Tag Archives: Orange County Housing Market

Orange County Housing Report August 1st, 2018

Orange County Housing Report:
“A Balanced Market”

Orange County Housing Report August 1st, 2018

 Orange County housing is moving away from a Seller’s Market to a Balanced Market.

 

A Balanced Market: With demand continuing to drop to levels not seen in over a decade, housing is rapidly evolving into a Balanced Market.

The housing market has favored sellers for years now. That good old-fashioned metal balance scale has been leaning heavily in favor of the sellers with very few homes on the market and tremendous demand. Yet, with more homes coming on the market and falling demand, that metal balance scale has slowly but surely been moving away from that hot seller’s market to a balanced market, one that does not favor sellers or buyers.

Everybody has been talking about not enough homes on the market, dating back to 2012. That lack of supply has fueled the frenzied real estate market; that is, until 2018. The supply problem has evolved into a demand problem. While the supply of homes has increased quite a bit this year, it still remains below the long-term average of 8,000 homes. The real issue is not that there are way too many homes on the market, as in prior slowdowns; instead, it is the fact that housing demand has dropped precipitously.

Demand, a snapshot of the last month of pending sales, has been off all year, especially from mid-April through today. Surprisingly, that is the meat of the housing market, the Spring and Summer Markets. In taking a closer look at demand at the end of July, the numbers are staggering. Demand was 18% higher last year. The last time demand was this low dates all the way back to 2007 when the housing market completely fell apart. It is interesting to take a look at the differences in context to the mortgage interest rate at the time. Today’s national average interest rate is 4.6%, the highest rate since 2011.

The housing run from 2012 through the first four months of 2018 has been fueled not only an extremely low supply of homes on the market; it has also been fueled by ultra-low interest rates. Mortgage rates have been juicing the run-up in values. The only other time that housing slowed a bit during the run was at the end of 2013 through 2014, the culprit, the higher interest rates. In December 2013, interest rates climbed to 4.5% and they remained elevated through the Spring Market of 2014.

As home values have appreciated unabated, the June median sales price reached yet another record level at $739,000. Combining record high values with interest rates that have climbed to heights not seen since 2011, prior to the 6-year housing run, it is no wonder that buyers are not jumping as quickly to purchase.

None of this means that the current market favors buyers. It is still an extremely slight Seller’s Market. The current Expected Market Time (the amount of time it would take to place a home onto the market today and enter escrow down the road) is at 85-days, knocking on the door of a Balanced Market. A Seller’s Market is hot when it is below 60-days. It is a slight Seller’s Market from 60 to 90 days. It is a Balanced Market from 90 to 120 days. Above 120-days is a Buyer’s Market.

Many mistakenly think that it is either a Seller’s Market or Buyer’s Market. That it has to be one or the other. That is not true. A Balanced Market is one that does not favor a buyer or seller. It is like that metal balance scale when it is perfectly balanced. There has been more supply this year, 13% higher year-over-year, and demand is down by 16% year-over-year. More supply and less demand are balancing the scale.

A warning for buyers: buyers are NOT in the driver’s seat, not even close. It is not a Buyer’s Market. The difference is that there are more choices now. The typical home is no longer flying off the market. Only extraordinary homes that are priced right will sell quickly. Buyers no longer need to trip over themselves to purchase. They are finally able to approach the market methodically and at a much more relaxed pace.

A warning for sellers: accurate pricing is fundamental in order to find success. Ignore the recent headlines of a record median sales price. That does not mean that homes are continuing to appreciate TODAY. The June median is a reflection of homes that were placed into escrow in April and May. That was in the past when the market was much hotter than today. Right now there are a lot more homes on the market, meaning a lot more competition. Also, demand has dropped considerably, meaning fewer showings and fewer potential offers. Overpriced, overzealous list prices result in wasted market time and do not generate offers. Pricing at or close to theFair Market Value is the wisest formula for success.

Active Inventory: The active inventory grew by 3% in the past two weeks.

The active listing inventory continued its climb in the past two weeks, adding 180 homes, or 3%, and now totals 6,759, its highest level since September 2016. Expect the active inventory to continue to grow until it peaks, most likely next month.

Last year at this time, there were 5,967 homes on the market, 792 fewer. That means that there are 13% more homes on the market today. The year over year difference is growing week by week. The trend of more homes on the market year over year is here to stay.

Demand:  Demand dropped by 2% in the past two weeks.                                                         

In the past two-weeks, demand, the number of pending sales over the prior 30-days, decreased by 61 pending sales, or 2%, and now totals 2,393, the lowest demand reading for this time of the year since 2007. Expect demand to drop further from August through the end of the year. Typically, demand downshifts from here because the best time to sell is in the rearview mirror. Fewer families desire to make a move once the kids are back in school, which is going to occur at the end of August. Many families pull out of the house hunt in August and demand drops.

Last year at this time, demand was at 2,835 pending sales, 18% more than today, or 442 additional pending sales.

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 down the road, increased from 80 to 85 days in the past two weeks. At 85 days, it is a slight seller’s market (between 60 to 90 days) where sellers still get to call the shots, but appreciation is muted. Last year at this time, the expected market time was at 63 days, substantially hotter than today.

Luxury End:  Demand for luxury homes dropped by 5% in the past couple of weeks.   

In the past two weeks, demand for homes above $1.25 million decreased by 17 pending sales, down 5%, and now totals 313, its lowest level since the end of January. The luxury home inventory decreased by two homes and now totals 2,192. The overall expected market time for homes priced above $1.25 million increased from 199 to 210 days over the past two weeks.

Year over year, luxury demand is down by 60 pending sales or 16%, and the active luxury listing inventory is up by an additional 127 homes,or 6%. The expected market time last year was at 166 days, significantly better than today.

For homes priced between $1.25 million and $1.5 million, the expected market time decreased from 126 to 107 days. For homes priced between $1.5 million and $2 million, the expected market time increased from 163 to 187 days. For homes priced between $2 million and $4 million, the expected market time increased from 250 to 300 days. For homes priced above $4 million, the expected market time increased from 511 to 718 days. At 718 days, a seller would be looking at placing their home into escrow around mid-July 2020.

Orange County Housing Market Summary: 

  • The active listing inventory increased by 180 homes in the past two weeks, up 3%, and now totals 6,759. Expect the inventory to increase from now through mid-August. Last year, there were 5,967 homes on the market, 792 fewer than today.
  • This year, 18% fewer homes have come on the market below $500,000 today compared to last year, and there have been 26% fewer closed sales so far this year. Fewer and fewer homes and condominiums are now priced below $500,000. This price range is slowly vanishing.
  • Demand, the number of pending sales over the prior month, decreased in the past two-weeks by 61 pending sales, down 2%, and now totals 2,393. Demand peaked in mid-May at 2,726 pending sales. Last year, there were 2,835 pending sales, 18% more than today.
  • The average list price for all of Orange County remained at $1.6 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 57 days, but is knocking on the door of a slight seller’s market (60-90 days). This range represents 38% of the active inventory and 56% of demand.
  • For homes priced between $750,000 and $1 million, the expected market time is 76 days, a slight seller’s market (between 60 and 90 days). This range represents 20% of the active inventory and 22% of demand.
  • For homes priced between $1 million to $1.25 million, the expected market time is 95 days, a balanced market (between 90 to 120 days).
  • For luxury homes priced between $1.25 million and $1.5 million, the expected market time decreased from 126 to 107 days. For homes priced between $1.5 million and $2 million, the expected market time increased from 163 to 187 days. For luxury homes priced between $2 million and $4 million, the expected market time increased from 250 to 300 days. For luxury homes priced above $4 million, the expected market time increased from 511 to 718 days.
  • The luxury end, all homes above $1.25 million, accounts for 32% of the inventory and only 13% of demand.
  • The expected market time for all homes in Orange County increased from 80 to 85 days in the past two weeks, a slight seller’s market (from 60 to 90 days).
  • Distressed homes, both short sales and foreclosures combined, made up only 0.9% of all listings and 1.4% of demand. There are only 27 foreclosures and 32 short sales available to purchase today in all of Orange County, 59 total distressed homes on the active market, down five in the past two weeks. Last year there were 88 total distressed homes on the market, 49% more than today.
  • There were 2,851 closed residential resales in June, down by 12% from June 2017’s 3,229 closed sales. June marked a 1% decrease from May 2018. The sales to list price ratio was 98.2% for all of Orange County. Foreclosures accounted for just 0.2% of all closed sales, andshort sales accounted for 0.7%. That means that 99.1% of all sales were good ol’ fashioned sellers with equity.

 

Orange County Housing Report July 20th, 2018

Orange County Housing Report:
“The Winds are Changing?”

Orange County Housing Report July 20th, 2018

 The 6-and-a-half year seller’s market is drastically slowing and feels sluggish.

 

A Changing Market: With more supply and less demand, the overall Orange County housing market has been losing steam.

Have you ever seen a windsock used by pilots to know the direction and speed of the wind? The housing market’s windsock has been blowing extremely hard in the seller’s favor since 2012. In that time, home values have risen about 80%. Over the past couple of month, the housing windsock has dramatically changed. It is not blowing as hard. It is more of a slight evening breeze.

The Orange County housing market has evolved this year. From February through April, there was not enough supply and plenty of demand. That was how the market had been behaving since 2012. Multiple offers within days was the norm. Buyers tripping over themselves to purchase was the norm. Sellers arbitrarily stretching their asking prices $25 thousand or more above the most recent comparable sale, and then getting away with it, was the norm. Not any longer.

What is going on? It all boils down to basic supply and demand. The supply of homes, the active listing inventory, has increased at the fastest pace since 2006. From the start of the year to today, the active inventory has blossomed by 77%. In 2006, it doubled. That was 12 years ago. There is a lot more seller competition today than there was at the start of the year.

Demand, a snapshot of the last 30-days of pending activity, has been a bit more sluggish all year. From April to today, it has been at levels not seen since 2007. With more supply and a lot less demand, the Expected Market Time, the amount of time it would take to list a home today and place it into escrow down the road, has climbed to 80-days, a slight seller’s market. Orange County housing is knocking on the door of a balanced market, 90-days, one that does not favor a seller or buyer.

In comparing the active inventory to last year, it is up in every single price range. Currently, there are 10% more homes on the market than last year. Keep in mind, there were fewer homes year over year for 20-months straight until May of this year. Since then, the difference has increased substantially. It is a new trend that is here to stay.

Similarly, year over year demand is down in nearly every single price range. Overall demand is down by 14% compared to last year at this time. There is a bit more demand in the $1 million to $1.25 million price range and the over $1.5 million luxury range, but both are more sluggish this year compared to last year because there are a lot more homes within those price ranges.

The biggest shift in the market can be found in the lower price ranges, homes priced below $1 million, which accounts for 57% of the active listing inventory and 78% of demand. That is where the Expected Market Time is 32% higher than last year at this time. Above $1 million, the expected market time is already a lot slower, typical for the higher price ranges. However, it is not typical for the meat of the market, homes priced below $1 million, to be this slow at this time of the year.

Why has demand drastically dropped? There are two factors at play: higher values and higher interest rates. Values have been increasing unabated for 6-and-a-half years at a pace that significantly outstrips the rise in incomes. That phenomenon cannot continue forever. Eventually, home values reach a point where they become unaffordable for the masses. As a result, buyer demand drops. That was already occurring on its own, but it was drastically aided by a rise in interest rates. Interest rates have risen from 4% at the start of the year to 4.625% today. Last year, interest rates dropped down to 3.75% by September. Moreover, many experts are forecasting interest rates to rise to 5% by year’s end.

Higher interest rates and higher prices erode affordability. In looking at May’s record Orange County median sales price of $738,500, assuming a 20% down payment, the monthly payment at today’s rate of 4.625% would be $3,038. That payment would have been $2,821 at the start of the year (4%). Because of higher interest rates, today’s median sales price buyer is paying an additional 8%. Housing has appreciated 6% year over year as well. The payment for the May 2017 median sales price of $695,000 would have been $2,654 at 4% (that was the rate a year ago as well). So, the increase in the median sales price and the interest rate in the past year has resulted in a monthly payment that ballooned from $2,654 to $3,038, a 14% increase. That is an additional $384 per month, or $4,608 per year.

With the active inventory rising, demand falling, and interest rates rising, the market will continue to slow and feel even more sluggish. In order for sellers to be successful, properly pricing their homes is fundamental in order to find success. Sellers are not getting away with stretching and padding their asking prices. Buyers are finally getting a little relief. There are a lot more choices and the overall pace is a bit more relaxed.

Active Inventory: The active inventory grew by 3% in the past two-weeks.

The active listing inventory continued its climb in the past two-weeks, adding 217 homes, or 3%, and now totals 6,579, its highest level since September 2016. Expect the active inventory to continue to grow until peaking most likely in mid-August.

Last year at this time, there were 5,983 homes on the market, the 2017 height, 596 fewer. That means that there are 10% more homes on the market today. The year over year difference is growing week by week. The trend of more homes on the market year over year is here to stay.

Demand:  Demand dropped by 6% in the past two-weeks.

In the past two-weeks, demand, the number of pending sales over the prior 30-days, decreased by 150 pending sales, or 6%, and now totals 2,454, the lowest demand reading for this time of the year since 2007. It is also the largest two-week drop of the year. Last year at this time, demand was at 2,838 pending sales, 16% more than today, or 384 additional pending sales.

The expected market time, the amount of time it would take for a home that comes onto the market today to be placedinto escrow down the road, increased from 73 to 80 days in the past two-weeks. At 80 days, it is a slight seller’s market (between 60 to 90 days) where sellers still get to call the shots, but appreciation is muted. Last year at this time, the expected market time was at 63 days, a lot hotter than today.

Luxury End:  Demand for luxury homes dropped by 9% in the past couple of weeks.   

In the past two-weeks, demand for homes above $1.25 million decreased by 33 pending sales, down 9%, and now totals 330, its lowest level since the end of January. The luxury home inventory increased by 20 homes and now totals 2,194. The overall expected market time for homes priced above $1.25 million increased from 179 to 199 daysover the past two-weeks.

Year over year, luxury demand is up by 1 pending sales,nearly identical, and the active luxury listing inventory is up by an additional 105 homes, or 5%. The expected market time last year was at 190 days, slightly better than today.

For homes priced between $1.25 million and $1.5 million, the expected market time increased from 113 to 126 days. For homes priced between $1.5 million and $2 million, the expected market time increased from 150 to 163 days. For homes priced between $2 million and $4 million, the expected market time increased from 225 to 250 days. For homes priced above $4 million, the expected market time increased from 427 to 511 days. At 511 days, a seller would be looking at placing their home into escrow around December 2019.

Orange County Housing Market Summary:

  • The active listing inventory increased by 217 homes in the past two weeks, up 3%, and now totals 6,579. Expect the inventory to increase from now through mid-August. Last year, there were 5,983 homes on the market, 596 fewer than today.
  • This year, 18% fewer homes have come on the market below $500,000 today compared to last year, andthere have been 26% fewer closed sales so far this year. Fewer and fewer homes and condominiums are now pricedbelow $500,000. This price range is slowly vanishing.
  • Demand, the number of pending sales over the prior month, decreased in the past two-weeks by 150 pending sales, down 6%, and now totals 2,454. Demand peaked in mid-May at 2,726 pending sales. Last year, there were 2,838 pending sales, 16% more than today.
  • The average list price for all of Orange County dropped to $1.6 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 54 days, but is knocking on the door of a slight seller’s market (60-90 days). This range represents 37% of the active inventory and 56% of demand.
  • For homes priced between $750,000 and $1 million, the expected market time is 72 days, a slight seller’s market (between 60 and 90 days). This range represents 20% of the active inventory and 22% of demand.
  • For homes priced between $1 million to $1.25 million, the expected market time is 101 days, a balanced market (between 90 to 120 days).
  • For luxury homes priced between $1.25 million and $1.5 million, the expected market time increased from 113 to 126 days. For homes priced between $1.5 million and $2 million, the expected market time increased from 150 to 163 days. For luxury homes priced between $2 million and $4 million, the expected market time increased from 225 to 250 days. For luxury homes priced above $4 million, the expected market time increased from 427 to 511 days.
  • The luxury end, all homes above $1.25 million, accounts for 33% of the inventory and only 14% of demand.
  • The expected market time for all homes in Orange County increased from 73 to 80 days in the past two weeks, a slight seller’s market (from 60 to 90 days).
  • Distressed homes, both short sales and foreclosures combined, made up only 1% of all listings and 1.3% of demand. There are only 28 foreclosures and 36 short sales available to purchase today in all of Orange County, 64 total distressed homes on the active market, up six in the past two weeks. Last year there were 76 total distressed homes on the market, 19% more than today.
  • There were 2,851 closed residential resales in June, down by 12% from June 2017’s 3,229 closed sales. June marked a 1% decrease from May 2018. The sales to list price ratio was 98.2% for all of Orange County. Foreclosures accounted for just 0.2% of all closed sales, andshort sales accounted for 0.7%. That means that 99.1% of all sales were good ol’ fashioned sellers with equity.

 

 

Orange County Housing Report July 6th, 2018

Orange County Housing Report:
“A Buyers Market?”

Orange County Housing Report July 6th, 2018

 The overall Orange County housing market is a seller’s market, but not at a certain price point.

 

A Cool Market: The housing market feels a bit frigid on the higher end compared to the rest of the market.

Recent headlines exclaim that the median sales price has reached a record level in Orange County, Los Angeles County, and all of Southern California. Article after article details the continued lack of supply, hot demand, and years of nonstop appreciation. How in the world can any local market be a buyer’s market? Technically, luxury housing favors buyers and it is anything but hot.

Real estate articles discuss the overall housing market. For Orange County, the median reached a record in May of $738,500. For perspective, the national median for May was $264,800. Yes, it is absolutely, unequivocally true that real estate is hot and has been hot since 2012; however, local news articles are referring to the heart of the Orange County housing market, homes priced below $1 million. They account for 78% of all closed sales so far this year, and it is still a hot seller’s market, red-hot below $750,000. A “Seller’s Market” occurs when the expected market time is below 90-days.

While it may be true that the lower the price range, the hotter the market; the reverse is true as well, the higher the price range, the cooler the market. For homes priced above $1.25 million in Orange County, housing is extremely cool. Luxury housing (defined by many as the top 10% of recent closed sales) starts at $1.45 million locally. The luxury end is technically, a “Buyer’s Market.” When the expected market time, the amount of time it would take to place a home into escrow if it were listed FOR SALE today, exceeds 120 days, it is considered a buyer’s market.

It is good ol’ supply and demand. While there is plenty of supply, demand just is not hot like the lower ranges. For homes priced between $1.5 million and $2 million, the expected market time is at 150 days. That would be opening escrow at the end of November. For homes priced between $2 million and $4 million, the expected market time climbs to 225 days. That would be opening escrow in mid-February of next year. For homes priced above $4 million, the expected market time balloons to 427 days, which translates to opening escrow in September of next year, 14-months from now.

The number of potential buyers that can afford to purchase a home diminishes as prices rise. In the lower ranges, that is where there are plenty of buyers and not enough choices. They attract a steady stream of buyers and many sellers entertain multiple offers. Yet, at the luxury end of the market, most sellers sit on the market for months and do not find success. There is tremendous seller competition for a limited number of buyers able to afford these homes.

In order to find success within the luxury price range, sellers must pack their patience and keep their fishing pole in the water for a lot longer than the lower ranges. Some homes may fly off the market at the higher price points, but they are the exceptionand not the rule. Luxury sellers also must be priced right. Like any home, buyers are unwilling to pay more than a home’s Fair Market Value. Yet, many luxury sellers arrive at their asking price arbitrarily, a lot higher than their Fair Market Value. They lack true motivation, as many state that they “don’t have to sell” to help rationalize their price. This is the Achilles’ heel of the luxury market and prevents so many sellers from achieving success. Instead, sellers need to approach pricing with extreme care by looking cautiously at all of the most recent comparable pending and closed sales and local data and statistics.

The best advice for a luxury seller: do not pay attention to all of the real estate headlines.Instead, they should rely on the professional analysis and advice of a seasoned REALTOR®.

Active Inventory: The active inventory grew by 4% in the past two-weeks.

The active listing inventory continued its climb in the past two-weeks, adding 257 homes, or 4%, and now totals 6,362, its highest level since October 2016. Expect the active inventory to continue to grow until peaking most likely in mid-August.

Last year at this time, there were 5,936 homes on the market, 7% fewer than today. In May of this year, the inventory was higher than the prior year for the first time in 20-months. The difference is growing week by week. The trend of more homes on the market year over year is here to stay.

Demand:  Demand decreased by 4% in the past two-weeks.

In the past two weeks, demand, the number of pending sales over the prior 30-days, decreased by 95 pending sales, or 4%, and now totals 2,604, the lowest demand reading for this time of the year since 2007. Demand reached a peak for 2018 in mid-May at 2,726 pending sales. That was the lowest peak since 2007.

Last year at this time, demand was at 2,885 pending sales, 11% more than today, or 281 pending sales. This is why REALTORS® in the trenches have articulated how the market is a bit more sluggish this year 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 placedinto escrow down the road, increased from 68 to 73 days in the past two-weeks. At 73 days, it is a slight seller’s market (between 60 to 90 days) where sellers still get to call the shots, but appreciation is muted. Last year at this time, the expected market time was at 62 days, a lot hotter than today.

Luxury End:  Demand for luxury homes dropped by 7% in the past couple of weeks.   

In the past two-weeks, demand for homes above $1.25 million decreased by 26 pending sales, down 7%, and now totals 363, its lowest level since the start of April. The luxury home inventory increased by 9 homes and now totals 2,174, nearly the same as two weeks ago. The overall expected market time for homes priced above $1.25 million increased from 167 to 179 daysover the past two-weeks.

Year over year, luxury demand is up by 19 pending sales,or 6%, and the active luxury listing inventory is up by an additional 106 homes, or 5%. The expected market time last year was at 180 days, nearly identical to today.

For homes priced between $1.25 million and $1.5 million, the expected market time increased from 111 to 113 days. For homes priced between $1.5 million and $2 million, the expected market time decreased from 162 to 150 days. For homes priced between $2 million and $4 million, the expected market time increased from 183 to 225 days. For homes priced above $4 million, the expected market time increased from 368 to 427 days. At 427 days, a seller would be looking at placing their home into escrow around September 2019.

Orange County Housing Market Summary:

  • The active listing inventory increased by 257 homes in the past two weeks, up 4%, and now totals 6,362. Expect the inventory to increase from now through mid-August. Last year, there were 5,936 homes on the market, 426 fewer than today.
  • This year, 19% fewer homes have come on the market below $500,000 today compared to last year, andthere have been 25% fewer closed sales so far this year. Fewer and fewer homes and condominiums are now pricedbelow $500,000. This price range is slowly vanishing.
  • Demand, the number of pending sales over the prior month, decreased in the past two-weeks by 95 pending sales, down 4%, and now totals 2,604. Demand peaked in mid-May at 2,726 pending sales. Last year, there were 2,885 pending sales, 11% more than today.
  • The average list price for all of Orange County remained at $1.7 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 48 days. This range represents 36% of the active inventory and 55% of demand.
  • For homes priced between $750,000 and $1 million, the expected market time is 64 days, a slight seller’s market (between 60 and 90 days). This range represents 20% of the active inventory and 22% of demand.
  • For homes priced between $1 million to $1.25 million, the expected market time is 85 days, a slight seller’s market.
  • For luxury homes priced between $1.25 million and $1.5 million, the expected market time increased from 111 to 113 days. For homes priced between $1.5 million and $2 million, the expected market time decreased from 162 to 150 days. For luxury homes priced between $2 million and $4 million, the expected market time increased from 183 to 225 days. For luxury homes priced above $4 million, the expected market time increased from 368 to 427 days.
  • The luxury end, all homes above $1.25 million, accounts for 34% of the inventory and only 14% of demand.
  • The expected market time for all homes in Orange County increased from 68 to 73 days in the past two weeks, a slight seller’s market (from 60 to 90 days).
  • Distressed homes, both short sales and foreclosures combined, made up only 0.9% of all listings and 1.4% of demand. There are only 25 foreclosures and 33 short sales available to purchase today in all of Orange County, 58 total distressed homes on the active market, up eight in the past two weeks. Last year there were 76 total distressed homes on the market, 31% more than today.
  • There were 2,871closed residential resales in May, down by 9% from May 2019’s 3,147 closed sales. May marked a 10% increase from April 2018. The sales to list price ratio was 98.5% for all of Orange County. Foreclosures accounted for just 0.5% of all closed sales, andshort sales accounted for 0.7%. That means that 98.8% of all sales were good ol’ fashioned sellers with equity.

 

Orange County Housing Report – June 29th, 2018

Orange County Housing Report:
“Tic… Tic… Tic…”

Orange County Housing Report June 29th, 2018

 The window of opportunity to take advantage of the Summer Market is already beginning to close.

Running Out of Time: Demand will remain elevated for only six more weeks.

Summer is here! It is the season of longer days, plenty of Southern California sunshine, beckoning, sandy beaches, and refreshing dips in the pool. With summer comes all of its distractions. There are also family vacations, Disneyland, California Adventure, Knott’s Berry Farm, Magic Mountain, LEGOLAND, Raging Waters, the Discovery Science Center, Sea World, and the San Diego Zoo.

The best time of the year to sell a home, the Spring Market, is officially in the rearview mirror. It is now the Summer Market, the second-best time of the year to sell a home. For some, buying a home takes a back seat to all of the family fun. Many will still purchase, but not with an extreme sense of urgency like the spring.

Sellers and real estate agents have already felt the shift in the marketplace. It actually started a few weeks ago with college graduations. Today, the sense of urgency has shifted from buyers to sellers. Sellers know that they need to open up escrow soon or risk passing up the opportunity to sell during the Summer Market. In fact, they have six-weeks to negotiate a deal before the market slows even further.

Here is the thing. Most potential buyers prefer moving during the summer months prior to the kids going back to school. That means closing on a home and moving into it by the end of August. In order to close by the end of August, a home needs to be placed into escrow by the end of July. Typically, a home takes about a month to close after negotiating a deal and opening escrow. In looking closely at the housing cycle, demand starts to drop at the end of June. From there, it plateaus during the month of July. Finally, demand steadily drops from August 1st on.

There is something to be said about reaching August in the housing market. At that point, the end of the “school summer” is fast approaching. Buyers with school-aged children start backing away from the housing market. Moving during a school year is very distracting; so, many buyers put the home buying process on hold and wait until the following year.

Sellers really need to understand that the window of opportunity is closing. Not only are there only six-weeks left before many will have missed the boat, this year is a bit more challenging than previous years. Demand is down 8% year over year. In fact, demand has not been this low in June since 2007. In addition, the active listing inventory is up 3% year over year and it is poised to continue to grow throughout the Summer Market. With an increasing supply and dropping demand, the Expected Market Time, the amount of time it takes to list a home today and then places it into escrow down the road, will continue to grow over the course of the next six weeks.

For sellers, it is like the tic… tic… tic… of valuable time passing by before the summer housing train leaves the station. In six-weeks, sellers will feel another noticeable shift in the housing market. In order to find success now and truly take advantage of this second best time of the year to sell a home, sellers absolutely, unequivocally MUST price their home with care. Ignore the impulse to arbitrarily price a home, stretching the asking price significantly above the most recent comparable sale. That is a recipe for disaster. Price a home $20,000 above that sale and a seller will sit with very little activity, no offers to purchase and lose valuable market time. Instead, sellers really need to lean into the expertise of a seasoned, experienced REALTOR®. Tic… tic… tic…

Active Inventory: The active inventory grew by 4% in the past two-weeks.

The active listing inventory continued its climb in the past two-weeks and surpassed last year’s height of 5,983 homes reached in mid-July. The inventory rose by 4%, adding 231 homes, and now totals 6,105, its highest level since October 2016. Expect the inventory to continue to grow until peaking sometime between July and August.

Last year at this time, there were 5,905 homes on the market, 3% fewer than today. The trend of more homes on the market year over year is here to stay.

In the past two weeks, demand, the number of pending sales over the prior 30-days, increased by 34 pending sales, up 1%. It now totals 2,699, the lowest demand reading for this time of the year since 2007. Demand most likely reached a peak for 2018 a month ago at 2,726 pending sales. That would be the lowest peak since 2007.

Demand:  Demand increased by 1% in the past two-weeks.

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 down the road, increased from 66 to 68 days in the past two-weeks. At 68 days, it is a slight seller’s market (between 60 to 90 days) where sellers still get to call the shots, but appreciation is muted. Last year at this time, the expected market time was at 60 days, still a hot seller’s market.

Luxury End:  Demand for luxury homes dropped by 8% in the past couple of weeks.   

In the past two-weeks, demand for homes above $1.25 million decreased by 34 pending sales, down 8%, and now totals 389. The luxury home inventory increased by 64 homes and now totals 2,165, up 3%. With increased supply and a drop in demand, the overall expected market time for homes priced above $1.25 million increased significantly from 149 to 167 days over the past two-weeks.

Year after year, luxury demand is up by 18 pending sales or 5%, and the active luxury listing inventory is up by an additional 154 homes or 8%. The expected market time last year was at 163 days, a little bit better than today.

For homes priced between $1.25 million and $1.5 million, the expected market time increased from 95 to 111 days. For homes priced between $1.5 million and $2 million, the expected market time increased from 123 to 162 days. For homes priced between $2 million and $4 million, the expected market time decreased from 189 to 183 days. For homes priced above $4 million, the expected market time decreased from 395 to 368 days. At 368 days, a seller would be looking at placing their home into escrow around the end of June 2019.

Orange County Housing Market Summary:

  • The active listing inventory increased by 231 homes in the past two weeks, up 4%, and now totals 6,105. Expect the inventory to increase from now through mid-Summer. Last year, there were 5,905 homes on the market, 200 fewer than today.
  • This year, 19% fewer homes have come on the market below $500,000 today compared to last year, and there have been 25% fewer closed sales so far this year. Fewer and fewer homes and condominiums are now priced below $500,000. This price range is slowly vanishing.
  • Demand, the number of pending sales over the prior month, increased in the past two-weeks by 34 pending sales, up 1%, and now totals 2,699. It appears that demand peaked a month ago. Last year, there were 2,937 pending sales, 9% more than today.
  • The average list price for all of Orange County remained at $1.7 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 43 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 60 days, a slight seller’s market (between 60 and 90 days). This range represents 19% of the active inventory and 22% of demand.
  • For homes priced between $1 million to $1.25 million, the expected market time is 88 days, a slight seller’s market.
  • For luxury homes priced between $1.25 million and $1.5 million, the expected market time increased from 95 to 111 days. For homes priced between $1.5 million and $2 million, the expected market time increased from 123 to 162 days. For luxury homes priced between $2 million and $4 million, the expected market time decreased from 189 to 183 days. For luxury homes priced above $4 million, the expected market time decreased from 395 to 368 days.
  • The luxury end, all homes above $1.25 million, accounts for 35% of the inventory and only 14% of demand.
  • The expected market time for all homes in Orange County increased from 66 to 68 days in the past two weeks, a slight seller’s market (from 60 to 90 days).
  • Distressed homes, both short sales, and foreclosures combined, made up only 0.8% of all listings and 1.2% of demand. There are only 23 foreclosures and 27 short sales available to purchase today in all of Orange County, 50 total distressed homes on the active market, up six in the past two weeks. Last year there were 71 total distressed homes on the market, 42% more than today.
  • There were 2,871 closed residential resales in May, down by 9% from May 2017’s 3,147 closed sales. May marked a 10% increase from April 2018. The sales to list price ratio was 98.5% for all of Orange County. Foreclosures accounted for just 0.5% of all closed sales, and short sales accounted for 0.7%. That means that 98.8% of all sales were good ol’ fashioned sellers with equity.

 

Orange County Housing Report – June 8th, 2018

Orange County Housing Report:
“Starting to Pull Back”

Orange County Housing Report June 8th, 2018

 In the tug-of-war between buyers and sellers, buyers are eginning to pull back.

Tug-of-War: There is a noticeable shift in housing as buyers are starting to approach the market with caution.

The housing market is like a big game of tug-of-war between buyers and sellers. Sellers have been dominating since 2012 with multiple offers and buyers tripping over themselves to be the winning bidder. As a result, prices have escalated and reached record levels. During the Great Recession, buyers dominated and called the shots. Prices dropped dramatically from 2007 through 2011.

There is a change in the air, and now buyers are beginning to pull back. In the tug-of-war, sellers are still “winning,” but not if they are overpriced. Sellers are no longer getting away with arbitrarily stretching their asking prices. Buyers are approaching housing a bit different than they did from 2012 through 2017. They are much more cautious.

Why the caution? The biggest culprits are interest rates and values. Values have increased significantly. The median sales price was up nearly 6% from April 2017 to April 2018. Remember, it has been a hot seller’s market dating back to 2012, six solid years of home price appreciation. From 2012 to 2018, the median has risen by an astounding 73%. At the end of May 2017, interest rates were at 3.95%. They are at 4.66% today, an 18% increase in a year. With higher values and higher mortgage rates, buyers still want to buy; but, they are getting to the point that they just do not want to pay much more than the most recent comparable sale.

The numbers illustrate how buyers are pulling back by simply comparing the current market to last year. They are tugging the rope harder in every single price range except for homes priced between $1.5 million to $2 million (that range still has an expected market time of 123 days and only represents 6% of demand). There may be 43 fewer homes priced below $500,000, but there are also 174 fewer pending sales. There are 103 fewer homes on the market between $500,000 and $750,000, but there are 132 fewer pending sales. These two price ranges account for 54% of all Orange County demand. When the inventory is down, that is great for sellers. It means less competition. Yet, when demand is down significantly, that is not good for sellers. It means fewer successful sellers.

Between $750,000 and $1 million, there are 25 more homes on the market and only 2 additional pending sales. That means there is more competition in selling a home and just about the same number of successful sellers. Like the lower ranges, it is a bit harder to sell. This price range represents 23% of demand.

The biggest year over year change is occurring in the $1 million to $1.25 million price range. There are 104 more sellers to compete against AND demand is down by 16 pending sales. This price point is a lot harder to sell compared to last year.

For homes priced above $2 million, demand may be up, but there is a lot more competition. Overall, there are 95 more homes on the market above $2 million, while demand is up by only 26. Even with the increase in demand, it feels more sluggish in these higher price ranges.

The word from the real estate trenches is clear: buyers are approaching housing very carefully and sellers are wondering what happened to the HOT SELLER’s market that everybody has been talking about for years. Sellers who are not priced extremely close to their Fair Market Values are not finding success. They are sitting on the market for a long time because buyers are not willing to write offers on their homes. A huge indicator that overpricing is rampant can be found in the number of price reductions. Currently, 11% of the active inventory is reducing their asking price every single week.

The bottom line is clear: it may still be a seller’s market, but sellers must carefully price their homes in order to be successful in this evolving market. In the tug-of-war between buyers and sellers, buyers are starting to pull back.

Active Inventory: The active inventory grew by 3% in the past two weeks.

The active listing inventory continued its climb in the past two weeks, just not at the same clip that it had been for the prior six weeks. It rose by 3%, adding 144 homes, and now totals 5,874, its highest level since August 2017. Expect the inventory to continue to grow until peaking sometime between July and August. It will eclipse last year’s peak of 5,983 homes within the next week or two and will continue to climb, breaking through the 6,000 home mark for the first time since October 2016.

Demand:  It appears that demand has peaked for 2018, falling by 2% in the past couple of weeks.
Last year at this time, there were 5,757 homes on the market, 2% fewer than today. Four weeks ago marked the first time where there were more homes on the market compared to the prior year since August 2016, ending a 20-month streak. It looks like this new trend of more homes on the market year over year is here to stay.

In the past two weeks, demand, the number of pending sales over the prior 30 days, decreased by a 61 pending sales. It now totals 2,665, the lowest demand reading for this time of the year since 2007. Demand most likely reached a peak for 2018 two weeks ago at 2,726 pending sales. That would be the lowest peak since 2007. From here, expect demand to remain the same for the next month and then drop slightly in July and August.

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 down the road, increased from 63 to 66 days in the past two weeks. At 66 days, it is a slight seller’s market (between 60 to 90 days) where seller still get to call the shots, but appreciation is muted. Last year at this time, the expected market time was at 59 days, still a hot seller’s market (less than 60 days).

Luxury End:  Demand for luxury homes dropped by 3% in the past couple of weeks.   

In the past two weeks, demand for homes above $1.25 million decreased by 14 pending sales, down 3%, and now totals 423. The luxury home inventory increased by two homes and now totals 2,101, nearly unchanged. With a drop in demand and a similar supply, the overall expected market time for homes priced above $1.25 million increased from 144 to 149 days over the past two-weeks.

Year over year, luxury demand is up by 72 pending sales or 21%, and the active luxury listing inventory is up by an additional 120 homes or 6%. The expected market time last year was at 169 days, slower than today.

 Orange County Housing Market Summary:
For homes priced between $1.25 million and $1.5 million, the expected market time increased from 90 to 95 days. For homes priced between $1.5 million and $2 million, the expected market time increased from 108 to 123 days. For homes priced between $2 million and $4 million, the expected market time decreased from 197 to 189 days. For homes priced above $4 million, the expected market time decreased from 426 to 395 days. At 395 days, a seller would be looking at placing their home into escrow around the start of July 2019. 

  • The active listing inventory increased by 144 homes in the past two weeks, up 3%, and now totals 5,874. Expect the inventory to increase from now through mid-Summer. Last year, there were 5,757 homes on the market, 117 fewer than today.
  • This year, 19% fewer homes have come on the market below $500,000 today compared to last year, and there have been 25% fewer closed sales so far this year. Fewer and fewer homes and condominiums are now priced below $500,000. This price range is slowly vanishing.
  • Demand, the number of pending sales over the prior month, decreased in the past two-weeks by 61 pending sales, down 2%, and now totals 2,665. It appears that demand peaked two weeks ago. Last year, there were 2,904 pending sales, 9% more than today.
  • The average list price for all of Orange County remained at $1.7 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 43 days. This range represents 35% of the active inventory and 54% of demand.
  • For homes priced between $750,000 and $1 million, the expected market time is 55 days, a hot seller’s market (fewer than 60 days). This range represents 19% of the active inventory and 23% of demand.
  • For homes priced between $1 million to $1.25 million, the expected market time is 92 days, a balanced market (between 90 and 120 days) where it does not favor buyers or sellers.
  • For luxury homes priced between $1.25 million and $1.5 million, the expected market time increased from 90 to 95 days. For homes priced between $1.5 million and $2 million, the expected market time increased from 108 to 123 days. For luxury homes priced between $2 million and $4 million, the expected market time decreased from 197 to 189 days. For luxury homes priced above $4 million, the expected market time decreased from 426 to 395 days.
  • The luxury end, all homes above $1.25 million, accounts for 36% of the inventory and only 16% of demand.
  • The expected market time for all homes in Orange County increased from 63 to 66 days in the past two weeks, a slight seller’s market (from 60 to 90 days).
  • Distressed homes, both short sales and foreclosures combined, made up only 0.7% of all listings and 1.3% of demand. There are only 22 foreclosures and 22 short sales available to purchase today in all of Orange County, 44 total distressed homes on the active market, up two in the past two weeks. Last year there were 76 total distressed homes on the market, 73% more than today.
  • There were 2,614 closed residential resales in April, down by 2% from April 2017’s 2,677 closed sales. April was nearly identical to March 2018’s closings. The sales to list price ratio was 98.7% for all of Orange County. Foreclosures accounted for just 0.5% of all closed sales, and short sales accounted for 0.6%. That means that 98.9% of all sales were good ol’ fashioned sellers with equity.

 

 

 

 

 

 

 

 

 

Orange County Housing Report – May 11th, 2018

Orange County Housing Report:
“Cracks Appearing”

Orange County Housing Report May 11th, 2018

Even though the housing market is hot, trends have emerged that confirm that it is starting to cool.

Cracks Appearing: Trends are developing which demonstrate that the six-year housing run is beginning to cool.

Headlines are the same across the country: there are not enough homes on the market and buyers are having an extremely difficult time finding a home It has been a supply and demand issue for more than six years now, dating back to 2012. The story has not changed much for quite some time; that is, until now.

Now that a third of the year is in the rearview mirror, noticeable cracks have appeared that illustrate a cooling market. It is not as if housing has suddenly tilted in favor of buyers. No, there are still multiple offers and plenty of homes flying off the market and into escrow just moments after the FOR SALE sign is pounded into the front yard. Buyers are still frustrated by the lack of available homes on the market below $1 million. Sellers are still in the driver’s seat. Nonetheless, trends have surfaced that highlight a cooling marketplace.

CRACK – The current active inventory has increased by 15% in the past month. After a rather dismal, anemic start to the year, the active inventory in Orange County has been surging, adding 726 homes in just four weeks. That is the largest one-month gain since July 2013. There are currently 5,434 homes on the market, well below the 8,000 home long-term average; yet, the current trend is for a rapidly increasing active inventory.CRACK – This is the first time there are more homes on the market compared to the prior year since August 2016.  For 20 consecutive months, the year over year active inventory comparison had been less. That just changed. There are 47 more homes today compared to one year ago. On New Year’s Day, there were 674 fewer homes on the market compared to January 1, 2017. As the year has rolled along, the difference diminished over time.

 

CRACK – Demand is at its lowest level for this time of the year since 2008.  Demand, the number of pending sales over the prior 30-days, has been muted since the start of the year. There are simply far fewer pending sales compared to the past several years. The difference has been substantial over the past six weeks. Year over year, demand is down 11%, that is 2,675 pending sales compared to 3,012. Typically, during the Spring Market, pending sales activity is firing on all cylinders, the busiest time of the year. Yet, demand has not been this low for a start to May since 2008 when it measured only 2,540 pending sales.

CRACK – A staggering 11% of all active listings reduced their asking price within the last week. The Multiple Listing Service (MLS) has a helpful red arrow pointing downward adjacent to the asking price if the asking price was reduced. In bringing up a list of homes across Orange County, there are a lot more red arrows pointing down compared to the past several years. This phenomenon is indicative of a market inundated by overpricing. Many sellers are arbitrarily pricing and not relying on the expertise of real estate professionals, so, to be successful, they have to reduce the asking price, and often more than once.

While there are definite cracks in the over six-year housing run, the market is still a seller’s market. It is just not as hot as the Spring of 2017. These trends have only developed this year. They are cautionary flags in approaching the local housing market. If these trends continue, the market will only cool further, but it will take time. The housing market will not change overnight. This year still promises to be a very good year for sellers, only a bit more challenging, which necessitates a more cautious, deliberate strategy and approach to the housing market.

CRACK – Like Orange County, all of Southern California, as a whole, is experiencing more homes on the market compared to last year, and a lot less demand. The active inventory is up for all of Southern California for the first time since May 2015. Most counties are experiencing a higher active inventory compared to the prior year. All counties are currently facing far less demand compared to last year. The bottom line: the trend of a cooler market is not just isolated to Orange County. It is affecting all of Southern California.

Active Inventory: The active inventory added 6% more homes in the past two weeks.

The active listing inventory continued its swift climb in the past two weeks, adding 290 homes, up 6%, and now totals 5,434, its highest level since September 2017. Expect the inventory to continue to climb as the market moves deeper into the Spring and Summer Markets, peaking sometime between July and August.

Demand:  Demand increased by only 1% in the past two weeks.

In the past two weeks, demand, the number of pending sales over the prior 30 days, increased by a paltry 35 additional pending sales. It now totals 2,675, the lowest demand reading for this time of the year since 2008. This lower demand level will affect the number of future closed sales for Orange County in comparison to the last few years.

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 down the road, increased from 58 days to 61 in the past two weeks, transitioning from a hot, seller’s market, to a slight seller’s market (less appreciation, but sellers still get to call the shots). Last year at this time, the expected market time was at 54 days, a bit hotter than today.

Luxury End:  The luxury inventory and luxury demand both increased in the last couple of weeks.  

In the past two weeks, demand for homes above $1.25 million increased by 41 pending sales, up 11%, and now totals 412. The luxury home inventory increased from 1,974 homes to 2,025, up 3%. Year over year, luxury demand is up by 14 pending sales, or 4%, and the active luxury listing inventory is up by an additional 138 homes, or 7%. With a surge in luxury demand, the overall expected market time for all homes priced above $1.25 million decreased from 160 days to 147 days over the past two-weeks. Last year the expected market time was at 142 days.

For homes priced between $1.25 million and $1.5 million, the expected market time decreased from 104 to 92 days. For homes priced between $1.5 million and $2 million, the expected market time decreased from 129 to 121 days. For homes priced between $2 million and $4 million, the expected market time decreased from 208 days to 182. For homes priced above $4 million, the expected market time increased from 386 to 456 days. At 456 days, a seller would be looking at placing their home into escrow around the start of August 2019.

Orange County Housing Market Summary:

  • The active listing inventory increased by an incredible 290 homes in the past two weeks, up 6%, and now totals 5,434. Expect the inventory to increase from now through mid-Summer. Last year, there were 5,387 homes on the market, 47 fewer than today.
  • This year, 20% fewer homes have come on the market below $500,000 today compared to last year, and there have been 27% fewer closed sales so far this year. Fewer and fewer homes and condominiums are now priced below $500,000. This price range is slowly vanishing.
  • Demand, the number of pending sales over the prior month, increased in the past two-weeks by 35 pending sales, up 1%, and now totals 2,675. Last year, there were 3,012 pending sales, 13% more than today.
  • The average list price for all of Orange County remained at $1.7 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 39 days. This range represents 35% of the active inventory and 55% of demand.
  • For homes priced between $750,000 and $1 million, the expected market time is 49 days, a hot seller’s market (fewer than 60 days). This range represents 18% of the active inventory and 23% of demand.
  • For homes priced between $1 million to $1.25 million, the expected market time is 81 days, a slight seller’s market (between 60 and 90 days).
  • For luxury homes priced between $1.25 million and $1.5 million, the expected market time decreased from 104 days to 92. For homes priced between $1.5 million and $2 million, the expected market time decreased from 129 days to 121. For luxury homes priced between $2 million and $4 million, the expected market time decreased from 208 days to 182. For luxury homes priced above $4 million, the expected market time increased from 386 to 456 days.
  • The luxury end, all homes above $1.25 million, accounts for 37% of the inventory and only 15% of demand.
  • The expected market time for all homes in Orange County increased from 58 days to 61 in the past two weeks, a slight seller’s market (from 60 to 90 days).
  • Distressed homes, both short sales and foreclosures combined, make up only 0.8% of all listings and 1.2% of demand. There are only 20 foreclosures and 24 short sales available to purchase today in all of Orange County, that’s 44 total distressed homes on the active market, up one in the past two weeks. Last year there were 81 total distressed sales, 84% more than today.
  • There were 2,614 closed residential resales in April, down by 2% from April 2017’s 2,677 closed sales. April was nearly identical to March 2018’s closings. The sales to list price ratio was 98.7% for all of Orange County. Foreclosures accounted for just 0.5% of all closed sales, and short sales accounted for 0.6%. That means that 98.9% of all sales were good ol’ fashioned sellers with equity.

 

 

 

 

 

Orange County Housing Report – April 24th, 2018

Orange County Housing Report:
“Vanishing Into Thin Air”

Orange County Housing Report April 24th, 2018

The lower end of the housing market is not only disappearing, it is impacting pending and closed sales.

Vanishing Lower Ranges: A mind-blowing 15% fewer homes have come on the market below $750,000 so far this year compared to 2017.

The market has been blistering hot for years now. For homes priced below $750,000, it has been a hot seller’s market (an expected market time less than 60-days) since October 2015. Home prices have appreciated dramatically for six solid years. As a result, there are only a handful of detached homes priced below $500,000 today, 55 to be precise, or 1% of the active listing inventory. Back in January 2012, there were 1,806, 22% of the active inventory. Detached homes below $500,000 have essentially disappeared. Similarly, there are only 69 condominiums, 1.5% of the active inventory, priced below $250,000 today. At the beginning of 2012, there were 1,413, 17% of the inventory. Condominiums below $250,000 is a thing of the past.

The story of the disappearing lower end has been evolving. With housing continuing to appreciate, there are now fewer detached homes available below $750,000. It is 13% of all available homes to purchase today compared to 38% in 2012. Relatedly, there are fewer condominiums priced below $500,000, only 13% of today’s inventory compared to 33% in 2012.

The numbers illustrate just how staggering the shortage of lower range homes has become in 2018. So far this year, 20% fewer properties have been placed on the market priced below $500,000 compared to 2017. As a result, there have been 29% fewer closed sales in this price range. The difference is significant. This is precisely why there are so many buyers sitting around waiting for homes to come on the market; there simply are not enough homes in the lower ranges.

For homes priced between $500,000 and $750,000, there have been 12% fewer homes to come on the market in 2018 compared to 2017. Closed sales are down by 5% in this price range.

There was a similar storyline last year. Fewer homes were coming on the market in the lower ranges. Yet, it did not impact closed sales. Despite 6% fewer homes year over year that came on the market in 2017, closed sales were nearly identical, up by 0.6%.

Something is distinctly different this year; total sales are down this year compared to last year. Last year, closed sales above $750,000 made up the difference of fewer closed sales in the lower ranges. Not this year. The upper ranges are not making up the difference. There are 5% fewer homes (all price ranges) that came on the market compared to the same time last year; and, there are 6% fewer closed sales. The lack of opportunities below $750,000 is affecting the total number of closed sales in Orange County.

The erosion of more affordable housing has been going on for years. The below $750,000 range was 84% of all closed sales back in 2012. It dropped to 62% last year. Through March of 2018, it has dropped to 59% of all closings. This trend will only continue as long as the market remains hot. With a depressed inventory and unrelenting demand, this sizzling market is poised to continue for quite some time.

For buyers anticipating more homes in the affordable price ranges coming on the market soon, it is just not going to happen. The number of opportunities is diminishing over time. Buyers who wait will be confronted with fewer available options to purchase.

Active Inventory: The active inventory only added 99 homes in the past two weeks.

The active listing inventory continued its climb in the past two weeks, just at a slower pace, adding 99 homes, up 2%, and now totals 4,708. The active inventory had been increasing at a very fast pace, but not in the past two weeks. Expect the inventory to continue to climb as the market moves deeper into the Spring and Summer Markets, peaking sometime between July and August. In comparing the active inventory to last year, the difference was shrinking after a very anemic start to the year. The difference was down to 107 homes two weeks ago. But, after adding a meager 2% to the inventory in the past two weeks, the difference grew to 308 homes. There were 5,016 homes last year at this time, 7% more than today’s level.

Demand:  Demand increased by an unimpressive 3% in the past two weeks.

Last year, demand, the number of new pending sales over the prior month, increased by 11% at this time of the year. This year, demand increased by only 3%, adding 64 pending sales over the past couple of weeks, and now totals 2,602. The last time demand was above the 2,600 pending sale level was back in August 2017. The Spring Market is here, just not at the same pace as the past few years. Roll the clock back to 2014 to find similar levels, which was the slowest year in terms of sales in the 6 year run in housing. There were 11% fewer closed sales in 2014 compared to 2017. With fewer pending sales in the lower price ranges, demand is taking a bit of a hit in 2018. If this trend continues, it could impact total sales for the year.

Last year at this time, demand was at 2,957 pending sales, 14% more than today.

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 down the road, remained at 54 days in the past two weeks, a hot, seller’s market. Last year at this time, the expected market time was at 51 days, a bit hotter than today.

Luxury End:  The luxury inventory increased while demand remained the same. 

In the past two weeks, demand for homes above $1.25 million remained at 353 pending sales. The luxury home inventory increased from 1,797 homes to 1,859, up 3%. Last year at this time, luxury demand was increasing rapidly and the overall expected market time was falling fast. Not this year. A new trend may be emerging, a slower luxury market; or, it may be just a blip on the radar. Only time will tell. With an increase in the inventory and unchanged demand, the overall expected market time for all homes priced above $1.25 million increased from 153 to 158 days over the past two-weeks.

For homes priced between $1.25 million and $1.5 million, the expected market time increased from 88 to 95 days. For homes priced between $1.5 million and $2 million, the expected market time increased from 142 to 155 days. For homes priced between $2 million and $4 million, the expected market time decreased from 202 days to 187. For homes priced above $4 million, the expected market time increased from 296 to 313 days. At 313 days, a seller would be looking at placing their home into escrow around mid-February 2019.

Orange County Housing Market Summary:

  • The active listing inventory increased by 99 homes in the past two weeks, up 2%, and now totals 4,708. Expect the inventory to increase from now through mid-Summer. Last year, there were 5,016 homes on the market, 308 more than today.
  • This year, 20% fewer homes have come on the market below $500,000 today compared to last year, and there have been 29% fewer closed sales so far this year. 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 in the past two-weeks by 64 pending sells, up 3%, and now totals 2,602. Last year, there were 2,957 pending sales, 14% more than today.
  • 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 32 days. This range represents 34% 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 18% of the active inventory and 22% of demand.
  • For homes priced between $1 million to $1.25 million, the expected market time is 68 days, a slight seller’s market (between 60 and 90 days).
  • For luxury homes priced between $1.25 million and $1.5 million, the expected market time increased from 88 days to 95. For homes priced between $1.5 million and $2 million, the expected market time increased from 142 to 155 days. For luxury homes priced between $2 million and $4 million, the expected market time decreased from 202 days to 187 days. For luxury homes priced above $4 million, the expected market time increased from 296 to 313 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 remained at 54 days in the past two weeks, a hot seller’s market (fewer than 60 days). From here, we can expect the market time to remain below 60-days through May.
  • Distressed homes, both short sales and foreclosures combined, make up only 0.8% of all listings and 1.5% of demand. There are only 18 foreclosures and 21 short sales available to purchase today in all of Orange County, that’s 39 total distressed homes on the active market, unchanged in the past two weeks. Last year there were 78 total distressed sales, 100% more than today.
  • There were 2,613 closed residential resales in March, down by 6% from March 2017’s 2,792 closed sales. March marked a 44% increase from February 2018. The sales to list price ratio was 97.6% for all of Orange County. Foreclosures accounted for just 0.5% of all closed sales, and short sales accounted for 0.6%. That means that 98.9% of all sales were good ol’ fashioned sellers with equity.

 

 

 

 

 

 

 

 

 

Orange County Housing Report April 6th, 2018

Orange County Housing Report:
“Wait and Afford Less”

Orange County Housing Report April 6th, 2018

With rising interest rates, purchasing power drops for buyers considerably the longer they wait.


Purchasing Power
: An increase in interest rates by 1% translates to an 11% drop in the home a buyer is able to afford.

For the past several years, experts and prognosticators across the country had been calling for increasing interest rates. Yet, it never really materialized. To many it was reminiscent of Chicken Little’s, “THE SKY IS FALLING!!” Sure interest rates had their ups and downs, but, in the end, they consistently dropped back down to historical lows, below 4%. That is, until this year.

With the election of President Trump in November 2016, interest rates rose significantly, climbing nearly 1% overnight. The new presidential administration was poised to lower taxes, increase spending on infrastructure, and reform trade around the world. These policies were seen as extremely inflationary and resulted in increasing rates. As financial markets realized that the policies were not going to occur overnight, once again, interest rates dropped below 4%.

It wasn’t unit the end of 2017 where the rubber started meeting the road with the passing of the new tax law. Interest rates responded almost immediately and began to climb. With the announcement of trade reform and a trillion-dollar infrastructure plan, there is tremendous pressure on rates today.

The experts and prognosticators may have had their timing off, but they collectively understood that it was not a matter of “if” interest rates would rise, but “when” they would rise. With the massive manipulation of the monetary policy by the Federal Reserve, the United States has been in economic, uncharted waters, making the art of forecasting rates not an exact science.

At this point, the pressure on interest rates to rise is real. But, after more than a decade of extremely affordable rates, everybody has become accustom to these affordable levels. It is time for a brief history lesson:

  • 1981 = 18%
  • 1990 = 10%
  • 2000 = 8%
  • 2007 = 6.5%
  • Today = 4.5%

Yes, 3.5% is a better rate; however, 4.5% is still a very low rate in historical context. Buyers should not wait for another drop. Instead, they should cash in on today’s mortgage rates. These low levels are an absolute gift based upon the economic history book.

Buyers must understand that the longer they wait to purchase, the greater the risk that rates will rise. As they rise, a buyer’s purchasing power erodes considerably the higher then climb. If mortgage rates climbed by 1% from where they are today, buyers looking for a $2,500 monthly payment would see their purchase power drop from $616,750 to $550,375; that’s a $66,375 drop in purchase price. For buyers looking for a $3,500 monthly payment, it drops from $863,500 to $770,500, a drop of $93,000. And, for buyers looking at a $4,500 monthly payment, it drops from $1,110,125 to $990,625, plunging by nearly $120,000.

Keep in mind, 5.5% is still a very low rate. The trouble is there are younger buyers in the marketplace who have never experienced rates above 5%. The housing market is not going to implode. It will not be the end of the world. But, it will eat into affordability and purchasing power. That 1% increase in mortgage rates will result in an 11% drop is what a buyer is able to afford.

With an improving economy, the new tax law, trade reform, and a new infrastructure plan, expect rates to rise. Buyers should not sit on the sideline and wait for them to drop. If they do, they will watch their purchase power crumble.

Active Inventory: The active inventory increased by 4% in the past two weeks.

The active listing inventory continued to climb in the past two weeks, adding an additional 189 homes, up 4%, and now totals 4,609. The active inventory is increasing at its fastest pace since 2014. It will continue to climb as the market moves deeper into the Spring Market, and will climb through the summer, peaking sometime between July and August.

After starting the year with 674 fewer homes compared to the start of 2017, 12% fewer, the year over year difference has drastically diminished. Today, there are only 107 fewer homes compared to last year, a 2% difference.

Demand:  Demand increased by 5% in the past two weeks.

Demand, the number of new pending sales over the prior month, increased by 121 pending sales over the past couple of weeks and now totals 2,538, a 5% rise. The last time demand was above the 2,500 pending sale level was back in September 2017. The Spring Market is in full bloom and demand will continue to rise, peaking sometime between April and May.

Last year at this time, demand was at 2,664 pending sales, 126 more than today, or 5%. The number of pending sales has dropped this year because of a serious lack of inventory of homes priced below $750,000. This price range is significant as it represented 62% of all closed sales in 2017. So far this year, there has been 12% fewer homes that have come on the market below $750,000. The lack of homes in the most affordable price ranges has seriously undermined potential 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 down the road, decreased slightly from 55 to 54 days in the past two weeks, a hot, seller’s market. Last year at this time, the expected market time was at 53 days, very similar to today.

Luxury End:  The luxury inventory and luxury demand increased in the past couple of weeks. 

In the past two weeks, demand for homes above $1.25 million increased from 343 to 353 pending sales, up 3%. The luxury home inventory increased from 1,704 homes to 1,797, up 5%. From here, 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 increased from 149 to 153 days over the past two-weeks.

Orange County Housing Market Summary:
For homes priced between $1.25 million and $1.5 million, the expected market time increased from 78 to 88 days. For homes priced between $1.5 million and $2 million, the expected market time decreased from 149 to 142 days. For homes priced between $2 million and $4 million, the expected market time increased from 193 days to 202. In addition, for homes priced above $4 million, the expected market time decreased from 338 to 296 days. At 296 days, a seller would be looking at placing their home into escrow around mid-January 2019.

  • The active listing inventory increased by 189 homes in the past two weeks, up 4%, and now totals 4,609. Expect the inventory to increase from now through mid-Summer. Last year, there were 4,716 homes on the market, 107 more than today.
  • This year, 18% fewer homes have come on the market below $500,000 today compared to last year and 39% fewer than two years ago. 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 in the past two-weeks by 121 pending sells, up 5%. The average pending price is $913,011.
  • 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 34% of the active inventory and 57% of demand.
  • For homes priced between $750,000 and $1 million, the expected market time is 44 days, a hot seller’s market (fewer than 60 days). This range represents 17% of the active inventory and 22% of demand.
  • For homes priced between $1 million to $1.25 million, the expected market time is 71 days, a slight seller’s market (between 60 and 90 days).
  • For luxury homes priced between $1.25 million and $1.5 million, the expected market time increased from 78 days to 88. For homes priced between $1.5 million and $2 million, the expected market time decreased from 149 to 142 days. For luxury homes priced between $2 million and $4 million, the expected market time increased from 193 days to 202 days. For luxury homes priced above $4 million, the expected market time decreased from 338 to 296 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 decreased from 55 days to 54 in the past two weeks, a hot seller’s market (fewer than 60 days). From here, we can expect the market time to remain below 60-days through May.
  • Distressed homes, both short sales and foreclosures combined, make up only 0.8% of all listings and 1.3% of demand. There are only 17 foreclosures and 22 short sales available to purchase today in all of Orange County, that’s 39 total distressed homes on the active market, dropping by 5 in the past two weeks. Last year there were 79 total distressed sales, 102% more than today.
  • There were 1,820 closed residential resales in February, down by 4% from February 2017’s 1,888 closed sales. February marked a 1% increase from January 2018. The sales to list price ratio was 97.6% for all of Orange County. Foreclosures accounted for just 0.9% of all closed sales and short sales accounted for 0.7%. That means that 98.4% of all sales were good ol’ fashioned sellers with equity.

 

 

 

 

 

 

 

 

 

 

Orange County Housing Report March 15th, 2018

Orange County Housing Report:
“Too Much Noise”

Orange County Housing Report March 15th, 2018

Everybody seems to have an opinion about the direction of the housing market.

Ignore the Noise: From talk of a housing bubble to speculation that the market will slow because of higher rates, the best advice is to ignore all of the noise and turn to the facts.

Wow! There is a lot of talk and speculation about the housing market these days. Some people are convinced that housing is a bubble and it will implode, dropping more than it did during the Great Recession. Yikes, interest rates have reached 4.5%, it must mean the end of the housing run is near. On a live video, one real estate professional warned that the market will turn this autumn stating that a downturn occurs every 10-years. Some speculated that the new tax law would affect the luxury market negatively.

From recent volatility in the stock market to the looming trade wars, there is a lot of uncertainty out there and it has been spilling over to housing. Is a housing downturn around the corner? Will the market finally favor buyers? The answer is simple, not anytime soon. Ignore all of the noise.

There is no major, upcoming downturn larger than the Great Recession. Interest rates would have to rise beyond 5.5% to negatively impact housing. No, real estate recessions do not occur every 10 years like clockwork. The new tax law is not impacting the luxury market. Stock market volatility and the trade war are not influencing housing. It is all just noise.

Some of the buzz may originate from wishful thinking. For others, it may be fear generated from the uncertainty that swirls around the modern economy. Yet, all of the clamor is not based on the facts. Quite simply, nobody can ignore the data. It is a seller’s market with ZERO indicators, or trends, that the market is going to turn in the buyer’s favor anytime soon.

FACT – It is a HOT seller’s market with an expected market time of 55 days. Any time the expected market time, the amount of time it would take for a home on the market today to be placed into escrow, falls below 90-days, it is a seller’s market. When it falls below 60 days, it is considered a HOT seller’s market, one that is pumping on all cylinders and leaning heavily in favor of sellers. Crowded open houses, multiple offers, buyers seemingly tripping over each other to purchase, that has become a springtime norm for Orange County housing and it is no different today.

FACT – In the past 15 years, today’s active inventory is at the second lowest level behind 2013. For the market to start tipping in the buyer’s direction, the inventory needs to rise above the long-term average of 8,000 homes for a sustained period of time. Not just exceeding 8,000 homes for a month or two; instead, it must remain elevated for years. During the Great Recession, the inventory exceeded 8,000 homes for six years. The active listing inventory is currently at 4,420 homes and does not look like it will come close to even touching 8,000.

FACT – More luxury homes have sold so far this year than ever before. Through the first two months of the year, there have been 444 closed sales above $1.25 million, a new record. Last year, the prior record, there were 430 closed sales, 3% fewer. So far, the new tax law has had zero impact on the trend in a record level of closed luxury sales.

FACT – The supply is low and demand is high. One cannot ignore basic supply and demand from Econ 101. When very little supply, a nine-year trend, is matched with very hot demand, a six-year trend, prices rise. Even though interest rates have risen to 4.5%, current rates are still low in historical contexts, making homes more affordable. This is precisely why the rise in interest rates has not adversely affected the market. Instead, it has pushed more buyers to buy before rates continue to rise.

FACT – A lack of homeowners coming on the market, especially below $750,000, is starting to eat into the number of closed sales. When there are fewer homes to purchase, sales go down. The headlines this year are going to report that sales are down and prices are up. That does not mean that the market is slowing. Instead, it means that the lack of entry-level homes coming on the market will make purchasing within this range even more challenging than prior years.

The bottom line is this: facts and data do not lie. Buyer, seller, and all consumer expectations should really be anchored in fact, not the noise of rumors, opinions, or uneducated guesses. The housing market is hot and it will remain a seller’s market for the long run.

Active Inventory: The active inventory increased by 6% in the past two weeks.

Across the board, in every price range, the active inventory increased. In the past two weeks, the inventory added 242 homes, a 6% increase, and now totals 4,420. Even though demand is hot and there are very few homes on the market, they are not instantly being placed into escrow. This is partly due to the fact that it takes a bit of time to market and negotiate a sale, even in a fast pace, seller’s market; HOWEVER, there are still plenty of homeowners aggressively pricing their homes, stretching the value too much. These homes are starting to accumulate on the market without success.  Today, buyers are willing to stretch in price a bit, but they are not going to get carried away, as values are already high. Alternatively, sellers should price their homes carefully, adhering to their Fair Market Value. When a home is priced right, it will procure multiple offers, allowing a seller to pit the offers again each other. This often results in a sales price at, or even above, the asking price.

Last year at this time, there were 4,571 homes on the market, 3% more than today. The year over year difference has slowly been diminishing.

Demand:  Demand dropped by 1% in the past two weeks.

Demand, the number of new pending sales over the prior month, decreased by 24 pending sales over the past couple of weeks and now totals 2,417, a 1% drop. Year in and year out, demand typically pauses for a brief moment at the beginning of March, strange annual phenomena. After “springing forward” this weekend, there will be more daylight to work with and the Spring Market will accelerate. Demand will increase dramatically from now through April and will peak sometime between April and May.

Last year at this time, demand was at 2,576 pending sales, 159 more than today, or 7%. The number of pending sales has dropped this year because of a serious lack of inventory of homes priced below $750,000. As a matter of fact, there have been 12% fewer homes that have come on the market below $750,000 so far this year. This lack of affordable housing has seriously undermined potential 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, increased from 51 to 55 days in the past two weeks, still a hot, seller’s market. Last year at this time, the expected market time was at 53 days, very similar to today.

In the past two weeks, demand for homes above $1.25 million decreased from 354 to 343 pending sales, down 3%. The luxury home inventory increased from 1,629 homes to 1,704, up 5%. From here, 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 increased from 138 to 149 days over the past two-weeks.

Luxury End:  The luxury inventory increased while luxury demand slightly decreased. 

For homes priced between $1.25 million and $1.5 million, the expected market time decreased from 79 to 78 days. For homes priced between $1.5 million and $2 million, the expected market time increased from 115 to 149 days. For homes priced between $2 million and $4 million, the expected market time increased from 167 days to 193. In addition, for homes priced above $4 million, the expected market time decreased from 515 to 338 days. At 338 days, a seller would be looking at placing their home into escrow around the February 2019.

Orange County Housing Market Summary: 

  • The active listing inventory increased by 242 homes in the past two weeks, up 5%, and now totals 4,420. Expect the inventory to increase from now through mid-Summer. Last year, there were 4,571 homes on the market, 151 more than today.
  • There are 24% fewer homes on the market below $500,000 today compared to last year at this time and demand is the same as last year. 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 in the past two-weeks by 24 pending sells, down 1%. The average pending price is $900,305.
  • 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 35% of the active inventory and 58% 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 22% of demand.
  • For homes priced between $1 million to $1.25 million, the expected market time is 82 days, a slight seller’s market (between 60 and 90 days).
  • For luxury homes priced between $1.25 million and $1.5 million, the expected market time dropped from 79 days to 78. For homes priced between $1.5 million and $2 million, the expected market time increased from 115 to 149 days. For luxury homes priced between $2 million and $4 million, the expected market time increased from 167 days to 193 days. For luxury homes priced above $4 million, the expected market time decreased from 515 to 338 days.
  • The luxury end, all homes above $1.25 million, accounts for 38% of the inventory and only 14% of demand.
  • The expected market time for all homes in Orange County increased from 51 days to 55 in the past two weeks, a hot seller’s market (fewer than 60 days). From here, we can expect the market time to remain below 60-days through May.
  • Distressed homes, both short sales and foreclosures combined, make up only 1% of all listings and 1.4% of demand. There are only 14 foreclosures and 30 short sales available to purchase today in all of Orange County, that’s 44 total distressed homes on the active market, rising by four in the past two weeks. Last year there were 77 total distressed sales, 77% more than today.
  • There were 1,820 closed residential resales in February, down by 4% from February 2017’s 1,888 closed sales. February marked a 1% increase from January 2018. The sales to list price ratio was 97.6% for all of Orange County. Foreclosures accounted for just 0.9% of all closed sales and short sales accounted for 0.7%. That means that 98.4% of all sales were good ol’ fashioned sellers with equity.

 

 

 

 

 

 

Orange County Housing Report February 27th, 2018

Orange County Housing Report:
“The 6-Year Drought”

Orange County Housing Report February 27th, 2018

There have been far fewer homeowners selling their homes
annually ever since the start of the Great Recession.

 

Lack of Sellers: In the face of massive home appreciation and excellent conditions that have favored sellers for years now, fewer homeowners are opting to sell.

In 2009, the midst of the Great Recession, a trend emerged. Fewer sellers were coming on the market. It made sense back then; homeowners watched their home equity evaporate overnight, so why would homeowners trip over themselves to sell in the middle of a tumultuous, deep buyer’s market? As a result, from 2009 through 2011, 22% fewer homes came on the market each year compared to 2000 through 2008.

In 2012, the housing market turned around, tipping in favor of sellers for the first time since 2006. Even though it was a seller’s market, the trend of fewer homeowners opting to place their homes on the market not only continued, it deepened. For the past six years, from 2012 through 2017, the number of homeowners coming on the market annually dropped from 22% fewer to an average of 31% fewer. To put it all in proper perspective, there were 1,500 more homes coming on the market every single month from 2000 through 2008. That is an additional 18,000 homes per year.

Today’s buyers would love to see more inventory. It is frustrating to be a buyer. With a lack of inventory and backed up demand, properly priced homes generate a parade of showings, open houses with buyers bumping into each other, and multiple offers (and in some cases, almost too many to count).

The lack of inventory is no longer a trend. After 9 years, it is a norm, a way of life in the trenches of real estate. A lack of inventory is not just a standard in Orange County; it is the new standard across Southern California, the entire state of California, and across the United States. People are no longer selling and moving like they did before.

Based upon 2017 closed sales, the turnover rate for the Orange County housing stock is once every 20 years. That is an improvement over 2016’s once every 21 years, 2015’s once every 23 years, and 2014’s once every 24 years. Although it may be slightly improving, once every 20 years is a long time to hold onto a home before opting to sell.

In 2017, the markets with the best rates were mainly newer areas, but there were a few exceptions. Ladera Ranch and Rancho Mission Viejo, Coto de Caza, Newport Coast, Rancho Santa Margarita, and Talega are all newer areas. More homeowners move between two to eight years of homeownership than any other number of years lived in a home. In newer areas, more homeowners fall within this parameter than in older, more established areas. Laguna Woods has enjoyed a higher turnover for years now and has been an exception on this list. Corona del Mar and Dove Canyon are two areas that are new to the list. Why they are at the top of the list is anybody’s guess. The top turnover rate in Orange County can be found in Ladera Ranch and Rancho Mission Viejo, once every 11 years.

The lowest turnover rates can be found in more established, older cities: Anaheim, Buena Park, Cypress, Fountain Valley, Seal Beach, Westminster, and La Palma. The lowest rate in Orange County was in La Palma where homeowners are moving once every 30 years.

Through surveys and in-depth studies, experts and statisticians have figured out many of the reasons there are not enough homes for sale. The biggest contributing factor is that baby boomers are staying put. They are not moving like many had originally anticipated. They have been slower than prior generations to sell the family home. Perhaps it is because baby boomers are living longer and are living a healthier lifestyle. The need to sell the family home is not as daunting right now, so they are happy to just age in place.

During the Great Recession and the recovery, millions of investors have converted family homes into rentals. With rising home values coupled with rising rents, holding onto these homes has proved to be a wise long-term investment. There is no incentive for them to sell anytime soon.

In addition, homeowners have cashed in on lower mortgage rates through purchase and refinance loans. Many are locked into 30-year fixed rates well below 4%. As interest rates rise, homeowners will elect to stay put and continue to enjoy their lower interest rates.

Finally, new homebuilders are ignoring the entry-level buyer. Builders used to cater to the entry-level buyer and the luxury end was the exception. Today, it is the other way around. Seemingly, everything is now tilting towards the luxury buyer. Without new affordable housing, the residential resale entry level has been squeezed. As a result, the lower end resale market has been on fire for years now and has appreciated dramatically, propping up the rest of the market.

Buyers in today’s market need to understand that the lack of supply is not a trend; it is the new norm. To be successful, buyers must realistically approach the market with a solid game plan, a game plan that includes patience, a very sharp pencil, and the ability to proceed quickly.

Active Inventory: The active inventory continues to climb.

In spite of massive, unbridled demand, the active inventory continues to rise, climbing an additional 5%, 197 homes, in the past two weeks, and now sits at 4,178. At this point, it appears as if the active inventory is trending towards surpassing last year’s incredibly low annual height of 6,000 homes. It has actually been increasing at a faster clip to start 2018 compared to last year.

Last year at this time, there were 4,460 homes on the market, 7% more than today. The year over year difference has slowly been diminishing.

Demand:  Demand increased by 7% in the past two weeks.

Demand, the number of new pending sales over the prior month, has increased by 155 pending sales over the past couple of weeks and now totals 2,441, its highest level since September of last year. 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 2,651 pending sales, 210 more than today, or 9%. The number of pending sales has dropped this year because of a serious lack of inventory of homes priced below $750,000. Fewer opportunities in the lower ranges have seriously undermined potential demand. Hopefully, this phenomenon will diminish as more homes enter the fray during the Spring Market.

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 52 to 51 days in the past two weeks, a hot, seller’s market.

Luxury End:  Both luxury demand and the luxury inventory increased by 5% in the past couple of weeks. 

In the past two weeks, demand for homes above $1.25 million increased from 336 to 354 pending sales, up 5%. The luxury home inventory increased from 1,540 homes to 1,629, up 5% as well. 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 remained at 138 days over the past two-weeks.

For homes priced between $1.25 million and $1.5 million, the expected market time decreased from 81 to 79 days. For homes priced between $1.5 million and $2 million, the expected market time decreased from 122 to 115 days. For homes priced between $2 million and $4 million, the expected market time increased from 163 days to 167. In addition, for homes priced above $4 million, the expected market time increased substantially from 349 to 515 days. At 515 days, a seller would be looking at placing their home into escrow around the end of July 2019.

 

Orange County Housing Market Summary:

  • The active listing inventory increased by 197 homes in the past two weeks, up 5%, and now totals 4,178. Expect the inventory to increase from now through mid-Summer. Last year, there were 4,460 homes on the market, 282 more than today.
  • There are 26% fewer homes on the market below $500,000 today compared to last year at this time and demand is down by 12%. 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 in the past two-weeks by 155 pending sells, up 7%. The average pending price is $876,310.
  • 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 31 days. This range represents 35% of the active inventory and 58% 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 63 days, a slight seller’s market (between 60 and 90 days).
  • For luxury homes priced between $1.25 million and $1.5 million, the expected market time dropped from 81 days to 79. For homes priced between $1.5 million and $2 million, the expected market time decreased from 122 to 115 days. For luxury homes priced between $2 million and $4 million, the expected market time increased from 163 days to 167 days. For luxury homes priced above $4 million, the expected market time dramatically increased from 349 to 515 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 52 days to 51 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% of demand. There are only 18 foreclosures and 22 short sales available to purchase today in all of Orange County, that’s 40 total distressed homes on the active market, rising by only one in the past two weeks. That’s right after reaching its lowest level since the very beginning of the Great Recession. Last year there were 85 total distressed sales, 113% more than today.
  • There were 1,800 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.