Orange County Housing Report:
“Running Out of Time”
The window of opportunity is closing for sellers to find success
Orange County Housing Report October 24th, 2017
Last Call for 2017: Four more weeks until the slowest season of the year starts for housing.
Pass the turkey! It is right around the corner… cranberry sauce, gravy, stuffing, mashed potatoes, cornbread, glazed carrots, green beans, pumpkin pie, honey baked ham, and, of course, plenty of turkey. Thanksgiving is a little over a month away. There are plenty of signs that the holiday season is right around the corner. The days are getting shorter. Professional installers are already putting up holiday lights on homes and businesses. Stores are gearing up for their busiest time of the year.
The weekend prior to Thanksgiving is the LAST HURRAH before the housing market transitions from the Autumn Market to the Holiday/Winter Market. From there, real estate activity takes a back seat to the all of the distractions of the holidays. Demand comes to a crawl, dropping by about 25% from where it is today. The active inventory drops considerably, shedding about 25% as well. Fewer and fewer homeowners will opt to sell and many unsuccessful sellers will throw in the towel and pull their homes off the market, choosing to wait until the much more active spring selling season.
There will still be plenty of new escrows opened prior to transitioning into the season of yuletide greetings, but that window of opportunity will close fast. Before you know it, real estate will take a back seat to holiday decorations, shopping, company parties, and family gatherings.
Many REALTORS® assert that they are busy during the month of December. There typically is an uptick in closed sales in comparing December to November numbers. This uptick is due to a slight surge in new pending sales from now through Thanksgiving. Those pending sales close during the month of December.
While there may be more closed sales in December, the number of new pending sales, demand, drops like a rock. Demand drops dramatically from mid-November until it bottoms with the start to the New Year. The market typically does not shake off the effects of the holidays until around the third week of January. It will not be until the end of January when Orange County housing will start to rev its massive engine and demand will rise considerably. As a result, January and February are cyclically the slowest months of the year in terms of closed sales.
The active inventory will drop from now through the end of the year and will pick up steam from Thanksgiving week on. It too will reach a bottom on January 1st. Typically, the inventory does not really start to build until the beginning of March. With so few homes on the market today, the start to 2018 is expected to be extremely anemic.
WARNING to Buyers: Contrary to want many think, the holidays are NOT a time when sellers are suddenly desperate; as a result, you will not get a “deal.” There are not enough homes on the market to begin with. The few that do remain will not be giving away the farm to make something happen just because it is the holidays.
WARNING to Sellers: You are running out of time before the market slows significantly and your chances of success drop.
Active Inventory: The active inventory dropped by 3% over the past couple of weeks.
The active listing inventory shed 167 homes in the past two weeks and now sits at 5,215, the lowest level since the start of April. The theme for the 2017 housing market has been “a serious lack of FOR SALE signs.” Unfortunately, it is not going to get any better any time soon. The active inventory will continue to drop for the remainder of the year.
Last year at this time, there were 6,337 homes on the market, 1,122 additional homes, or 22% more than today.
Demand: Demand decreased by 1% in the past couple of weeks.
Demand, the number of homes placed into escrow within the prior month, decreased by 33 pending sales, or 1%, in the past two-weeks, and now totals 2,393. It is the lowest level since the start of January of this year. Demand will remain close to this level for the next month before it starts its seasonal drop from Thanksgiving week through the end of 2017.
Last year at this time, demand was at 2,480 pending sales, 87 more than today. Part of the difference is due to significantly fewer homes available to purchase today compared to last year.
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, dropped from 67 to 65 days, a slight seller’s market where housing still tilts in the sellers favor and appreciation slows. Last year’s expected market time was at 77 days.
Luxury End: Luxury supply plummets while demand remains the same.
In the past two weeks, demand for homes above $1.25 million dropped from 303 to 302 pending sales. That is solid, indicating that the luxury market will most likely remain stable from now through Thanksgiving similar to the lower price ranges. The luxury home inventory decreased from 1,887 homes to 1,818, a 4% drop, in the past two-weeks. The luxury inventory will continue to drop through the end of the year. Since demand really did not change and the inventory dropped, the expected market time for all homes priced above $1.25 million dropped from 187 days to 181.
For homes priced between $1.25 million and $1.5 million, the expected market time increased from 101 to 111 days. For homes priced between $1.5 million and $2 million, the expected market time decreased from 178 to 173 days. For homes priced between $2 million and $4 million, the expected market time dropped from 280 days to 218 days. In addition, for homes priced above $4 million, the expected market time increased from 316 to 326 days. At 326 days, a seller would be looking at placing their home into escrow around mid-September of 2018.
Orange County Housing Market Summary:
- The active listing inventory decreased by 167 homes in the past couple of weeks, and now totals 5,215. The trend is down for the remainder of the year. Last year, there were 6,337 homes on the market, 1,122 more than today.
- There are 38% fewer homes on the market below $500,000 today compared to last year at this time and demand is down by 17%. 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, decreased by 33 homes in the past couple of weeks, down 1%, and now totals 2,393. The average pending price is $872,219.
- The average list price for all of Orange County remained at $1.7 million. 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 43 days. This range represents 40% of the active inventory and 61% of demand.
- For homes priced between $750,000 and $1 million, the expected market time is 55 days, a hot seller’s market (less than 60 days). This range represents 17% of the active inventory and 20% of demand.
- For homes priced between $1 million to $1.25 million, the expected market time is 88 days, an extremely slight seller’s market with very slow appreciation.
- For luxury homes priced between $1.25 million and $1.5 million, the expected market time increased from 101 days to 111. For homes priced between $1.5 million and $2 million, the expected market time decreased from 178 to 173 days. For luxury homes priced between $2 million and $4 million, the expected market time decreased from 280 days to 218 days. For luxury homes priced above $4 million, the expected market time increased from 316 to 326 days.
- The luxury end, all homes above $1.25 million, accounts for 35% of the inventory and only 13% of demand.
- The expected market time for all homes in Orange County decreased in the past couple of weeks from 67 days to 65 days, a tepid seller’s market (60 to 90 days). From here, we can expect the market time to slowly rise as housing makes its way through the final month of the Autumn Market.
- Distressed homes, both short sales and foreclosures combined, make up only 1.3% of all listings and 2.5% of demand. There are only 27 foreclosures and 40 short sales available to purchase today in all of Orange County, that’s 67 total distressed homes on the active market, decreasing by 14 in the past two weeks. Last year there were 133 total distressed sales, 99% more than today.
- There were 2,746 closed residential resales in September, nearly identical to the 2,736 closed sales in September 2016. September marked a 12% drop from August 2017, part of a normal autumn housing transition. The sales to list price ratio was 98% for all of Orange County. Foreclosures accounted for just 0.6% of all closed sales and short sales accounted for 0.9%. That means that 98.5% of all sales were good ol’ fashioned sellers with equity.