Orange County Housing Report:
“The Spring Market Has Arrived”
Orange County Housing Report February 13th, 2018
With demand exploding onto the scene, it is officially the
best season to sell a home.
Spring Market: The activity below $1 million is nothing short of CRAZY!!
In Southern California, it is hard to tell the seasons apart. You have to look up at the trees to see if there are leaves or not. The time of the sunset is another dead giveaway. Are there flowers yet?
Similarly, there are signs that the housing market has officially changed. There is a steady stream of buyers at open houses for all homes priced below $1.25 million. Sellers are entertaining multiple offers within days of coming on the market. Buyers are writing offers before even seeing the home. That’s right; the crazy Spring Market has arrived.
Many are scratching their heads knowing that the first day of spring is not until March 20th. That is when the days are longer, the flowers are blooming, and trees are sprouting their new leaves. However, the Spring Market in Southern California actually starts in February and runs all the way through the end of May. The expected market time, the amount of time it would take to place a home onto the market and then into escrow dips to its lowest level of the year. Orange County housing is already moving at a feverish pitch.
This year will be similar to 2017 when the expected market time dipped below 60-days, considered a hot, seller’s market, throughout the entire Spring Market. Spring 2018 is going to be hot. Buyers will be faced with tremendous competition to buy, and sellers will be running the table.
The market is very hot for attached homes, currently running at 41 days. It is a hot, seller’s market for all attached homes priced below $1 million. The hottest range is condominiums priced between $250,000 and $750,000. That range represents 82% of all attached home demand.
Take a look at the velocity of the market already. For detached homes, the expected market time dipped below 60-days for the first time since the start of April 2017. It is less than a month, 29-days, for homes priced below $500,000. For homes priced between $500,000 and $750,000, it is a 31-day market. It is a hot market for homes priced between $750,000 and $1 million with a 39-day expected market time. From $1 million to $1.25 million, it too is below the 60-day threshold at 51-days. From $1.25 million to $1.5 million, it is still considered a seller’s market, just not a mad rush like the lower ranges.
For detached homes priced above $1.5 million and attached homes priced above $1 million, the market does not lean in the seller’s favor. As prices rise, sellers are faced with a much slower market. They represent 31% of the inventory and only 9% of demand.
For the rest of the market, we are back to bidding wars. When a home procures 15 offers, there is only one winner. The other 14 buyers need to go back to the drawing board and start the process all over again. It is extremely frustrating being a buyer in today’s market. After losing out on one or two homes, most buyers sharpen their pencils and are prepared to write very strong offers in their attempt to secure a home, maybe even stretch the offered price a bit. That is how buyers have been approaching the hot Spring Market selling season since 2012.
Warning to Buyers: regardless of rising interest rates and the volatility of Wall Street, the market is not going to change anytime soon and tilt in the buyer’s favor. The trends are lined up in favor of sellers with tremendous demand and a very low supply of homes to purchase.
Warning to Sellers: pricing very close to the most recent comparable pending and closed sales is fundamental in order to find success. The active inventory has already started to increase despite red-hot demand. This is due primarily to the fact that many sellers cannot help themselves. They ignore the comparable data and reach for the moon, overpricing their homes and sitting on the market without success.
Active Inventory: The active inventory increased by 5% in the past couple of weeks.
The active listing inventory added an additional 207 homes in the past two-weeks, a 5% increase, and now sits at 3,981. The inventory will cross the 4,000 home threshold this week and will continue its climb through the summer. The inventory is actually increasing at a faster clip than last year at this time. Moreover, it is occurring at a time when demand is hot. It is too early to tell if this trend will continue, enabling the inventory to surpass last year’s heights.
Last year at this time, there were 4,448 homes on the market, 12% more than today. The year over year difference has slowly been diminishing.
Demand: Demand increased by 58% in the past month.
Demand, the number of new pending sales over the prior month, has exploded onto the scene and increased by 839 pending sales over the past 4-weeks and now totals 2,286, its highest level since November. Demand will continue to rapidly increase from now through April and will peak sometime between April and May.
Last year at this time, demand was at 2,430 pending sales, 117 more than today, or 5%. This is primarily due to fewer homes on the active listing market since the start of the year. As more homes come enter the fray during the Spring Market, demand will achieve similar levels compared to 2017.
The expected market time, the amount of time it would take for a home that comes onto the market today to be placed into escrow, decreased from 64 to 52 days in the past two weeks, a hot, seller’s market.
Luxury End: Luxury demand dramatically increased in the past two weeks.
In the past two weeks, demand for homes above $1.25 million increased from 241 to 336 pending sales, up an incredible 39%. The luxury home inventory increased from 1,429 homes to 1,540, an 8% rise in the past two-weeks. Expect both demand and the inventory to rise throughout the Spring Market. The current expected market time for all homes priced above $1.25 million plunged from 178 days to 138. The luxury range is heating up, but nothing like the lower ranges with an expected market time of just 36 days for homes below $1 million.
For homes priced between $1.25 million and $1.5 million, the expected market time dropped from 112 to 81 days. For homes priced between $1.5 million and $2 million, the expected market time decreased from 145 to 122 days. For homes priced between $2 million and $4 million, the expected market time decreased from 221 days to 163. In addition, for homes priced above $4 million, the expected market time dipped from 355 to 349 days. At 349 days, a seller would be looking at placing their home into escrow around the end of January 2019.
Orange County Housing Market Summary:
- The active listing inventory increased by 207 homes in the past two weeks, up 5%, and now totals 3,981. Expect the inventory to increase from now through mid-Summer. Last year, there were 4,448 homes on the market, 467 more than today.
- There are 29% fewer homes on the market below $500,000 today compared to last year at this time and demand is down by 20%. Fewer and fewer homes and condominiums are now priced below $500,000. This price range is slowly disappearing.
- Demand, the number of pending sales over the prior month, skyrocketed in the past two weeks by adding an additional 522 pending sells, up 30%. The average pending price is $909,074.
- The average list price for all of Orange County remained at $1.8 million over the past two weeks. This number is high due to the mix of homes in the luxury ranges that sit on the market and do not move as quickly as the lower end.
- For homes priced below $750,000, the market is HOT with an expected market time of just 33 days. This range represents 36% of the active inventory and 57% of demand.
- For homes priced between $750,000 and $1 million, the expected market time is 43 days, a hot seller’s market (fewer than 60 days). This range represents 17% of the active inventory and 21% of demand.
- For homes priced between $1 million to $1.25 million, the expected market time is 54 days, a hot seller’s market.
- For luxury homes priced between $1.25 million and $1.5 million, the expected market time dropped from 112 days to 81. For homes priced between $1.5 million and $2 million, the expected market time decreased from 145 to 122 days. For luxury homes priced between $2 million and $4 million, the expected market time decreased from 221 days to 163 days. For luxury homes priced above $4 million, the expected market time fell from 355 to 349 days.
- The luxury end, all homes above $1.25 million, accounts for 39% of the inventory and only 14% of demand.
- The expected market time for all homes in Orange County dropped from 64 days to 52 in the past two weeks, a hot seller’s market (fewer than 60 days). From here, we can expect the market time to drop a little bit more by the end of the month.
- Distressed homes, both short sales and foreclosures combined, make up only 1% of all listings and 2.3% of demand. There are only 16 foreclosures and 23 short sales available to purchase today in all of Orange County, that’s 39 total distressed homes on the active market, dropping by 8 in the past two weeks and reaching its lowest level since the very beginning of the Great Recession. Last year there were 103 total distressed sales, 164% more than today.
- There were 1,799 closed residential resales in January, down by 9% from January 2017’s 1,904 closed sales. January marked a 21% drop from December 2017. The sales to list price ratio was 97.6% for all of Orange County. Foreclosures accounted for just 1.1% of all closed sales and short sales accounted for 0.8%. That means that 98.1% of all sales were good ol’ fashioned sellers with equity.