The Orange County housing market sent a mixed signal in February. Sales activity remained sluggish, but home prices held steady and mortgage rates briefly dropped below 6% for the first time in more than three and a half years.

Taken together, these trends suggest the market may be nearing a shift.

Mortgage Rates Drop Below 6%

Last week, the average mortgage rate briefly fell to 5.98%, marking the first time rates have dropped below 6% in roughly three and a half years. This week, they’ve been hovering right around 6% on average.

Why does that matter?

Many homeowners currently have mortgage rates in the 3-4% range, which has created the so-called “lock-in effect.” Sellers have been reluctant to move because buying a new home meant taking on a significantly higher rate.

In the last 5 years or so, the 5-6% range is where movement began to return to the market. At that level, some homeowners start to feel comfortable making a move again, especially if they have a strong reason to relocate.

We’re already seeing some evidence of that. Some buyers are securing effective mortgage rates around 5%, either through lender programs or seller-paid rate buydowns.

If those trends continue, we could begin to see more activity in the coming months.

Sales Activity Still Slow

Interest impact is important, because activity so far this year has been slow. February home sales in Orange County were 6.6% lower than the same time last year.

That number sounds concerning at first glance, but there’s an important timing detail to keep in mind. Most of the homes that closed in February actually went into escrow in December and January. That means the sales data largely reflects market conditions from late 2025 and early 2026, before the recent improvement in mortgage rates.

In other words, the February numbers don’t yet capture what could happen if lower rates start pulling more buyers off the sidelines.

Prices Continue to Hold Steady

Even with slower sales, Orange County home prices have remained surprisingly resilient.

The average price per square foot reached $771, which is about 0.8% higher than this time last year.

That’s not rapid appreciation, but it does show that values are holding firm despite lower sales volume.

Another indicator of price stability is the sales-price-to-list-price ratio, which came in at 99% for the ninth consecutive month. That means sellers are still receiving very close to their asking price on average.

When homes consistently sell near list price, it typically signals a balanced market rather than a declining one.

What This Means for Buyers and Sellers

Right now, the Orange County market sits in an interesting middle ground.

Sales are slower than usual, but prices are holding steady and interest rates may be improving. If mortgage rates stay near or below the 6% range, the market could see increased activity as the year progresses.

For buyers, this environment can offer a window of opportunity. There’s less competition than during the peak frenzy years, and some sellers are willing to offer incentives like rate buydowns.

For sellers, pricing and presentation remain critical. Homes that are well-prepared and priced correctly are still selling close to asking price.