Navigating the Horizon: The Orange County Real Estate Report
Carl Lachman, MBA, CFP®, and Joe Lins
A summary of our Orange County real estate discussion by Eclectic Associates Vice President Carl Lachman and Realtor® Joe Lins on December 3, 2025.
Why a Crash Is Unlikely
The question on many homeowners’ minds is whether the Orange County (OC) market is headed for a cliff. While financial markets can be volatile, real estate operates on much longer cycles. Currently, a crash appears unlikely. The primary reason is a persistent supply-demand imbalance; OC has very few remaining areas for significant new development. While prices may trend slightly lower from recent peaks, the high demand for the Southern California lifestyle provides a sturdy floor for valuations.
Density and Trends
As large parcels of land vanish, the architectural landscape is shifting. When older properties are sold, they are increasingly replaced by multiple smaller, multi-story structures. Local cities often favor these high-density, "zero lot line" developments to meet housing mandates.
The current market data reveals a cooling, but expensive, environment. While inventory and "days on market" are rising for both single-family homes and condos, the entry price remains steep. In 2025, the average home price in Orange County sits at approximately $1.8 million, while condos average $900,000. Areas like Fullerton remain notable for offering prices slightly below these countywide averages.
Interest Rates and the 50-Year Mortgage Idea
While the Federal Reserve might lower rates in 2026, mortgage rates are notoriously "sticky" on the way down, though they jump quickly when the Fed signals a hike. Prospective buyers should not expect a dramatic improvement in borrowing costs over the next one to two years.
There is growing chatter regarding a proposed 50-year mortgage. However, the math suggests it is no "silver bullet" for affordability. For a $1.2 million home with a 20% down payment, a 50-year term might reduce the monthly payment by only about $290 compared with a 30-year loan, while significantly slowing equity build-up. Furthermore, the interest rate on a 50-year loan would likely be higher to compensate the lender for the extended risk.
Strategic Buying and Selling
For buyers, especially young adults, the "wait and see" approach is rarely profitable in OC. Waiting for a price drop often results in losing more to interest or rent than is saved on the purchase price.
Here are some thoughts for first-time buyers:
Stretching Is Standard: Most buyers "grow" into their mortgages as incomes rise.
Avoid ARMs: Currently, adjustable-rate mortgages offer little discount over fixed rates, making the risk of future increases hard to justify.
Budget for Chaos: Maintain an emergency fund. In homeownership, the roof, the car, and the washer usually break down simultaneously.
For sellers, realistic pricing is key. Do not assume renovations will yield a 1-to-1 return, but kitchen and bathroom upgrades remain the gold standard for recouping most costs.
Gifting and Prop. 19
Parents looking to assist the next generation have powerful tools in 2026. An individual can gift up to $19,000 in 2026 without triggering gift tax reporting. For a couple gifting together, that is $38,000. Even exceeding this limit requires only a simple tax form and deducts from the lifetime exemption, which stands at $15 million for 2026.
Proposition 19 remains a vital strategy for those 55 and older. It allows homeowners to transfer their original property tax base to a new home up to three times within California, provided the move occurs within two years of the sale.
Real Estate
Rental real estate remains a good wealth-building tool in OC, often yielding a 5% annual return through leverage. However, buyers must treat it as a small business rather than passive income.
Next, take a few steps to protect your real estate equity from the rising tide of real estate fraud. Always verify wiring instructions via a direct phone call to your escrow officer. In a digital world, a simple conversation remains the best defense against sophisticated email spoofing.
And, finally, if you are concerned about title fraud, consider signing up for Property Alerts for your property at ocrecorder.com and ocassessor.gov. Although title fraud is rare in OC, it does happen. You can also monitor your property at the OC official records portal at ocrecorder.com quarterly.