The Orange County housing market starts slow at the beginning of every year. This year’s start is the slowest start to a year since 2019, yet the lower mortgage rate environment and improved affordability has the ability to jumpstart demand in 2026. There is a holiday hangover, and most everyone is still distracted with New Year’s resolutions. Over the next several weeks, after shaking off the holiday fog and leaving most resolutions behind, the housing market will magically heat up, seemingly overnight. The Holiday Market continues to run through mid-January. Housing will thaw and rapidly heat up by the end of January, as demand accelerates much faster than the supply of available homes.

This year is exceptionally chilly with the coldest start since 2019, when the expected market time (the number of days it takes to sell all listings at the current buying pace) reached 152 days. Today’s 85-day expected marketing time is reading is similar to 2017 (84 days), 2020 (82 days), and 2023 (84 days). The speed of the market is determined by supply and demand. Demand has not changed much over the past several years, ever since the Federal Reserve rapidly increased the Federal Funds Rate for 11 consecutive meetings between 2022 and 2023. Demand has been muted due to affordability constraints. The big annual difference in speed has come on the supply of listings side.

Many expect 2026 to be a similar story. There will be more homeowners selling this year and buyer demand will begin to thaw if mortgage rates remain between 6% and 6.5% over the Winter and Spring Markets (mid-January to beginning of June). The lower the rate, the larger the increase in year-over-year demand.

Today, mortgage rates have remained below 6.5% for 124 days since September 3rd, the longest period since the Federal Reserve finished raising the Federal Funds Rate in July 2023. Most housing economists project that rates will remain between 6% and 6.5% for the year, meaning that the lower mortgage rate environment will match up with the Winter and Spring Markets, allowing demand to improve due to increased affordability. That is assuming that the job market will remain weak and inflation does not suddenly spike higher. In fact, there is a case to be made that the job market may break in the coming months. If that occurs, the Federal Reserve will change its tune and indicate more rate cuts to come. Subsequently, mortgage rates would fall between 5.75% and 6%, and demand will rise even higher year-over-year.

BUYERS: Do NOT be fooled by the sluggish housing market at the start of the year. In January, the inventory will grow week over week ad buyer demand will grow at a faster pace. There will be increased competition among buyers, especially in the entry-level price range. The market will continue to pick up steam from now through mid-March. There are very few sellers who are desperate to sell, especially with the dawn of a new year and the anticipation of the Spring Market, the best time of the year to sell. Unlike post-holiday retail shopping, this is not the time of year to search for a “deal.”

SELLERS: Even if demand increases, it still boils down to proper pricing. Today’s buyers are savvy and understand value. They scrutinize every photo and soak in all the details: bedrooms, bathrooms, square footage, condition, upgrades, location, lot size, amenities, year built, garages, storage, view, etc. Yet, price is the most critical factor. It is the differentiator between a buyer choosing to see the home in person or waiting for the next home to hit the market. A realistic price will allow a seller to attract immediate interest. Sellers who overprice will waste valuable market time with far less activity before ultimately reducing. As the saying goes, you only get one shot at a first impression, so analyze every recent comparable pending and closed sale to properly arrive at an accurate price.