Stalemate is a situation in the game of chess where the player whose turn it is to move is not in check and has no legal move. The game ends in a draw.

Since the start of 2020, home prices in Coastal South Orange County (Newport Beach, Corona Del Mar, Laguna Beach, Dana Point and San Clemente) increased a staggering 61% from an average of $1,885,000 to $3,040,000 now. All throughout 2020 and into early 2022 interest rates hovered around 3.0% for a fixed 30 year loan. In response to inflation running rampant, the Fed has, and continues to, aggressively raise interest rates, forcing lenders to increase their mortgage rates. Today, a 30 year fixed loan is in the range of 6.5% and still going up.

So, what does that mean for the real estate market? Let’s start with the seller. Homeowners have seen their neighbors fetch record-high prices for their homes and figure “My home is as nice as theirs, so I should get a similar price.” Mr. and Mrs. Seller decide to put their house on the market and list for the same price their neighbor’s house sold for in February of this year. This is logical reasoning in normal times, but these are not normal times. Take a look below to see the effect higher rates have on the same borrower who purchased the property in February:




  • Borrower goes through loan application process and qualifies for a purchase of $2,500,000 based on their income, credit and down payment of $500,000
  • Buyer purchases property for $2,500,000
  • Down payment is 20% or $500,000
  • Loan is $2,000,000 at 3.0% fixed for 30 years
  • Monthly principal and interest payment is $8,411

Apply the same purchasing ability and same down payment eight months later and see what happens. Keep in mind that lenders qualify borrowers on their credit worthiness and how much they can afford to pay on a monthly basis.



  • Same borrower goes through loan application process and qualifies for a purchase of just $1,840,000: same income, same credit score, and same down payment
  • Buyer purchases property for $1,840,000
  • Down payment is still $500,000 or 27%
  • Loan amount is $1,340,000
  • Monthly principal and interest payment is $8,424
With sellers expecting to achieve a sale similar to recent comps, but buyers qualifying for loan amounts that are 26% lower than earlier in the year, we are at an impasse. STALEMATE.  
What happens next? Sellers either have to accept the realities of the market by lowering their expectations or wait to sell their properties in more favorable times. The market is experiencing a painful shift as power moves to favor the buyer, when it has been an insane seller’s market for the past few years.
Buyers should be patient and thoughtful by waiting for the right opportunity to present itself. Market shifts will take place, but they will not happen at the same rapid pace that the Fed has established with their aggressive reaction to inflation.
Now, more than ever, it is critical to enlist the help of a smart, experienced real estate professional. Your real estate consultant should provide you with guidance and good advice, but not push you into a situation that you later regret. At Cove Canyon Realty, we pride ourselves on forging long-term relationships by analyzing the facts and helping to assess the most favorable path forward. Please feel free to contact us any time to work through your specific scenario.

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