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Orange County Housing Report November 7th, 2017

Orange County Housing Report:

“Hot in November?!?!”

With such limited supply, this is the hottest November housing
market in years.

Orange County Housing Report November 7th, 2017

 

Hot November Housing: With an expected market time of just 61 days, the Orange County housing market is still firing on all cylinders.

Buyers cannot get a break from the relentlessly hot housing market in Orange County. For homes priced below $1 million, there are simply not enough homes to satisfy the sea of buyers attempting to purchase. Moreover, November 2017 is exceptionally hot for this time of the year.

Just because Starbucks now has festive cups and holiday commercials monopolize the airwaves does not mean that the housing market slows. In fact, during this time of the year, if a home is priced right and in great condition, it will procure multiple offers, often times selling for above its list price. This will continue through Thanksgiving when the market transitions to the slower Holiday/Winter Market.

What is really at play here is that there are plenty of buyers who still want to purchase, yet fewer homes are coming on the market and many homeowners who have been on the market for quite some time are giving up and throwing in the towel in anticipation of the slower holiday season. The active listing inventory drops like a rock and demand remains steady. With a dropping supply and steady demand, the expected market time dips, and the market gets hotter.

 

Within the last couple of weeks, the expected market time dropped from 65 days to 61. Housing is actually getting stronger. It typically does from October through mid-November. The difference this year is that the market was already hot and somebody just turned up the heat.

Within the past couple of weeks, the active inventory shed 6%, dropping by 337 homes, the largest drop so far this year. On the other hand, demand, the number of new pending sales over the prior month, increased by 16, or 1%. That is precisely why the expected market time plunged from 65 to 61 days in such a short period. The supply of homes dropped and demand increased. At 61 days, this is the hottest the market has been in November since 2012, the beginning of the housing recovery.

Buyers are feeling the pinch too, as the number of homes on the market is evaporating before their very eyes. For the sellers that do remain, open houses are still packed, there are plenty of showings, and attractively priced homes in great condition are entertaining offers within hours of installing the FOR SALE sign in their yards. It is frustrating to be a buyer and glorious to be a seller.

In spite of the fact that Thanksgiving is just a couple of weeks away, November 2017 is going to be very hot for housing.

Tax Reform and Its Impact on Housing: California is going to be hit hard by the proposed tax reform. 

Many are asking how the proposed tax reform is going to affect the housing market right here in Orange County. Here’s how it will impact real estate:

  • Lowers the mortgage interest deduction cap from $1 million to $500,000 (on all new purchases)
  • Eliminates the mortgage interest deduction on second homes
  • Homeowners would no longer be able to deduct the interest on home equity loans
  • Eliminates state and local income tax deductions
  • Caps property tax deductions at $10,000
  • Extends the qualification period for exclusion of capital gains tax on the sale of a primary home from two out of the last five years to five out of the last eight years

Remember, at this point this is just a proposal from the House Ways and Means Committee. However, the House is attempting to pass a tax reform bill by Thanksgiving in order for it to move its way through the Senate and onto President Trump’s desk for signing by year’s end.

The tax proposal would hurt homeownership and remove incentives for buyers to purchase. Its impact would be significant and has the potential to shake up the housing industry especially in California and Orange County where the median sales price is much higher than the rest of the country.

Active Inventory: The active inventory dropped by 6% over the past couple of weeks.

The active listing inventory shed 337 homes in the past two weeks and now sits at 4,878, a 6% drop. It is the largest drop so far this year, bringing the inventory to the lowest level since March. The inventory will continue to drop through the end of the year, which will result in a start to the New Year with less than 4,000 homes, the second lowest inventory behind 2013. On January 1, 2013, there were only 3,249 homes on the market. This year started with 4,071 homes.

Last year at this time, there were 5,955 homes on the market, 1,077 additional homes, or 22% more than today.

Demand:  Demand increased by 1% in the past couple of weeks.

Demand, the number of homes placed into escrow within the prior month, increased by 16 pending sales, or 1%, in the past two-weeks, and now totals 2,409. 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 2,468 pending sales, 59 more than today. That is not that big of a difference considering that there are far fewer choices on the market today compared to one year ago.

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 65 to 61 days, on the cusp of a hot seller’s market. Last year’s expected market time was at 72 days.

Luxury End:  Luxury supply plummets while demand rises.

In the past two weeks, demand for homes above $1.25 million increased from 302 to 325 pending sales, up 8%. That is a solid improvement and a clear indicator that the luxury market is making its final push to close out the year strong. The luxury home inventory decreased from 1,818 homes to 1,712, a 6% drop in the past two-weeks. The luxury inventory will continue to drop through the end of the year. Since demand increased and the inventory dropped, the expected market time for all homes priced above $1.25 million dropped from 181 days to 158.

For homes priced between $1.25 million and $1.5 million, the expected market time decreased from 111 to 100 days. For homes priced between $1.5 million and $2 million, the expected market time decreased from 173 to 154 days. For homes priced between $2 million and $4 million, the expected market time dropped from 218 days to 164 days. In addition, for homes priced above $4 million, the expected market time increased from 326 to 424 days. At 424 days, a seller would be looking at placing their home into escrow around the start of January 2019.

 

Orange County Housing Market Summary:

  • The active listing inventory decreased by 337 homes in the past couple of weeks, the largest drop of the year, and now totals 4,878. The trend is down for the remainder of the year. Last year, there were 5,955 homes on the market, 1,077 more than today.
  • There are 36% fewer homes on the market below $500,000 today compared to last year at this time and demand is down by 16%. 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, increased by 16 homes in the past couple of weeks, up 1%, and now totals 2,409. The average pending price is $879,146.
  • 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 40 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 51 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 85 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 decreased from 111 days to 100. For homes priced between $1.5 million and $2 million, the expected market time decreased from 173 to 154 days. For luxury homes priced between $2 million and $4 million, the expected market time decreased from 218 days to 164 days. For luxury homes priced above $4 million, the expected market time increased from 326 to 424 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 65 days to 61 days, a tepid seller’s market (60 to 90 days). From here, we can expect the market time to remain relatively flat, rising slightly by year’s end.
  • Distressed homes, both short sales and foreclosures combined, make up only 1.2% of all listings and 2.3% of demand. There are only 20 foreclosures and 38 short sales available to purchase today in all of Orange County, that’s 58 total distressed homes on the active market, decreasing by 9 in the past two weeks. Last year there were 133 total distressed sales, 129% more than today.
  • There were 2,543 closed residential resales in October, down by 1% from October 2016’s 2,575 closed sales. October marked a 7% drop from September 2017, normal for the Autumn Market. The sales to list price ratio was 98.2% for all of Orange County. Foreclosures accounted for just 0.7% of all closed sales and short sales accounted for 1.2%. That means that 98.1% of all sales were good ol’ fashioned sellers with equity.

 

 

 

 

 

Orange County Housing Report October 24th, 2017

Orange County Housing Report:

“Running Out of Time”

The window of opportunity is closing for sellers to find success
in 2017.

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.

 

 

 

 

 

 

 

 

 

Orange County Housing Report October 11th, 2017

Orange County Housing Report:

“I’m Going to Wait to Buy”

Many potential buyers are unaware that there is a significant cost in waiting to purchase.

Orange County Housing Report October 11th, 2017

 

Cost of Waiting: Today’s 3.85% interest rate is a gift in historical context.
There have not been enough homes on the market for over five years now. This trend has been reinforced in 2017 with 7% fewer FOR SALE signs compared to last year. Buyers have been tripping over each other in search of their piece of the “American Dream.” The lower the price range, the harder it has been to secure a home.

It has been difficult and frustrating to be a buyer, and that has not changed in years; and, it is not going to change in 2018 either. It is easy to empathize with buyers, especially those with smaller down payments. Buyers cannot help but fall in love with a home, write an offer, and then find out that they are one of ten buyers bidding on the same home. They have a 10% chance of being the winning bidder. They are instructed not to fall in love with a home until they are the winning bid. That is easier said than done. Buyers are human beings. They write offers to purchase a home because it is a good fit for their family. They visualize how their furniture will be situated in their potential new home. They visualize where they will entertain the extended family on the 4th of July and Thanksgiving. They visualize life. How are they supposed to strip the process of finding a home from all of their emotions?

Most buyers have been busy writing offer after offer, falling in love with home after home. The process can be grueling and exhausting. It does not mean that it cannot be done; it is just not going to be easy by any stretch of the imagination. Tapping out is not the answer. As frustrating as the process has been, it is not going to improve anytime soon. Taking a short break is understandable, but buyers really need to talk themselves out of saying, “I’m going to wait to buy.”

What exactly are they waiting for? The inventory of homes is not forecasted to significantly rise for a very long time. Buyers will be facing limited choices for the long haul unless they are looking for homes in the luxury end. There are plenty of choices above $1.5 million, but that is simply not the typical buyer. The only reason there are more choices for luxury housing is that there are fewer buyers that can afford the high sticker prices. For the rest of the market, there are not enough options to purchase and demand is red hot.

So, what happens to buyers that do wait?  The biggest risk is the eventual rise in interest rates. It seems that the experts and prognosticators have been calling for a rise in interest rates for a few years running; yet, the increases have yet to materialize. Everybody needs to understand that it took quite a bit of manipulation by central banks around the world to get rates down to these unbelievable levels. Rates will not drop further. Instead, as the central banks, starting with the U.S. Federal Reserve, reverse course on their monetary policies, rates will become more volatile and will begin to rise.

Will rates remain low for the coming year? It is quite likely; however, “don’t look a gift horse in the mouth.” This interest rate environment is a total gift from international central banks and our Federal Reserve. It will not be around forever.

Down the road, many will look back at these interest rates and wish they had pulled the trigger and locked in for the long haul. When interest rates rise just 1% from where they are today, a $500,000 mortgage will cost an additional $297 per month or $3,564 per year. For a $750,000 mortgage, a buyer is looking at paying an additional $445 per month or $5,340 per year. Over a five-year period the increase accumulates to $26,700; and, over the 30-year life of the loan, the homeowner will have paid an additional $160,020.

It seems that everybody has become quite accustomed to today’s low rates. For context, the 30-year fixed rate peaked at over 18% back in 1981 and it has been trending down ever since. In 1990, rates were at 10%. In 1980, it was 8%. Just prior to the Great Recession, mortgage rates had fallen to 6.35%. After tremendous manipulation by the Federal Reserve, rates dropped all the way down to 3.35% by the end of 2012, fueling the bonanza in housing that everybody is feeling today. Rates have hit a bottom and are only expected to rise from here. It’s not a matter of IF they rise; it’s more a matter of WHEN.

For buyers, it is not wise to gamble on rates. They are low today and the Orange County housing market is expected to continue to appreciate through 2018. The longer a buyer waits, the higher the mortgage payment will be down the road.

Active Inventory: The active inventory dropped by 2% over the past couple of weeks.
The active listing inventory shed 111 homes in the past two weeks and now sits at 5,382. There really are not that many homes on the market compared to the last few years. Only in 2012 were there fewer homes on the market to start October. The active inventory will continue to fall through the remainder of the year, picking up steam after Thanksgiving, the start of the Holiday/Winter Market.

Last year at this time, there were 6,472 homes on the market, 1,090 additional homes, or 20% more than today.

Demand:  Demand decreased by 4% in the past couple of weeks.
Demand, the number of homes placed into escrow within the prior month, decreased by 94 pending sales, or 4%, in the past two-weeks, and now totals 2,426. Part of this drop is seasonal. Demand tends to drop a bit during the Autumn Market with both the Spring and Summer Markets in the rearview mirror. Additionally, fewer homes are coming on the market compared to the last few years for this time of year as well. Within the last month, 7% fewer FOR SALE signs have been placed in homeowners’ yards compared to 2016. With fewer choices, the number of pending sales has taken a hit.

Last year at this time, demand was at 2,693 pending sales, 267 more than today, or 11% higher.

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, rose from 65 to 67 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 72 days at the beginning of October.

Luxury End:  Luxury supply and luxury demand dropped in the past couple of weeks.
In the past two weeks, demand for homes above $1.25 million decreased from 318 to 303 pending sales, a 5% drop. Since reaching 385 at the end of August, demand has dropped by 21%, representing a major shift in the Autumn Luxury Market. The luxury home inventory decreased from 1,959 homes to 1,887, a 4% drop, in the past two-weeks. As a result, the expected market time for all homes priced above $1.25 million slowed slightly from 185 days to 187. Luxury inventory and luxury demand will continue to drop through the end of the year.

For homes priced between $1.25 million and $1.5 million, the expected market time increased from 99 to 101 days. For homes priced between $1.5 million and $2 million, the expected market time increased from 169 to 178 days. For homes priced between $2 million and $4 million, the expected market time increased from 264 days to 280 days. In addition, for homes priced above $4 million, the expected market time decreased from 424 to 316 days. At 316 days, a seller would be looking at placing their home into escrow around the end of August of 2018.

Orange County Housing Market Summary:

  • The active listing inventory decreased by 111 homes in the past couple of weeks and now totals 5,382. The trend is down for the remainder of the year. Last year, there were 6,472 homes on the market, 1,090 more than today.
  • There are 37% fewer homes on the market below $500,000 today compared to last year at this time and demand is down by 27%. 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 94 homes in the past couple of weeks, down 4%, and now totals 2,426. The average pending price is $870,430.
  • 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 42 days. This range represents 39% of the active inventory and 62% of demand.
  • For homes priced between $750,000 and $1 million, the expected market time is 57 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 95 days, a balanced market that does not favor a buyer or seller.
  • For luxury homes priced between $1.25 million and $1.5 million, the expected market time increased from 99 days to 101. For homes priced between $1.5 million and $2 million, the expected market time increased from 169 to 178 days. For luxury homes priced between $2 million and $4 million, the expected market time increased from 264 days to 280 days. For luxury homes priced above $4 million, the expected market time decreased from 424 to 316 days.
  • The luxury end, all homes above $1.25 million, accounts for 35% of the inventory and only 12% of demand.
  • The expected market time for all homes in Orange County increased in the past couple of weeks from 65 days to 67 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 Autumn Market.
  • Distressed homes, both short sales and foreclosures combined, make up only 1.5% of all listings and 2% of demand. There are only 34 foreclosures and 47 short sales available to purchase today in all of Orange County, that’s 81 total distressed homes on the active market, decreasing by 7 in the past two weeks. Last year there were 128 total distressed sales, 58% more than today.
  • There were 2,733 closed residential resales in September, nearly identical to the 2,736 closed sales in September 2016. September marked a 12% drop over August 2017, part of a normal autumn housing transition. The sales to list price ratio was 98.1% 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.

Orange County Housing Report September 26th, 2017

Orange County Housing Report: My Home’s Not Selling!!!

Even though the housing market is hot, there are plenty of homes that are sitting with no success.

 

Orange County Housing Report September 26th, 2017

 

Sitting on the Market: 43% of the active listing inventory has been on the market for over two months.

The excitement is in the air. A homeowner sits across from a REALTOR® and signs all of the contracts. Their home is officially on the market. With eager anticipation, they clean their home from top to bottom and turn on all of the lights; the first potential buyer is coming to look. After the buyer tours the home, the sellers return and wonder whether the buyers liked it enough to bring an offer. After all, the market is incredibly hot, right? Yet, there is no offer. Showing after showing, day after day, week after week, there are no offers. Moreover, the number of showings has trickled down to only a couple per week after three months of market exposure. What is going on?

Everybody has been talking about how Orange County housing has been red-hot; however, many sellers are not finding success. An incredible 43% of all homes that are on the active listing inventory have been exposed to the market for more than two months. Of course, this is standard for luxury real estate, but there are plenty of homes in the lower ranges having trouble as well.  Nearly a third of all homes priced below $750,000 have been FOR SALE for more than two months and are still waiting for the right buyer to bring a mutually acceptable offer to purchase. For homes priced between $750,000 and $1 million, it grows to 36%; the higher the price, the harder it is to sell.

 

What gives? If housing is so unbelievably hot, why are many sellers struggling to hit pay dirt? Of course, most everybody immediately thinks it is the price. In most cases, that is only part of the issue.

Buyers are human. They like to purchase new. They prefer a home that is truly “turnkey” where all they have to do is move in. The reality is there is not enough brand new product in Orange County. Yet, even brand new is not turnkey. They have to decide on upgrades through the builder, and, after the closing, they have to purchase and install window coverings and design and complete all of the landscaping. There is a lot of effort that goes into a new home purchase.

All of the HGTV programs, from Flip or Flop to Property Brothers, have helped create an expectation and desire for buyers to purchase homes that look like a model. As long as the price is right, the closer a home looks to model perfect with all of the bells and whistles, the faster the home will fly off the market. Unfortunately, not every home shows like a model.

Many homes are dated. If a home has a kitchen that is more than 10 years old, it is starting to look worn and dated. If the grass has brown patches and the planters are sprouting weeds, the yard is looking worn and dated. Vinyl flooring, popcorn ceilings, stained carpet, single-paned windows, scuffed walls, aluminum blinds, ceramic tile in the kitchen, original bathroom hardware, water stained cabinets, etcetera, all contribute to a home feeling used and worn. Throw in a pet with all of the odors, hair, and damage, and it is no wonder that sellers are having a hard time selling.

Many investors have flipped homes for a profit. How do they do this? They do this by purchasing a home for a low price that needs quite a bit of work, and then fixing it up and selling it for much more, making a handsome profit. They install new granite counters, flooring, paint, light fixtures, cabinets, scrape popcorn ceilings, and install new sod, plants, flowers, and mulch. Basically, they make a residential resale look and feel like a model. A little professional staging and the investor is able to make a healthy profit.

In order to compete and fetch top dollar, a good ol’ fashioned homeowner who has lived in their home for years must invest in their home by approaching selling like a flipper. They too can make their home look like a model. Taking care of deferred maintenance will afford buyers the ability to visualize moving in right away. They will not have to address cosmetic issues after closing. Buyers are willing to pay a premium for homes that are turnkey and look like a model. The sellers will net more money by addressing the deferred maintenance and their home will fly off the market.

If a seller does not address the deferred maintenance, then the price must be adjusted accordingly. Buyers subtract a lot more than it costs to take care of any deferred maintenance, which ultimately nets the seller less money in the sale of their home.

WARNING TO SELLERS: price is the most important factor in successfully selling. Overprice in a hot seller’s market, and you still won’t sell. Instead, you will waste valuable market time. Success takes into consideration price, condition, and location. Sellers are able to control both the price and condition in order to achieve their goal in selling.

Active Inventory: The active inventory dropped by 3% over the past couple of weeks.
The active listing inventory shed 146 homes in the past two weeks and now sits at 5,493. The inventory has not been this low since the start of May; and, for this time of the year, the start of autumn, it has not been this low since 2012. The active inventory will continue to trend down through the remainder of the year, picking up steam after Thanksgiving, the start of the Holiday/Winter Market.

Last year at this time, there were 6,786 homes on the market, 1,293 additional homes or 24% more than today.

 

Demand:  Demand decreased by 4% in the past couple of weeks.
Demand, the number of homes placed into escrow within the prior month, decreased by 104 pending sales, or 4%, in the past two-weeks and now totals 2,520. The Orange County housing market is experiencing a higher than the normal drop for this time of the year because of a serious lack of homes coming on the market right now. Within the last month, 10% fewer homes have come on the market this year compared to 2016. Fewer available homes are cutting into the number of potential pending sales, which is affecting demand.

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, rose from 64 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 72 days at the end of September.

Last year at this time, demand was at 2,812 pending sales, 292 more than today, or 12% higher.

Luxury End:  Luxury demand tumbled by 11% in the past couple of weeks, while the inventory dropped by only 1%.
In the past two weeks, demand for homes above $1.25 million decreased from 358 to 318 pending sales, an 11% drop, representing a major shift in the luxury market. The luxury home inventory decreased from 1,979 homes to 1,959, a 1% drop. As a result, the expected market time for all homes priced above $1.25 million increased from 166 days to 185 days. The luxury inventory and demand will continue to drop through the end of the year.

For homes priced between $1.25 million and $1.5 million, the expected market time increased from 90 to 99 days. For homes priced between $1.5 million and $2 million, the expected market time decreased from 171 to 169 days. For homes priced between $2 million and $4 million, the expected market time increased from 198 days to 264 days. In addition, for homes priced above $4 million, the expected market time decreased from 460 to 424 days. At 424 days, a seller would be looking at placing their home into escrow around Thanksgiving of next year.

 



Orange County Housing Market Summary:

  • The active listing inventory decreased by 146 homes in the past couple of weeks and now totals 5,493. The trend is down for the remainder of the year. Last year, there were 6,786 homes on the market, 1,293 more than today.
  • There are 43% fewer homes on the market below $500,000 today compared to last year at this time and demand is down by 28%. 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 104 homes in the past couple of weeks, down 4%, and now totals 2,825. The average pending price is $847,650.
  • 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 41 days. This range represents 38% of the active inventory and 62% of demand.
  • For homes priced between $750,000 and $1 million, the expected market time is 57 days, a hot seller’s market (less than 60 days). This range represents 18% of the active inventory and 20% of demand.
  • For homes priced between $1 million to $1.25 million, the expected market time is 97 days, a balanced market that does not favor a buyer or seller.
  • For luxury homes priced between $1.25 million and $1.5 million, the expected market time increased from 93 days to 99. For homes priced between $1.5 million and $2 million, the expected market time decreased from 171 to 169 days. For luxury homes priced between $2 million and $4 million, the expected market time increased from 185 days to 264 days. For luxury homes priced above $4 million, the expected market time decreased from 460 to 424 days.
  • The luxury end, all homes above $1.25 million, accounts for 36% of the inventory and only 12% of demand.
  • The expected market time for all homes in Orange County increased in the past couple of weeks from 64 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 Autumn Market.
  • Distressed homes, both short sales and foreclosures combined, make up only 1.6% of all listings and 2.1% of demand. There are only 35 foreclosures and 53 short sales available to purchase today in all of Orange County, that’s 88 total distressed homes on the active market, increasing by 1 in the past two weeks. Last year there were 120 total distressed sales, 36% more than today.
  • There were 3,116 closed sales in August, a 12% increase over July 2017 and a 1.3% increase over August 2016. The sales to list price ratio was 98% for all of Orange County. Foreclosures accounted for just 0.8% of all closed sales and short sales accounted for 0.7%. That means that 98.5% of all sales were good ol’ fashioned equity sellers.

 

 

 

 

 

 

 

Orange County Housing Report August 4th, 2017

Orange County Housing Report: A Mid-Year Checkup

Buyers and sellers often rely on the price per square foot as a way to determine the value of a home, but it is just not accurate.

Orange County Housing Report August 4th, 2017

Price Per Square Foot: Do not rely on the price per square foot as a reliable method to determine a home’s value.
Everybody is looking for a shortcut in establishing the value of a home. Online home valuation tools are now everywhere, Zillow being the most popular. They simply are not accurate. If you can find the fine print and have a math degree to determine what in the world they are saying, these tools are merely approximations of value and frequently have significant errors. If going online and plugging in an address does not work, what about utilizing the price per square foot to secure the value of a home? Unfortunately, it too is just another unreliable shortcut.

The average price per square foot varies from city to city, neighborhood to neighborhood, street to street, and even home to home. For all of Orange County, the price per square foot in June was $440. In May, it was $459. No, there was not a 4% drop in value from May to June. Instead, it illustrates that this data point cannot be relied upon to determine the value of a home. Just as the median sales price is a poor indicator of the precise increase or decrease in value, the price per square foot is unquestionably as unreliable.

Orange County Housing Report August 4th, 2017

Applying the average price per square foot to different sized homes to determine the value results in a major error in comparing it to the true average sales price. In Orange County, a 3,000 square foot home comes close but is still $29,000 off, a 2% error. In breaking it down by the city, the severity of the errors is similar. In Mission Viejo, for example, there is quite a discrepancy in both the low end and the higher end. In Newport Beach, prices vary considerably for smaller sized homes.

Overall, the price per square foot should not be used to isolate the true value of a home. It can be used, over time, as a gauge to determine which direction home values are moving. Some months it is up, and other months it is down. Yet, over the course of a year, the values will start to paint a picture that illustrates the direction of the market.

So, why can’t the price per square foot be used to zero in on the value of a home? There are way too many nuances that go into the Fair Market Value of a home. The number of bedrooms and bathrooms, lot size, usable lot, square footage, location, pool, spa, upgrades, amenities, condition, main floor bedroom, number of stories, school zone, privacy, architecture, floor plan design, view, garages, street parking, proximity to the beach, and so on, all determine a home’s value. Does the home back to a busy street? Is it located on a cul-de-sac that has homes on only one side of the street? Is there street noise? The list of questions goes on and on.

Square footage alone cannot determine if a home has been updated, upgraded, or is in turnkey condition. For example, four of the exact same Madrid Del Lago single level plans sold in Mission Viejo over the past 90-days, all 2,133 square feet. The sold prices varied from $838,000 ($392 per square foot) to $997,500 ($468 per square foot), a $159,500 difference. Quite obviously, square footage alone does not provide enough information to arrive at the price of a home.

Professional REALTORS® and appraisers take a home and compare it to similar pending and recently sold homes, adjusting the value up and down based upon all of the differences. The price per square foot is not really a factor. There are no shortcuts. The market analysis that professionals prepare is by far the most accurate method for determining the value of a home.

Active Inventory: The active inventory may have already peaked after declining by 16 homes in the past couple of weeks.
The active listing inventory shed 16 homes and now sits at 5,967, the first drop since the end of January. Sixteen homes may not be a lot, but it illustrates how the active inventory is having a real hard time pushing past the 6,000 home mark. And, it looks as if that is not going to occur at all this year. Typically, the inventory peaks around mid-August, but not this year. The theme for 2017 has been fewer homeowners listing their homes for sale. There have been 10% fewer homes to come on the market over the past month, and 7% fewer overall this year. As a result, it looks as if the Orange County active inventory may have already peaked, a bit early.

Last year at this time, there were 7,317 homes on the market, 1,350 additional homes or 23% more than today.

Orange County Housing Report August 4th, 2017

Demand:  Demand increased by 5 pending sales in the past couple of weeks.
Demand, the number of homes placed into escrow within the prior month, increased by 5 pending sales in the past two-weeks and now totals 2,835, nearly the same. Demand is up year over year in every price range except the entry-level market, homes priced below $500,000. With 39% fewer homes available below $500,000 compared to this time last year, predictably, demand is off by 19% year over year.

Last year at this time, there were 31 additional pending sales, totaling 2,866. The current expected market time remained the same over the past couple of weeks at 63 days, a much hotter market than last year’s 77 days. At 63 days, the market is no longer a HOT seller’s market, but a tepid seller’s market with muted appreciation.

Luxury End:  Luxury demand increased by 13% in the past couple of weeks and the inventory fell by 1%.
In the past two weeks, demand for homes above $1.25 million increased from 329 to 373 pending sales, a 13% rise, the highest level since mid-May. The luxury home inventory decreased from 2,089 homes to 2,065, down 1%.  This surge has been isolated to homes between $1.25 million and $2 million.

For homes priced between $1.25 million and $1.5 million, the expected market time decreased from 123 to 101 days. For homes priced between $1.5 million to $2 million, the expected market time dropped from 176 to 135 days. In addition, for homes priced above $2 million, the expected market time increased from 269 days to 280 days. At 269 days, a seller would be looking at placing their home into escrow around the beginning of May of next year.

Orange County Housing Report August 4th, 2017

Orange County Housing Market Summary:

  • The active listing inventory decreased by 16 homes in the past couple of weeks and now totals 5,967, nearly the same. The inventory is having a real issue reaching 6,000 homes this year and may have already peaked a couple of weeks ago. Last year, there were 7,317 homes on the market, 1,350 more than today.
  • There are 39% fewer homes on the market below $500,000 today compared to last year at this time and demand is down by 19%. 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, increased by five homes in the past couple of weeks, and now totals 2,835. The average pending price is $842,718.
  • The average list price for all of Orange County remained at $1.6 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 40 days. This range represents 39% of the active inventory and 62% of demand.
  • For homes priced between $750,000 and $1 million, the expected market time is 59 days, a hot seller’s market (less than 60 days). This range represents 18% of the active inventory and 19% of demand.
  • For homes priced between $1 million to $1.25 million, the expected market time is at 94 days, a balanced market that does not favor a buyer or seller.
  • For luxury homes priced between $1.25 million and $1.5 million, the expected market time decreased from 123 to 101 days. For homes priced between $1.5 million to $2 million, the expected market time decreased from 176 to 135 days. For luxury homes priced above $2 million, the expected market time increased from 269 to 280 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 remained the same over the past couple of weeks at 63 days, a tepid seller’s market (60 to 90 days). From here, we can expect the market time to slowly rise throughout the Summer Market.
  • Distressed homes, both short sales and foreclosures combined, make up only 1.5% of all listings and 2% of demand. There are only 32 foreclosures and 58 short sales available to purchase today in all of Orange County, that’s 88 total distressed homes on the active market, one more than two weeks ago. Last year there were 136 total distressed sales, 54% more than today.
  • There were 3,229 closed sales in June, a 3% increase over May 2017 and a 3% increase over June 2016. The sales to list price ratio was 97.9% for all of Orange County. Foreclosures accounted for just 0.99% of all closed sales and short sales accounted for 0.87%. That means that 98% of all sales were good ol’ fashioned equity sellers.

Orange County Housing Report August 4th, 2017

 

Orange County Housing Report August 4th, 2017

 

Orange County Housing Report August 4th, 2017

 

Orange County Housing Report August 4th, 2017

 

Orange County Housing Report August 4th, 2017

Orange County Housing Report for July 19th, 2017

Orange County Housing Report July 19th, 2017

Orange County Housing Report: A Mid-Year Checkup

With half of 2017 in the rearview mirror, it is helpful to take a look at where housing has been, where it is now, and where it is heading.

Orange County Housing Report July 19th, 2017

Housing Checkup: Every once in a while, it is helpful to take a step back and evaluate the overall health of the current housing market and the latest trends.

The Orange County housing market has been hot for a very long time. It is working on its sixth year of continuous appreciation. Home values have surpassed record heights reached in June of 2007. There have not been enough homes on the market, buyers continue to trip over each other in pursuit of their piece of the American Dream, and multiple offers are the norm. That adequately describes the first half of 2017, so where do we go from here? Will it be more of the same or will the market evolve?

Let’s take a step back from the relentless real estate market for a moment. With a stethoscope, thermometer, and blood pressure cuff in hand, here are the latest trends and current heartbeat of the Orange County housing market:

  • 2017 has been the year of the extremely lean active inventory. The year started with only 4,071 homes on the market, the lowest level since 2013. Since then, the active inventory has grown, but at a much slower pace than normal. It has been slim pickings. There have been 6% fewer homes placed on the market so far this year compared to 2016. In the past month alone, 11% fewer homes have entered the fray, resulting in an active inventory that only grew by 78 homes. It seems as if the housing market has already peaked, yet the inventory has not quite reached the 6,000 home mark. The inventory needs to be at 8,000 homes for it to move away from a seller’s market to one that is balanced, not favoring a buyer or seller; but that is not going to happen anytime soon. Today’s inventory is 18% lower than last year. It will remain at about 6,000 homes through the rest of the Summer Market and then will start to fall during the Autumn Market as unsuccessful homeowners throw in the towel, realizing that both the Spring and Summer Markets will be in the past.
  • Demand has been hot this year but has been muted a bit due to a lack of inventory. With fewer homes coming on the market this year, demand has not reached its full potential. In spite of that, it has reached levels similar to last year, surpassing 2016 for the first couple of months. From there, it has fallen slightly short of last year’s levels. The latest reading has demand surpassing 2016 slightly. From here, demand will slowly drop as summer progresses. It will continue its descent throughout the Autumn Market and will reach the lowest levels of the year during the Holiday Market, Thanksgiving through January 2018. With demand slowing a bit due to all of the summer distractions, carefully pricing is fundamental in order for sellers to find success. That will hold true for the remainder of the year.
  • The expected market time is on the rise, but the overall market is a lot hotter than last few years. Supply (the inventory) and demand (recent pending sales) determines the expected market time. That is the amount of time it will take for a newly listed home to be placed into escrow. When it drops below 2 months, it is a HOT seller’s market. From February through the mid-June, the market was HOT, two months longer than last year. Since then, the market has exceeded 60 days, indicating a tepid seller’s market. In a tepid seller’s market, carefully pricing is essential and appreciation slows. Sellers were getting away with stretching the asking price and home values were appreciating swiftly. With the Summer Market rolling along, the pace has slowed a bit. For all of Orange County, it has risen from 51 days in the heart of the Spring Market to 63 days today. All price ranges are slowing, but it is still HOT below $750,000. It is important to note that the higher the price, the longer it takes to find success. The market will continue to slow throughout the summer. As the market downshifts, buyers move away from a willingness to pay any price to obtain a home, to a strong desire to pay the Fair Market Value for a home, a value determined by the most recent pending and closed sales. It will remain a tepid seller’s market for the remainder of 2017.
  • Closed sales are slightly higher than last year and it looks as if that will not change for the remainder of the year. Through the first half of the year, there have been 15,658 closed sales compared to 15,219 last year, 3% more. With slightly higher demand for the remainder of the year, closed sales will remain a bit higher than last year.
  • Luxury home sales have surpassed last year’s record pace, but there is still a lot of seller competition to overcome in order to find success. The luxury market is best defined as the top 10% of closed sales, or $1,250,000 and higher. For the first six months, there have been 1,864 closed luxury sales compared to 1,532 last year, 22% more. That is a record number of luxury sales in Orange County. However, as of today there are 2,089 active listings above $1,250,000, more than have sold in the first half of this year. Today, the expected market time for luxury homes is 190 days. For proper perspective, that would mean that escrow would open up at the end of January of next year. Keep in mind, the expected market time is even longer in the higher price ranges. For homes priced above $2 million, the expected market time is 269 days, opening escrow in April 2018.
  • In spite of the Federal Reserve raising the short-term rate, interest rates have slowly inched their way back below 4%. The Federal Reserve has been talking a big game for a few years now about raising the short-term rate. After years of bluffing, they have backed up all of the talk and have raised rates three times, including the one last December. Yet, rates have not been behaving at all like expected by economic experts or prognosticators. After the presidential elections in November, interest rates climbed significantly at the prospect of inflation and reached 4.375% by the end of 2016. However, with the realization that the new presidential administration’s inflationary policies may take years to implement, long-term interest rates have floated back down to below 4%, reaching 3.91% in June. As international economic uncertainty continues, everybody is seemingly “parking their money” in US Treasuries as a “safe haven,” ultimately ensuring that the low-interest rate environment continues. Interest rates will not change much for the remainder of the year and they will continue to stoke the flames of demand.

 

Active Inventory: The active inventory increased by only 47 homes in the past couple of weeks.

The active listing inventory added an additional 47 homes in the past two weeks, a 1% increase, and now sits at 5,983, poised to surpass the 6,000 home mark. The inventory is only slowly growing and it looks as if this year’s peak will be right around that 6,000 home mark. Quite simply, not enough homes are coming on the market as more and more homeowners are opting to stay put.

Last year at this time, there were 7,329 homes on the market, 1,346 additional homes or 22% more than today.

 

Orange County Housing Report for July 19th, 2017

Demand:  Demand decreased by 2% in the past couple of weeks.

Demand, the number of homes placed into escrow within the prior month, decreased by 55 pending sales in the past two-weeks and now totals 2,830, a 2% decline. Demand is off the most in the entry-level market, homes priced below $500,000. With 38% fewer homes available below $500,000 compared to this time last year, it is no wonder that demand is off by 18% year over year.

Last year at this time, there were 47 fewer pending sales, totaling 2,783. The current expected market time increased from 62 to 63 days in the past couple of weeks, a much hotter market than last year’s 79 days. At 63 days, the market is no longer a HOT seller’s market, but a tepid seller’s market with muted appreciation.
Orange County Housing Report for July 19th, 2017
Luxury End:  Luxury demand decreased by 4% in the past couple of weeks while the inventory grew by 1%.

In the past two weeks, demand for homes above $1.25 million decreased from 344 to 329 pending sales, a 4% decline. The luxury home inventory increased from 2,068 homes to 2,089, up 1%.  The luxury market downshift is due to summer distractions. The supply is up and demand is down.

For homes priced between $1.25 million and $1.5 million, the expected market time increased from 120 to 123 days. For homes priced between $1.5 million to $2 million, the expected market time increased from 155 to 176 days. In addition, for homes priced above $2 million, the expected market time increased from 266 days to 269 days. At 269 days, a seller would be looking at placing their home into escrow around the beginning of April of next year.

Orange County Housing Report for July 19th, 2017


Orange County Housing Market Summary:

  • The active listing inventory increased by just 47 homes, or 1%, in the past couple of weeks, and now totals 5,983, knocking on the door of the 6,000 home level. Last year, there were 7,329 homes on the market, 1,346 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 18%. 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 2% in the past couple of weeks, dropping by 55 pending sales and now totals 2,830. The average pending price is $829,260.
  • The average list price for all of Orange County remained at $1.6 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 39 days. This range represents 39% of the active inventory and 63% of demand.
  • For homes priced between $750,000 and $1 million, the expected market time is 57 days, a hot seller’s market (less than 60 days). This range represents 18% of the active inventory and 20% of demand.
  • For homes priced between $1 million to $1.25 million, the expected market time is at 93 days, a balanced market that does not favor a buyer or seller.
  • For luxury homes priced between $1.25 million and $1.5 million, the expected market time decreased from 120 to 123 days. For homes priced between $1.5 million to $2 million, the expected market time increased from 155 to 176 days. For luxury homes priced above $2 million, the expected market time increased from 266 to 269 days.
  • The luxury end, all homes above $1.25 million, accounts for 34% of the inventory and only 11% of demand.
  • The expected market time for all homes in Orange County increased from 62 days to 63 in the past couple of weeks, a tepid seller’s market (60 to 90 days). From here, we can expect the market time to slowly rise throughout the Summer Market.
  • Distressed homes, both short sales and foreclosures combined, make up only 1.5% of all listings and 1.8% of demand. There are only 36 foreclosures and 51 short sales available to purchase today in all of Orange County, that’s 87 total distressed homes on the active market, 11 more than two weeks ago. Last year there were 128 total distressed sales, 47% more than today.
  • There were 3,229 closed sales in June, a 3% increase over May 2017 and a 3% increase over June 2016. The sales to list price ratio was 97.9% for all of Orange County. Foreclosures accounted for just 0.99% of all closed sales and short sales accounted for 0.87%. That means that 98% of all sales were good ol’ fashioned equity sellers.

 

Orange County Housing Report for July 19th, 2017

 

Orange County Housing Report for July 19th, 2017

 

Orange County Housing Report for July 19th, 2017

 

Orange County Housing Report for July 19th, 2017

 

Orange County Housing Report for July 19th, 2017

Orange County Housing Report July 5th, 2017

Orange County Housing Report: Waiting on Change

Many would be buyers are holding off on purchasing and waiting for the market to change.

Orange County Housing Report July 5th 2017

When Will the Market Change: The Orange County housing market has reached record heights and has been appreciating for over five years now.

The Orange County Housing Market has been going up non-stop for over five years now. It has been like the initial chain lift hill on one of the many roller coasters at Knott’s Berry Farm. Clickety clack, clickety clack, clickety clack… it seems as if the housing roller coaster could go up forever. Yet, many buyers believe that roller coaster ascent has to reach a peak soon.

Housing does not go up forever. There are peaks and there are troughs. There are times when buyers are in control, and there are times when sellers are in control. The skeptical buyers who are waiting for an end to this madness find many reasons for a housing downturn on the horizon. They point to record prices. They recall mid-2007 when the housing market began to unravel; however, prior to it unraveling, almost everybody felt like the market would increase forever. Very few economists and prognosticators forecasted a crippling housing downturn.

It is completely understandable where these buyers are coming from. They are right. The market will eventually reverse course and depreciate. The questions boil down to “when?” The answer is simply, “not anytime soon.”

To better understand why the market is poised to continue to accelerate forward, it is best to dust off that old Econ 101 book that details supply and demand. When there is too much supply and demand is low, it favors the buyer. When there is not enough supply and demand is high, it favors the seller. With years of a lack of supply of homes and red-hot demand, it is no wonder that it has been a hot seller’s market for quite some time now.

Orange County Housing Report July 5th 2017

Orange County Active Listing Inventory Year Over Year

Currently, there are 5,936 homes on the market, the lowest level for this time of the year since 2013. Back then there were 4,732 homes on the market and it was even more difficult for buyers to secure a home than it is today. For housing to move away from a seller’s market towards a balanced market, one that does not favor a buyer or seller, there needs to be at least 8,000 homes on the market for a sustainable amount of time. The more homes on the market, the higher the supply of homes. With more supply often comes softer demand. Only then could housing finally shift towards a buyer’s market.

That is the issue. Supply needs to increase and demand to soften. For proper perspective, at the end of June 2007, there were 17,250 homes on the market and the expected market time was over 9-months (that is the amount of time a home is on the market prior to being placed into escrow). Demand (the last month of pending sales) was at 1,894 back then compared to 2,885 today. The current expected market time is 62 days, quite a bit different than a decade ago.

The trend of a lack of inventory and red hot demand stoked by ultra low-interest rates does not look like it will change course anytime soon. Multiple offers are the norm. This holds true for just about any property priced below $1.25 million that is in great condition, nicely appointed, in a good location, and priced right, close to its Fair Market Value. And, in the lower price ranges, buyers are tripping over each other to secure their piece of the American Dream.

For buyers waiting on the market to change, they are in store for a long wait.

Active Inventory: The active inventory increased by only 31 homes in the past couple of weeks.

The active listing inventory added an additional 31 homes in the past two weeks, a 1% increase, and now sits at 5,936. The biggest issue for Orange County housing this year has been a real lack of inventory. Thus far this year, there have been 6% fewer homes placed on the market. In the past month alone, there have been 10% fewer homes placed on the market. This issue has prevented additional closed sales and has undermined the performance of housing this year.

We can expect the inventory to continue to rise throughout the Summer Market until it reaches a peak somewhere around mid-August. From there, the market will transition into the Autumn Market, from mid-August through Thanksgiving, with fewer homes coming on the market with both the spring and summer in the rearview mirror.

Last year at this time, there were 7,104 homes on the market, 20% more than today.

 

Orange County Housing Report July 5th 2017

Orange County Demand Year Over Year


Demand
:  Demand decreased by 2% in the past couple of weeks.

The number of homes placed into escrow within the prior month, decreased by 52 pending sales in the past two weeks and now totals 2,885, a 2% decline. Demand is off the most in the entry-level market, homes priced below $500,000. With 22% fewer homes that have been placed on the market so far this year below $500,000, demand is now off by 17%. This market has been underperforming all year due to a real lack of inventory.

We can expect demand to drop slightly from now through the end of the summer.

Last year at this time, there were 2 more pending sales totaling 2,887, almost identical. The expected market time increased from 60 to 62 days in the past couple of weeks. At 62 days, the market is no longer a HOT seller’s market, but a tepid seller’s market with muted appreciation.  Last year it was at 74 days.


Luxury End
Luxury demand decreased by 7% in the past couple of weeks while the inventory grew by 3%.

In the past two weeks, demand for homes above $1.25 million decreased from 371 to 344 pending sales, a 7% decline. The luxury home inventory increased from 2,011 homes to 2,068, up 3%.  The luxury market downshifted with the beginning of the Summer Market. The supply is up and demand is down.

For homes priced between $1.25 million and $1.5 million, the expected market time increased from 96 to 120 days. Homes priced between $1.5 million to $2 million, the expected market time increased from 148 to 155 days. In addition, for homes priced above $2 million, the expected market time increased from 253 days to 266 days. At 266 days, a seller would be looking at placing their home into escrow around the end of March of next year.

Orange County Housing Report July 5th 2017

 

Orange County Housing Market Summary:

  • The active listing inventory increased by just 31 homes, or 1%, in the past couple of weeks, and now totals 5,936, knocking on the door of the 6,000 home level. Last year, there were 7,104 homes on the market, 1,168 more than today.
  • There are 39% 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 2% in the past couple of weeks, declining 52 pending sales and now totals 2,885. The average pending price is $830,508.
  • The average list price for all of Orange County remained at $1.6 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 38 days. This range represents 39% of the active inventory and 62% of demand.
  • Homes priced between $750,000 and $1 million, the expected market time is 59 days, a hot seller’s market (less than 60 days). This range represents 18% of the active inventory and 19% of demand.
  • Houses priced between $1 million to $1.25 million, the expected market time is at 79 days, a tepid seller’s market.
  • For luxury homes priced between $1.25 million and $1.5 million, the expected market time decreased from 96 to 120 days. Homes priced between $1.5 million to $2 million, the expected market time increased from 148 to 155 days. Luxury homes priced above $2 million, the expected market time increased from 253 to 266 days.
  • The luxury end, all homes above $1.25 million, accounts for 34% of the inventory and only 12% of demand.
  • The expected market time for all homes in Orange County increased from 60 days to 62 in the past couple of weeks, a tepid seller’s market (60 to 90 days). From here, we can expect the market time to slowly rise throughout the Summer Market.
  • Distressed homes, both short sales and foreclosures combined, make up only 1.3% of all listings and 2.2% of demand. There are only 27 foreclosures and 49 short sales available to purchase today in all of Orange County, that’s 76 total distressed homes on the active market, 5 more than two weeks ago. Last year there were 135 total distressed sales, 82% more than today.
  • There were 3,147 closed sales in May, an 18% increase over April 2017 and a 4% increase over May 2016. The sales to list price ratio was 97.8% for all of Orange County. Foreclosures accounted for just 1.1% of all closed sales and short sales accounted for 1.7%. That means that nearly 97.2% of all sales were good ol’ fashioned equity sellers.

Orange County Housing Report July 5th 2017

Orange County Housing Report July 5th 2017

Orange County Housing Report July 5th 2017

Orange County Housing Report July 5th 2017

Orange County Housing Report July 5th 2017

Orange County Housing Report July 5th 2017

Orange County Housing Report July 5th 2017

Orange County Housing Report July 5th 2017

Orange County Housing Report July 5th 2017

Orange County Housing Report July 5th 2017

Orange County Housing Report June 22nd, 2017

Orange County Housing Report: Slim Pickens

For years now the Orange County housing inventory has been low, but this year it is more pronounced.

 

Low Supply: The active listing inventory has been down all year and it is currently off by 14% compared to 2016.

Whew! It is tough to be a buyer looking for a home in today’s market. The biggest complaint has to be that there are simply not enough choices. In fact, nearly 1,200 fewer homes have come on the market so far this year compared to last year. The active inventory currently sits at 5,905 homes; that is 14% fewer than the 6,868 that were available last year.

The trend of fewer homes hitting the market dates back to the beginning of the Great Recession, 2008. Ever since then, fewer and fewer homeowners have placed a FOR SALE sign in their yard. This trend is nothing close to a blip on the radar screen. Something happened to everybody’s collective psyche during the drawn out and bruising recession. Homeowners are staying put.

This year has been off from last year, averaging 222 fewer homes placed on the market each month. As the half way point for the 2017 housing market rapidly approaches, the slower pace has added up. Buyers who have been working hard to secure a home without any luck can attest to the need for additional choices. Yet, the 222 year over year difference is nothing compared to the number of homes on the market during the first decade of the 2000’s. In 2006, there were 2,239 additional homes FOR SALE coming on each and every month. That added up to an additional FOR SALE sign in just about every neighborhood on a monthly basis.

 

Price is determined by supply and demand. Just for kicks, imagine that demand remained the same. When the same number of buyers are interested in purchasing a home, yet the supply drops considerably, the highest bidder wins. As a result, prices rise. Essentially, that is what has happened over the past five years. In 2012, demand spiked; however, there were not enough homes on the market to satiate the voracious appetite for buyers to buy. Home values have been on the rise ever since.

In past housing run-ups, homeowners have been encouraged and enticed to join the fray, eager to cash in on the market and make a move. That has not been the case during the current five-year run. Homeowners have not been tempted to sell like they did from 2000 through 2007.

ADVICE FOR BUYERS: be realistic out of the gate. Don’t delay in pulling the trigger to write an offer to purchase a home. You do not have to overpay, especially now that the housing has transitioned into the Summer Market. Offer the FAIR MARKET VALUE of a home. Most of all, pack your patience.

ADVICE FOR SELLERS: be realistic out of the gate. Far too many sellers hit the market overpriced. The market has been on the rise, but it does a majority of its annual appreciation during the Spring Market. Homes appreciate at a much slower rate for the rest of the year. Orange County detached housing values have been increasing at a pace of about 5% per YEAR. That is 365 days, not 30 days. So, price accordingly. A wise strategy is to price a home at its FAIR MARKET VALUE. The better the price, the more activity that is generated. Multiple offers drive the sales price up.

Active Inventory: The active inventory increased by 3% in the past couple of weeks.

The active listing inventory added an additional 148 homes in the past two weeks, a 3% increase, and now sits at 5,905. Within the next couple of weeks, the inventory will eclipse the 6,000 home mark. Last year that occurred at the start of May.

We can expect the inventory to continue to rise throughout the Summer Market until it reaches a peak somewhere around mid-August. From there, the market will transition into the Autumn Market, from mid-August through Thanksgiving, with fewer homes coming on the market with both the spring and summer in the rearview mirror.

Last year at this time, there were 6,868 homes on the market, 16% more than today.

Demand:  Demand increased by 1% in the past couple of weeks.

Demand, the number of homes placed into escrow within the prior month, increased by 33 pending sales in the past two weeks and now totals 2,937, a 1% increase. Demand is off the most in the entry-level market, homes priced below $500,000. With 23% fewer homes that have been placed on the market so far this year below $500,000, demand is now off by 21%. This market has been underperforming all year due to a real lack of inventory.

We can expect demand to drop slightly from now through the end of the Summer Market.

Last year at this time, there were 52 more pending sales totaling 3,989, or 2% more. The expected market time increased from 59 to 60 days in the past couple of weeks. At 60 days, the market is no longer a HOT seller’s market, but a tepid seller’s market with muted appreciation.  Last year it was at 69 days.

Luxury EndLuxury demand increased by 6% in the past couple of weeks while the inventory grew by 2%.

In the past two weeks, demand for homes above $1.25 million increased from 351 to 371 pending sales, a 6% increase and nearly the same level as a month ago. The luxury home inventory increased from 1,981 homes to 2,011, up 2%.  Even with the increase in demand, the luxury market is NOT a robust seller’s market, taking months in order to find success.

For homes priced between $1.25 million and $1.5 million, the expected market time decreased from 108 to 96 days. For homes priced between $1.5 million to $2 million, the expected market time increased from 144 to 148 days. In addition, for homes priced above $2 million, the expected market time decreased slightly from 256 days to 253 days. At 253 days, a seller would be looking at placing their home into escrow around the end of February of next year.

 

 

Orange County Housing Market Summary:

  • The active listing inventory increased by 148 homes, or 3%, in the past couple of weeks, and now totals 5,905, knocking on the door of the 6,000 home level. Last year, there were 6,868 homes on the market, 963 more than today.
  • There are 35% fewer homes on the market below $500,000 today compared to last year at this time and demand is down by 21%. 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, increased by 1% in the past couple of weeks, adding 33 pending sales and now totals 2,937. The average pending price is $845,004.
  • The average list price for all of Orange County remained at $1.6 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 39 days. This range represents 39% of the active inventory and 61% of demand.
  • For homes priced between $750,000 and $1 million, the expected market time is 53 days, a hot seller’s market (less than 60 days). This range represents 18% of the active inventory and 20% of demand.
  • For homes priced between $1 million to $1.25 million, the expected market time is at 84 days, a tepid seller’s market.
  • For luxury homes priced between $1.25 million and $1.5 million, the expected market time decreased from 108 to 96 days. For homes priced between $1.5 million to $2 million, the expected market time increased from 144 to 148 days. For luxury homes priced above $2 million, the expected market time decreased from 256 to 253 days.
  • The luxury end, all homes above $1.25 million, accounts for 34% of the inventory and only 13% of demand.
  • The expected market time for all homes in Orange County increased from 59 days to 60 in the past couple of weeks, changing from a hot seller’s market to a tepid seller’s market (60 to 90 days). From here, we can expect the market time to slowly rise throughout the Summer Market.
  • Distressed homes, both short sales and foreclosures combined, make up only 1.2% of all listings and 2.1% of demand. There are only 25 foreclosures and 46 short sales available to purchase today in all of Orange County, that’s 71 total distressed homes on the active market, 5 fewer than two weeks ago. Last year there were 138 total distressed sales, 94% more than today.
  • There were 3,147 closed sales in May, an 18% increase over April 2017 and a 4% increase over May 2016. The sales to list price ratio was 97.8% for all of Orange County. Foreclosures accounted for just 1.1% of all closed sales and short sales accounted for 1.7%. That means that nearly 97.2% of all sales were good ol’ fashioned equity sellers.