ANAHEIM, Calif. — Jeff Lazerson doesn't have enough words to describe the housing market's current state.

"It's painful. It's rough. It's awful. It's scary. It's slow," said Lazerson, the president of Mortgage Grader in Laguna Niguel. "It's just going south."

What You Need To Know

  • Real estate professionals lament the difficulty of the current housing market

  • Mortgage rates continue to rise as Federal Reserve committee clamps down on inflation

  • The 30-year fixed mortgage rates hovers around 6.5%, it's highest since 2008 

  • Orange County's housing inventory is still historically low

As mortgage rates continue to rise — nearly doubled since the start of the year, fewer people are looking into buying a home. And those pending or under contract are finding every reason to back out, said Lazerson.

"It's a swirly market, and confidence is going down by the day, by the hour," said Lazerson.

The Federal Reserve's latest — and ongoing rate increase has changed the housing landscape, locally and nationally. 

Just six months ago, in March, the 30-year average mortgage rate hovered around 3.5%. Home buyers had to act quickly and, in many cases, overbid to submit a competitive offer for the home.

But those days are over.

Last week, the Federal Reserve committee raised rates again, by three-quarters of a percentage point for the third straight time to curb historically high inflation, which is hovering around 8.5%. The Feds are aiming to lower inflation at the rate of 2%.

The committee's action does not directly impact mortgage rates but influences them. And almost immediately, the 30-year mortgage rate went up as high as 7%, Mortgage News Daily reported. 

Mortgage applications are down. Thursday's 30-year fixed rate was around 6.6%, its highest level since mid-2008.

With mortgage rates rising, this new round of homebuyers is becoming skittish. 

According to a new Redfin report, 15% or about 64,000 home-purchase agreements nationwide fell through in August, a 12% increase from the previous year.

Pre-pandemic, the number of pending home sale contracts that fell through is around 12%.

In Los Angeles, 16% of pending sales fell out of contract in August, Redfin reported. That number was 15% in Orange County, and in Riverside, 18% last month.

"There's a lot low ball offers and stuff like that," he said. "It's hard to keep deals together. A lot of real estate deals are falling apart in the middle. Whether it's about repairs, cold feet, or the buyer found something better."

If there is one bright spot in the current housing madness is that housing inventory is still low. 

In Orange County, the expected market time, a term used to describe the moment a home is posted for sale to opening escrow - is about 61 days, Reports on Housing reported. From August 2020 to June 2021, the expected market time was 40 days.

The inventory is about 3,700 homes - more than 3,000 fewer than in pre-pandemic times. 

Reports on Housing Economist Steven Thomas said it's still slightly a seller's market. 

"Sellers need to pack their patience," wrote Thomas in his most recent newsletter. "The market is no longer instant. As a result, more and more homes are sitting on the market."

Thomas reiterated that the market has completely changed and that sellers and their agents should be more realistic. 

"The market has undeniably evolved from warp speed, out of control, to a much more normal pace," he wrote. "However, nobody is used to normal... Sellers do not call all the shots. There is no more waiving the appraisal or inspections. Sellers do not have the opportunity to rent their homes back from buyers after the closing for free. For the most part, homes are not selling over their asking prices. The froth of the past two years is gone."