.
- Second, higher-priced homes are taking longer to sell than others, but the current market is still more competitive for those below the average/median.
- Third, year-over-year price increases have been significantly larger than the price regression from the peak of the current year.
- Finally, a majority of homes are still selling above asking price and are selling faster on average than prior years.
So, are prices in Southern Orange County dropping? The answer is a qualified yes. While it is a relief to see prices lower than what was experienced in early 2022, prices are still significantly higher than those of recent years. The spring market of 2023 will be more telling in terms of our trajectory.
*Southern Orange County is defined in this article as the zip codes of 27510, 27514, 27516, and 27517 within county boundaries.
Gary A. Miller is co-owner of Red Bloom Realty. He has lived and worked in Chapel Hill off and on since 1994 and is an avid musician, traveler, and former educator.