The monthly Janna Mooney Report keeps you informed on current market trends and how they affect you.
WILL PRICES PLUNGE?
There are three indicators to look for in determining when home prices will drop sharply, but only one of them is currently present. The three Indicators are a surplus of homes available for purchase, a weak demand, and an elevated number of distressed homes, including foreclosures and short sales that will collectively signal the next plunge in home values. Many people argue that housing is due for a correction. Their rationale is that home prices surged at an unprecedented rate from 2020 through the first half of 2022. When mortgage rates jumped from 3.25% in January 2022 to 7.37% nine months later in October, home affordability plummeted to historically low levels. Affordability is based on household incomes, mortgage rates, and home values. Since household incomes have not skyrocketed, and mortgage rates have bounced around 7% for nearly three years, the natural conclusion is that prices must plunge to improve affordability. Many have exclaimed that they feel it in their “gut,” that it is not a matter of if prices correct, it is when. Economics does not adhere to intuition or a “gut” feeling. Instead, it is best to turn to the facts, data, and current trendlines.
Today’s Market:
- Supply of Available Homes: Despite many more sellers competing against each other, supply is still constrained compared to where it was leading up to and during the Great Recession.
- Buyer Demand: Mortgage rates have been stuck above 6% for three years, and buyer demand has been muted ever since.
- Distressed Homes: There have been very few distressed home sales for years now, and it is not going to change anytime soon.
The Bottom Line: Only one of the three indicators for prices to plunge is present in today’s housing market, muted demand. There must be considerable additional pressure for prices to fall substantially, not just low demand. A glut of available homes, along with unemotional distressed sellers who “have to sell,” and weak demand are the necessary ingredients for housing to experience a correction. Prices will not plunge solely due to weak demand.
REALTOR LIFE
Thanks to my reliable team holding down the fort, I was able to step away from the hustle of daily real estate life for a family getaway to Mammoth. My parents flew in from Sweden, my brother and his girlfriend from New York and my other brother, his wife and my nieces who live nearby. It was the ideal blend of adventure and relaxation – days filled with hiking scenic trails, discovering crystal-clear lakes, fishing, bike rides, horseback riding, and breathing in fresh mountain air, and nights filled enjoying good food and playing games. The mountains have a way of nourishing the soul and I am grateful for the quality time away.
AT A CROSSROADS
There are many crossroads in life where a single decision can take someone down a completely new path. Whether it’s choosing a career, getting married, or moving to a new city, each decision shapes a unique and distinct future.
The second half of 2025 stands at a crossroads, where the pathway of mortgage rates will result in two vastly different outcomes. Will mortgage rates remain elevated, or will they fall below 6.5% with duration? The housing market is at the mercy of rates.
So, where does the housing market go from here? It all depends on rates. There are two scenarios:
Scenario 1 – Rates remain elevated and continue to fluctuate between 6.5% and 7% for the remainder of the year. For this to happen, the expected market time will slowly rise from week to week. Demand will gradually decline slowly to end of the year, inventory will slowly climb until it reaches a peak.
For mortgage rates to remain where they stand today, the economic data must continue to be
similar to that of the first half of 2025. Financial market volatility persists due to ongoing
tariff announcements, while strong labor market readings continue, characterized by solid
job growth and low unemployment rates. Any rise in inflation due to the implementation of tariffs will keep a lid on Federal Reserve rate cuts.
Scenario 2 – Rates drop and hover between 6% and 6.5% with duration. For this to happen the U.S. economy must show signs of a looming slowdown. As the Federal Reserve monitors job market any cracks in labor will lead to immediate cuts.
Last year in early August rates dropped below 6.5% for 47 consecutive days which increased demand 14%. If rates follow similar pattern to last year and remain the rest of the year demand will increase. The biggest difference between last year and this year is the higher inventory. This would cause the inventory to peak earlier than in the first scenario. With fewer available homes and higher demand, the days on market would decrease, and the housing market would improve from week to week. Home values would stabilize and potentially rise monthly by the end of the year.
The Orange County housing market is at a crossroads. The speed of the market depends entirely on the direction of mortgage rates, which hinges on the direction of the U.S. economy.
REALTOR LIFE
While the market is undeniably at a crossroads, the Orange County real estate scene is still very much in motion. From what I’m seeing on the ground, homes are selling, but buyers have become more cautious, closely watching whether mortgage rates will hold steady or finally begin to dip. Inventory remains modest, which helps maintain competition, but open houses are noticeably less frenzied than earlier this year. Sellers who price their homes realistically are securing solid offers often at or above market value, while those chasing peak prices are seeing longer days on market and, ultimately, lower returns. Buyers frequently ask, “Should I wait to see if rates fall by fall?” My answer: No. Entering the market should be based on affordability, not speculation. We saw this in 2020; many buyers paused hoping prices would drop, but they missed out on opportunities and never saw 3% rates again. A pause doesn’t guarantee anything; taking action when the numbers make sense is key.
MYTH CRUSHING
With over 50% of millennials and 70% of Gen Z expecting a housing crash, it is no wonder that numerous YouTube, TikTok, Instagram, X, and Facebook posts are devoted to the demise of the housing market. Negativity sells. It gets the clicks. It supports the narrative that far too many are banking on. First-time homebuyers had to contend with skyrocketing values during the COVID-19 pandemic, and many missed the opportunity to purchase. Today, record-high home prices persist alongside a more elevated mortgage rate environment. When will prices plunge? When will it be the right time to make a purchase? They ultimately turn to social channels that have been habitually incorrect, steering countless consumers in the wrong direction for years. The better strategy is to uncover the facts and ignore the myths.
MYTH—Housing is flooded with homes on the market. Across the U.S., the active inventory grew to 1.45 million homes in April, 21% higher than in the same month last year and 39% higher than two years ago. Yes, there are more homes on the market in almost every city and neighborhood; yet, the inventory is rising from record-low levels. It is all about perspective.
MYTH—The drop in home values during the second half of the year will lead to plunging prices. The pressure on home values to fall is building as the inventory has grown extensively, even though demand has remained relatively unchanged. The inventory is returning to pre-pandemic levels, which are still significantly lower than those of the Great Recession and previous decades. Today’s United States housing stock is the strongest ever.
MYTH—Homeowners are not moving because they are “locked into” low mortgage rates. In California, 80% of all mortgages have an interest rate of 5% or lower. 64% have a rate at or below 4%, and 29% have a rate at or below 3%. Homeowners gave up their low fixed rate, placed a “For Sale” sign in their yard, and moved. In Orange County in the month of April, there were 19% more “For Sale” signs than in the same period last year, and 39% more than in 2023.
MYTH—Timing the market is the best strategy in purchasing a home. Many people believe that if they wait a little longer, home prices will magically drop to a point where they’ll snag a “deal of a lifetime.” This myth is perpetuated by news and social media headlines that continuously call for a housing correction or slowdown. The burn of the Great Recession is still fresh in people’s minds, so they feel a crash is coming. Nobody knows when the perfect “dip” will happen. Ultimately, buyers should take advantage of motivated sellers today. If someone is ready to buy with good credit, a stable income, and manageable debt, that’s more important than waiting for the “perfect” time to purchase.
The bottom line: ignore social media’s megaphone of negative housing narratives and turn to facts and data. The data does not lie.
REALTOR LIFE
It’s All In The Pricing & Prepping
What helps a home sell for the highest value possible in today’s market and prevents it from sitting on the market longer than the competition? It’s all in the prepping and pricing! It goes without saying these two key factors are important in any market but even more vital in today’s real estate market. With inventory rising sellers are experiencing more competition and buyers have more to choose from. It is important to prep a home to free it of clutter, minimize repairs and stage are all extremely important. Just like with online dating. If you have a lot of “prospective candidates” to choose from, you are immediately attracted to what is visually pleasing. Same goes for the buyer looking for a home. A well-manicured, staged and clean home will be attractive online causing the buyer to “date the property” and schedule a showing. Once they see the home in person and have the same feeling as they did online without disappointments, it provides a higher percentage for an offer.
Pricing is equally important. Price reductions are more popular today but many don’t realize the majority of them were overpriced from the beginning. Higher interest rates and more to choose from will prevent a buyer from “dating” an overpriced property. Pricing to allow room to negotiate or expecting a buyer to pay more than market value is a risky strategy. The smarter option is to price at market value or 1% lower than market value, and that will bring more buyers and result in an offer at list price or multiple offers driving the price up. The end goal is to find a buyer to “marry” the home in the shortest amount of time at the highest price relative to the current market.
