Tag Archives: Orange County Housing Report

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.

 

 

 

 

 

 

 

 

 

Orange County Housing Report February 13th, 2018

Orange County Housing Report:
“The Spring Market Has Arrived”

Orange County Housing Report February 13th, 2018

With demand exploding onto the scene, it is officially the
best season to sell a home.

 

Spring Market: The activity below $1 million is nothing short of CRAZY!!

In Southern California, it is hard to tell the seasons apart. You have to look up at the trees to see if there are leaves or not. The time of the sunset is another dead giveaway. Are there flowers yet?

Similarly, there are signs that the housing market has officially changed. There is a steady stream of buyers at open houses for all homes priced below $1.25 million. Sellers are entertaining multiple offers within days of coming on the market. Buyers are writing offers before even seeing the home. That’s right; the crazy Spring Market has arrived.

Many are scratching their heads knowing that the first day of spring is not until March 20th. That is when the days are longer, the flowers are blooming, and trees are sprouting their new leaves. However, the Spring Market in Southern California actually starts in February and runs all the way through the end of May. The expected market time, the amount of time it would take to place a home onto the market and then into escrow dips to its lowest level of the year. Orange County housing is already moving at a feverish pitch.

This year will be similar to 2017 when the expected market time dipped below 60-days, considered a hot, seller’s market, throughout the entire Spring Market. Spring 2018 is going to be hot. Buyers will be faced with tremendous competition to buy, and sellers will be running the table.

The market is very hot for attached homes, currently running at 41 days. It is a hot, seller’s market for all attached homes priced below $1 million. The hottest range is condominiums priced between $250,000 and $750,000. That range represents 82% of all attached home demand.

Take a look at the velocity of the market already. For detached homes, the expected market time dipped below 60-days for the first time since the start of April 2017. It is less than a month, 29-days, for homes priced below $500,000. For homes priced between $500,000 and $750,000, it is a 31-day market. It is a hot market for homes priced between $750,000 and $1 million with a 39-day expected market time. From $1 million to $1.25 million, it too is below the 60-day threshold at 51-days. From $1.25 million to $1.5 million, it is still considered a seller’s market, just not a mad rush like the lower ranges.

For detached homes priced above $1.5 million and attached homes priced above $1 million, the market does not lean in the seller’s favor. As prices rise, sellers are faced with a much slower market. They represent 31% of the inventory and only 9% of demand.

For the rest of the market, we are back to bidding wars. When a home procures 15 offers, there is only one winner. The other 14 buyers need to go back to the drawing board and start the process all over again. It is extremely frustrating being a buyer in today’s market. After losing out on one or two homes, most buyers sharpen their pencils and are prepared to write very strong offers in their attempt to secure a home, maybe even stretch the offered price a bit. That is how buyers have been approaching the hot Spring Market selling season since 2012.

Warning to Buyers: regardless of rising interest rates and the volatility of Wall Street, the market is not going to change anytime soon and tilt in the buyer’s favor. The trends are lined up in favor of sellers with tremendous demand and a very low supply of homes to purchase.

Warning to Sellers: pricing very close to the most recent comparable pending and closed sales is fundamental in order to find success. The active inventory has already started to increase despite red-hot demand. This is due primarily to the fact that many sellers cannot help themselves. They ignore the comparable data and reach for the moon, overpricing their homes and sitting on the market without success.

 

Active Inventory: The active inventory increased by 5% in the past couple of weeks.

The active listing inventory added an additional 207 homes in the past two-weeks, a 5% increase, and now sits at 3,981. The inventory will cross the 4,000 home threshold this week and will continue its climb through the summer. The inventory is actually increasing at a faster clip than last year at this time. Moreover, it is occurring at a time when demand is hot. It is too early to tell if this trend will continue, enabling the inventory to surpass last year’s heights.

Last year at this time, there were 4,448 homes on the market, 12% more than today. The year over year difference has slowly been diminishing.

 

Demand:  Demand increased by 58% in the past month.

Demand, the number of new pending sales over the prior month, has exploded onto the scene and increased by 839 pending sales over the past 4-weeks and now totals 2,286, its highest level since November. Demand will continue to rapidly increase from now through April and will peak sometime between April and May.

Last year at this time, demand was at 2,430 pending sales, 117 more than today, or 5%. This is primarily due to fewer homes on the active listing market since the start of the year. As more homes come enter the fray during the Spring Market, demand will achieve similar levels compared to 2017.

The expected market time, the amount of time it would take for a home that comes onto the market today to be placed into escrow, decreased from 64 to 52 days in the past two weeks, a hot, seller’s market.

Luxury End:  Luxury demand dramatically increased in the past two weeks. 

In the past two weeks, demand for homes above $1.25 million increased from 241 to 336 pending sales, up an incredible 39%. The luxury home inventory increased from 1,429 homes to 1,540, an 8% rise in the past two-weeks. Expect both demand and the inventory to rise throughout the Spring Market. The current expected market time for all homes priced above $1.25 million plunged from 178 days to 138. The luxury range is heating up, but nothing like the lower ranges with an expected market time of just 36 days for homes below $1 million.

For homes priced between $1.25 million and $1.5 million, the expected market time dropped from 112 to 81 days. For homes priced between $1.5 million and $2 million, the expected market time decreased from 145 to 122 days. For homes priced between $2 million and $4 million, the expected market time decreased from 221 days to 163. In addition, for homes priced above $4 million, the expected market time dipped from 355 to 349 days. At 349 days, a seller would be looking at placing their home into escrow around the end of January 2019.

 

 Orange County Housing Market Summary:

  • The active listing inventory increased by 207 homes in the past two weeks, up 5%, and now totals 3,981. Expect the inventory to increase from now through mid-Summer. Last year, there were 4,448 homes on the market, 467 more than today.
  • There are 29% fewer homes on the market below $500,000 today compared to last year at this time and demand is down by 20%. Fewer and fewer homes and condominiums are now priced below $500,000. This price range is slowly disappearing.
  • Demand, the number of pending sales over the prior month, skyrocketed in the past two weeks by adding an additional 522 pending sells, up 30%. The average pending price is $909,074.
  • The average list price for all of Orange County remained at $1.8 million over the past two weeks. This number is high due to the mix of homes in the luxury ranges that sit on the market and do not move as quickly as the lower end.
  • For homes priced below $750,000, the market is HOT with an expected market time of just 33 days. This range represents 36% of the active inventory and 57% of demand.
  • For homes priced between $750,000 and $1 million, the expected market time is 43 days, a hot seller’s market (fewer than 60 days). This range represents 17% of the active inventory and 21% of demand.
  • For homes priced between $1 million to $1.25 million, the expected market time is 54 days, a hot seller’s market.
  • For luxury homes priced between $1.25 million and $1.5 million, the expected market time dropped from 112 days to 81. For homes priced between $1.5 million and $2 million, the expected market time decreased from 145 to 122 days. For luxury homes priced between $2 million and $4 million, the expected market time decreased from 221 days to 163 days. For luxury homes priced above $4 million, the expected market time fell from 355 to 349 days.
  • The luxury end, all homes above $1.25 million, accounts for 39% of the inventory and only 14% of demand.
  • The expected market time for all homes in Orange County dropped from 64 days to 52 in the past two weeks, a hot seller’s market (fewer than 60 days). From here, we can expect the market time to drop a little bit more by the end of the month.
  • Distressed homes, both short sales and foreclosures combined, make up only 1% of all listings and 2.3% of demand. There are only 16 foreclosures and 23 short sales available to purchase today in all of Orange County, that’s 39 total distressed homes on the active market, dropping by 8 in the past two weeks and reaching its lowest level since the very beginning of the Great Recession. Last year there were 103 total distressed sales, 164% more than today.
  • There were 1,799 closed residential resales in January, down by 9% from January 2017’s 1,904 closed sales. January marked a 21% drop from December 2017. The sales to list price ratio was 97.6% for all of Orange County. Foreclosures accounted for just 1.1% of all closed sales and short sales accounted for 0.8%. That means that 98.1% of all sales were good ol’ fashioned sellers with equity.

 

 

 

 

 

 

 

 

 

 

Orange County Housing Report January 31st, 2018

Orange County Housing Report:
“On Your Mark, Get Set, Go!!!”

Orange County Housing Report January 31st, 2018

With the holidays behind us, the 2018 Orange County housing market is beginning to rev its engine.

 

Heating Up Fast: With a low housing supply and fierce demand, the housing market is accelerating fast.

In the blink of an eye, Starbucks holiday cups are gone, all of the ornaments are tucked away, and most of those good intentioned New Year’s resolutions have fallen victim to the hustle and bustle of everyday life. Emerging from the fog of all of the holiday distractions are buyers eager and ready to purchase their next home.

In just two weeks, demand has increased 22% while supply has only increased 2%. To understand why the market is changing so rapidly, let’s dust off that old Econ 101 book that details supply and demand. When there is a lot of supply and very little demand, prices fall, which favors buyers. When there is very little supply and tremendous demand, prices rise, which favors sellers. Since 2012, the supply of homes on the market has been severely constrained and demand, propped up by historically low-interest rates, has been through the roof.

When the supply of homes is low and demand to buy a piece of the “American Dream” is high, the expected market time falls. That is precisely what is occurring right now. During the Holiday Market, the supply of homes was low and so was demand. Buyers were distracted by the holidays and diverted their attention away from housing. Now that the holidays are in the rearview mirror, the supply of homes has remained at chronically low levels, while demand is rapidly rising. As a result, the expected market time, the amount of time it would take from placing a home on the market to opening escrow, is falling like a rock.

 

 

In just two weeks, the expected market time for all price ranges combined dropped from 77 days to 64, knocking on the door of an extremely hot seller’s market. For homes priced below $1 million, the market is already hot and will only grow hotter. The higher price ranges will also heat up, but will not sizzle like the lower ranges. Above $1.5 million, the market will improve but will be a lot more sluggish.

The housing market is forging its way to the absolute best time to sell, from about mid-February through mid-May. That is when the expected market time drops to its lowest levels of the year. Homes will fly off the market at the fastest annual rate. From mid-May through June, a deluge of sellers enter the fray, exceeding the number of pending sales, and the expected market time actually rises. Going back to “supply and demand,” demand remains steady and strong while the supply of homes on the market increases. As a result, the expected market time rises. It is still a great time to sell, just not as hot as earlier in the year. From July through the remainder of 2018, the expected market time will remain elevated.

It is extremely important to note that placing a home on the market during the hottest time of the year does not guarantee success. It is still all about price. When sellers price their homes too aggressively, they sit on the market and do not entertain offers to purchase. A stunning 25% of all homes that have been placed into escrow so far this year had to reduce their asking price at least once. When the market is hot, carefully pricing a home close to its Fair Market Value is the absolute best way to approach the market. This can be accomplished by diligently analyzing recent comparable pending and closed sales and not giving too much weight to active listings. A realistic price will attract multiple offers to purchase and, often times, will allow a seller to fetch a sales price at or higher than the active listing price.

The market is not titling in favor of buyers and will not anytime soon. Buyers should approach the market with a ton of patience and the mindset that they will eventually persevere. It may take writing offers on 10 different homes, but in the end will be worth it. Interest rates are still at historically low rates, but this gift will not last forever. Waiting is not the answer.

 

Active Inventory: The active inventory increased by only 67 homes in the past couple of weeks.

The active listing inventory added an additional 67 homes in the past two-weeks, a 2% increase, and now sits at 3,774. The biggest issue for Orange County housing this year has been a real lack of inventory. Thus far in 2018, there have been 6% fewer homes placed on the market. This issue has prevented additional closed sales and has been undermining the true potential for housing. If there were more homes for sale, there would be more pending and closed sales.

We can expect the inventory to continue to rise from now through mid-summer until it reaches a peak somewhere between mid-July and mid-August. The velocity of homes coming on the market will pick up steam in mid-March as the active inventory climbs at is highest rate of the year.

Last year at this time, there were 4,320 homes on the market, 14% more than today.

 

Demand:  Demand increased by 22% in the past couple of weeks.

Buyers are extremely eager to purchase, yet are faced with a very anemic inventory. Buyers are gobbling up inventory nearly as fast as homes are placed onto the market. As a result, in the past two weeks, demand, the number of new escrows over the prior month, increased by 317 pending sales, or 22%, and now totals 1,764. That’s the largest gain since the start of February of last year. The housing market is only revving the engine at this point. Expect demand to continue to accelerate from here until it peaks sometime in May.

 

 

Last year at this time, demand was at 1,930 pending sales, 166 more than today, or 9%. This is primarily due to fewer homes coming on the market. There simply are not enough choices.

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 77 to 64 days in the past two weeks, a seller’s market with mild appreciation.

 

Luxury End:  Luxury demand has thawed and dramatically improved in just two weeks. 

In the past two weeks, demand for homes above $1.25 million increased from 170 to 241 pending sales, up a staggering 42%. The luxury home inventory increased from 1,376 homes to 1,429, a 4% rise in the past two-weeks. Expect both demand and the inventory to rise from now through the Spring Market. The current expected market time for all homes priced above $1.25 million plunged from 243 days to 178.

For homes priced between $1.25 million and $1.5 million, the expected market time dropped from 157 to 112 days. For homes priced between $1.5 million and $2 million, the expected market time decreased from 188 to 145 days. For homes priced between $2 million and $4 million, the expected market time decreased from 285 days to 221 days. In addition, for homes priced above $4 million, the expected market time dipped from 695 to 355 days. At 355 days, a seller would be looking at placing their home into escrow around January 2019.

 

 

Orange County Housing Market Summary:

  • The active listing inventory increased by 67 homes in the past two weeks and now totals 3,774. Expect the inventory to increase from now through mid-Summer. Last year, there were 4,320 homes on the market, 546 more than today.
  • There are 25% fewer homes on the market below $500,000 today compared to last year at this time and demand is down by 28%. Fewer and fewer homes and condominiums are now priced below $500,000. This price range is slowly disappearing.
  • Demand, the number of pending sales over the prior month, skyrocketed in the past two weeks by adding an additional 317 pending sells, up 22%. The average pending price is $902,385.
  • 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 40 days. This range represents 37% of the active inventory and 59% 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 17% of the active inventory and 20% 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 dropped from 157 days to 112. For homes priced between $1.5 million and $2 million, the expected market time decreased from 188 to 145 days. For luxury homes priced between $2 million and $4 million, the expected market time decreased from 285 days to 221 days. For luxury homes priced above $4 million, the expected market time fell from 695 to 355 days.
  • The luxury end, all homes above $1.25 million, accounts for 37% of the inventory and only 13% of demand.
  • The expected market time for all homes in Orange County dropped from 77 days to 64 in the past two weeks, a slight seller’s market (60 to 90 days). From here, we can expect the market time to drop dramatically through mid-February.
  • Distressed homes, both short sales and foreclosures combined, make up only 1.2% of all listings and 2.2% of demand. There are only 15 foreclosures and 32 short sales available to purchase today in all of Orange County, that’s 47 total distressed homes on the active market, dropping by 3 in the past two weeks and reaching its lowest level since the very beginning of the Great Recession. Last year there were 91 total distressed sales, 74% more than today.
  • There were 2,269 closed residential resales in December, down by 9% from December 2016’s 2,484 closed sales. December marked a 6.5% drop from November 2017. The sales to list price ratio was 97.3% for all of Orange County. Foreclosures accounted for just 0.8% of all closed sales and short sales accounted for 0.9%. That means that 98.3% of all sales were good ol’ fashioned sellers with equity.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Orange County Housing Report January 31st, 2018

Orange County Housing Report January 17th, 2018

Orange County Housing Report:
“That Was a Close One!”

Orange County Housing Report January 17th, 2018

After starting the year with nearly nothing on the market, the active inventory is on the rise.

Not 2013: The active listing inventory increased by 9% since New Year’s Day.
The housing market has been on a tear for six years now and is showing no signs of letting up. Two long-term trends emerged during the run that is also showing no signs of diminishing anytime soon: unrelenting, hot demand and a chronic lack of homes on the market.

Demand has been juiced by historically low-interest rates for the entire six-year run. In spite of experts and prognosticators forecasting a rise in the long-term rate for years now, mortgage rates have remained steady, never exceeding 4.5% (reached in September 2013). In fact, today’s rates are still bouncing around 4% and are not expected to rise much in 2018. These persistent, historically low rates dramatically improve home affordability, and, ultimately, prop up demand.

The chronic lack of homeowners placing FOR SALE signs in their front yards has been the Achilles heel to this housing run. Years of juiced demand and a low supply of homes on the market has resulted in rapid appreciation, fewer total yearly home sales, and frustrated buyers, especially entry level, first-time buyers. Multiple offers and sales prices at or above their list price is the norm for homes priced below $1 million (81% of all closed sales in 2017). It has been a deep seller’s market for years now with nothing indicating a change on the horizon. Buyers will have to continue to navigate the harsh reality of plenty of competition with very few choices.

Fewer choicesis exactly how 2018 started. On New Year’s Day, the active listing inventory was at 3,397 homes, the second lowest start in the past 13 years. Only 2013 was lower, with 3,161 homes on the market. With such an anemic inventory, the biggest worry to start the year was that 2018 would shape up to be just like 2013. In 2013, the inventory did not increase much at all for the first three months and the market heavily favored sellers (typically, the inventory rises from January through mid-August). The expected market time dropped to 33 days for all of Orange County by March 2013. Sellers were able to stretch their asking prices quite a bit over the most recent sale and they often got their price. It felt impossible for buyers to secure a home, especially if they had a small down payment. They just would not be able to compete. The 2013 housing market proved to be extremely challenging.

Yet, 2018 is shaping up to be completely different than 2013. Since starting the year at 3,397 homes, the active inventory has increased by 9%, adding an additional 310 homes, and now totals 3,707. The expected market time is currently at 77 days, quite a bit slower than the 45day expected market time at the beginning of 2013. It is not as deep of a seller’s market; so, homes will not appreciate as fast as they did in 2013. Remember, home prices are a lot higher today compared to 5 years ago. Buyers are not willing to dramatically overpay for a home compared to the most recent closed sale. If a home is placed on the market and is not priced according to its Fair Market Value, opting to significantly pad the price and take a stab at getting more, it will sit on the market and will not sell.

Carefully pricing is a fundamental ingredient in achieving the objective of selling a home. In December, 59% of all closed sales had to reduce the asking price at least once. It was not the time of the year; it was the inability for many sellers to price their homes accurately right out of the gate.

From here, we can expect the inventory to continuously rise from now through mid-Summer. It will fall short of the long-term average of 8,000 homes, which is where the inventory needs to be for an extended period of time for the market to transition into a balanced market, one that does not favor a buyer or seller.

Demand:  Demand decreased by 10% in the past couple of weeks.
In the past two weeks, demand, the number of new escrows over the prior month, decreased by 158 pending sales, or 10%, and now totals 1,447. This is a true reflection of cyclically the slowest time of the year, the last 30-days. This period encompasses all of the holidays and all of its distractions. Also, with so few homes coming on the market, coupled with very limited choices of active listings, it’s no wonder demand has dropped to such a low level. As more homes enter the fray, expect demand to start to rocket upward by the end of this month.

Last year at this time, demand was at 1,562 pending sales, 115 more than today, or 8%.

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 67 to 77 days, a slight seller’s market with mild appreciation. Last year’s expected market time was at 84 days. The expected market time will significantly drop by the end of this month.

Luxury End:  Luxury demand continued its holiday/winter plunge.
In the past two weeks, demand for homes above $1.25 million decreased from 187 to 170 pending sales, down 9%. The luxury home inventory decreased from 1,391 homes to 1,376, a 1% drop in the past two-weeks. Since the start of November 2017, luxury demand dropped by 52%, while the luxury inventory dropped by only 20%. Expect both demand and the inventory to rise from now through the Spring Market. The current expected market time for all homes priced above $1.25 million increased from 223 days to 243.

For homes priced between $1.25 million and $1.5 million, the expected market time increased from 123 to 157 days. For homes priced between $1.5 million and $2 million, the expected market time decreased from 196 to 188 days. For homes priced between $2 million and $4 million, the expected market time increased from 266 days to 285 days. In addition, for homes priced above $4 million, the expected market time increased from 667 to 695 days. At 695 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 310 homes since the start of the New Year and now totals 3,707. Expect the inventory to increase from now through mid-Summer. Last year, there were 4,376 homes on the market, 669 more than today.
  • There are 31% fewer homes on the market below $500,000 today compared to last year at this time and demand is down by 28%. Fewer and fewer homes and condominiums are now priced below $500,000. This price range is slowly disappearing.
  • Demand, the number of pending sales over the prior month, plunged by 158 in the past couple of weeks, down 10%, and now totals 1,447, most likely its lowest point of the year. The average pending price is $839,613.
  • The average list price for all of Orange County decreased to $1.8 million after reaching a record $1.9 million two weeks ago. 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 46 days. This range represents 38% of the active inventory and 62% of demand.
  • For homes priced between $750,000 and $1 million, the expected market time is 67 days, a slight seller’s market (between 60 and 90 days). This range represents 17% of the active inventory and 19% of demand.
  • For homes priced between $1 million to $1.25 million, the expected market time is 101 days, a balanced market that does not favor a buyer or seller.
  • For luxury homes priced between $1.25 million and $1.5 million, the expected market time increased from 123 days to 157. For homes priced between $1.5 million and $2 million, the expected market time decreased from 196 to 188 days. For luxury homes priced between $2 million and $4 million, the expected market time increased from 266 days to 285 days. For luxury homes priced above $4 million, the expected market time increased from 667 to 695 days.
  • The luxury end, all homes above $1.25 million, accounts for 36% of the inventory and only 12% of demand.
  • The expected market time for all homes in Orange County increased from 67 days to 77 in the past two weeks, a tepid seller’s market (60 to 90 days). From here, we can expect the market time drop dramatically by the end of this month.
  • Distressed homes, both short sales and foreclosures combined, make up only 1.3% of all listings and 2.7% of demand. There are only 17 foreclosures and 33 short sales available to purchase today in all of Orange County, that’s 50 total distressed homes on the active market, dropping by 11 in the past two weeks and reaching its lowest level since the very beginning of the Great Recession. Last year there were 112 total distressed sales, 124% more than today.
  • There were 2,269 closed residential resales in December, down by 9% from December 2016’s 2,484 closed sales. December marked a 6.5% drop from November 2017. The sales to list price ratio was 97.3% for all of Orange County. Foreclosures accounted for just 0.8% of all closed sales and short sales accounted for 0.9%. That means that 98.3% of all sales were good ol’ fashioned sellers with equity.

 

Orange County Housing Report January 2nd, 2018

Orange County Housing Report:
HAPPY NEW YEAR!!!  Now, what does that mean for Orange County real estate?

Orange County Housing Report January 2nd, 2018

First, let’s take a look back at what happened in 2017 in terms of the inventory, demand, expected market time, luxury properties, and distressed properties. 

Active Inventory: A chronic lack of inventory defined 2017 and the year finished at levels not seen since 2013.
The year started with an active inventory of 4,071 homes on the market and ended with 3,560. It was the second lowest start to a year behind 2013. Ever since the Great Recession, the trend has been fewer homeowners selling their homes. Since 2009, the number of homes placed on the market has diminished by 28% compared to the heydays of 2000 through 2007. In 2017, the issue was magnified with 6% fewer homes coming on the market compared to 2016.Cutting into the inventory a bit were closed sales. In 2017, closed sales were nearly identical to 2016 despite fewer homes coming on the market.The active inventory did not really climb much. The theme throughout the year was the anemic feel to the housing inventory. There just were not enough homes on the market below $1 million (82% of all closed sales in 2017 could be found below $1 million) and the market remained hot all year long for this range. The peak in the active inventory was reached in mid-July with 5,983 homes on the market. That was the lowest peak in decades. Last year’s peak of 7,329 homes, 22% higher, was also reached in mid-July. Typically, the peak is attained in mid-August, but there have not been enough homes coming on the market during the summer months compared to prior years.

The active inventory has remained at anemically low levels since the start of 2012 and has been a seller’s market ever since. The long-term active listing inventory average is 8,000 homes, and it has only reached that level for a few weeks in the summer of 2014.

In order for the market to start tilting in the buyer’s favor, the active inventory not only has to eclipse the 8,000 home mark; it needs to remain consistently above that threshold for a sustained period of time. Only when there is extra supply will appreciation slow. Until then, we can expect more of the same, slow methodical appreciation.


Residential resale homes in Orange County have been appreciating at a pretty solid 5% clip for three years now. In spite of the chronically anemic supply of homes, sellers still did not get away with stretching the asking price. Buyers were willing to stretch a bit, especially for detached homes priced below $750,000 and for condominiums priced below $500,000. Yet, sellers who were a bit too overzealous and pumped up their prices ultimately sat on the market until they made an adjustment more in line with their true Fair Market Value.

The inventory grew by only 37% from January through July. With not enough homes coming on the market all year, coupled with the same number of closed sales as 2016, the inventory dropped by 40% by the end of 2017. In the past two weeks alone, the inventory has shed 12%, 463 homes, and now totals 3,560, the lowest level since April 2013. Over the past thirteen years, only 2013 had fewer homes to start a New Year with 3,161. Home price appreciation and hot market expectations that favor sellers has everything to do with supply and demand. With such an extremely low supply, 2018 is definitely starting on the right foot.

DemandWith historically low-interest rates around 4%, demand continued to thrive in Orange County.
Demand for Orange County homes (the number of pending sales over the prior month) followed a normal strong housing pattern. The local housing market revved its massive engine in February, and by April, another strong housing market emerged with plenty of activity. Demand remained elevated and strong throughout the Spring and Summer Markets and did not cool until September, the Autumn Market. Of course, demand slowed considerably from Thanksgiving on, typical for the Holiday Market.

Interest rates remained low and have not really changed much over the past few years, even dipping below the 4% level for a period of time in 2017. Investors from around the world continue to invest in long-term government bonds, especially the United States treasuries. As a result, interest rates have remained at historical lows and do not appear to be changing much anytime soon. Despite higher prices in Orange County, the low-interest rates environment has helped home affordability and buyers have been taking advantage of it.

Even though the median sales price has surpassed 2007 record levels, homes are still more affordable due to favorable interest rates. For proper perspective, in 1990 the interest rate was at 10%. In 2000, it was 8%. And, just prior to the Great Recession, interest rates were at 6.4%. A $650,000 mortgage at 4% has a payment of $3,103. Compare that to a payment of $4,066 at 6.4%. It is no wonder that buyers are still flocking to purchase even with home values rising to record levels.Low-interest rates are facilitating affordability and propping up demand.

Within the past two weeks, demand dropped by 259 pending sales, or 14%, and now sits at 1,605. Last year at this time, demand was at 1,697, or 6% more than today.

Luxury EndMore homes sold in the luxury end this year than ever before.
Orange County’s luxury home market continues to pump on all cylinders. More homes have closed above $1.25 million than ever before in the county. There were 3,895 closed luxury sales compared to 3,249 last year, up 20%. The highest level prior to the recession occurred in 2005 with 2,857 closes sales. It is safe to say that the luxury housing market in Orange County is on solid footing.

Despite the record number of closed sales in the luxury range, the market still felt sluggish compared to the lower ranges. That was simply due to supply and demand. With the exception of homes priced between $1.25 and $1.5 million, the expected market time soared to levels considered buyer market territory. There simply were not enough buyers actively looking to buy. On the other hand, there were plenty of sellers competing with each other, the higher the price, the slower the market. Homes did not fly off the market with multiple offers like the lower ranges.

Year over year, the luxury inventory tracked about the same in terms of inventory. Luxury demand was considerably strong during the spring, 36% higher in April compared to 2016. By year’s end, demand was almost identical.

In the past two weeks, demand for homes above $1.25 million decreased from 217 to 187 pending sales, down 14%. Luxury demand has dropped 42% since the start of November. The luxury home inventory decreased from 1,490 homes to 1,391, a 7% drop in the past two-weeks. The inventory has dropped by 19% since the start of November.

Distressed Properties: Foreclosures and short sales are nothing more than an asterisk to the 2017 market.
In Orange County, homes have appreciated substantially since the beginning of 2012. With a six-year run in housing, the number of underwater homes has declined to 1.2% of all homes with a mortgage. During the Great Recession, the number climbed to as high as 25%. In 2017, distressed sales were nothing more than an asterisk to an overall healthy, nearly recovered housing market, almost not worth mentioning in reviewing 2017.Back in 2012, distressed homes accounted for 36% of closed sales. In 2017, with over 31,000 closed sales, there were only 274 foreclosures or 0.9%. And, there were only 342 closed short sales, or 1.1%. That means that 98% of all closed sales were good ol’ fashioned homeowners with equity.The distressed active listing inventory started the year at 112 total foreclosures and short sales and ended the year at 61, a 44% drop.

Expected Market Time: Based upon the low inventory and hot demand, it was a solid seller’s market the entire year.
The expected market time (the length of time it would take to place a home into escrow based upon current supply and demand) remained below the 90-day mark all year, continuously tipping in the seller’s favor. It dipped below 60 days, a HOT seller’s market where homes appreciate at a faster clip, from February through May, the longest stretch since 2013.  Since then, the expected market time has not risen that much. For buyers looking to purchase below $1 million, they simply have not had a break. Multiple offers have been the norm all year long.

The expected market time for all of Orange County grew to 67 days in the past two weeks but is an excellent start to the New Year. In fact, in the past 13 years, 2018 will have the second-best start. The best start to a year occurred in 2013 with an expected market time of 47 days.

For homes priced below $1 million, the expected market time is at 43 days. For homes over $1 million, the expected market time rises to 135 days or 4.5 months.

Orange County has not experienced equilibrium, a market that does not favor a buyer or seller, between 3 and 4 months, since the second half of 2014. It has not been a buyer’s market, above the 4-month mark, since the start of 2011.
The 2018 Forecast: More of the same.
There have not been many changes to the U.S. economy. No shocks to the economic engine. That all changed with the new tax bill that was signed into law on December 22nd. The mortgage interest deduction was lowered from $1 million to $750,000. Equity lines of credit are no longer deductible. State and local property taxes deductions are capped at $10,000. The cards seem to be stacked against Californians and, more specifically, Orange County residents. Yet, with a chronically anemic inventory and demand juiced by historically low-interest rates, the tax bill will not have a major impact on the local housing market like so many fear. Here is the forecast:
  • Interest Rates – even with the Federal Reserve raising the short-term rate three times in 2017, interest rates continue to float around the 4% level. The Federal Reserve meets eight times per year and it will most likely pull the trigger on further increases three more times in 2018. Yet, these changes in the short-term rate will not have much of an impact on long-term rates. They do not move together. By year’s end, expect interest rates to stretch only to 4.25%.
  • Active Inventory – the year will begin with an extremely anemic inventory, around 3,500 homes, that will translate to a very hot start for housing. Just as in 2017, the theme of 2018 will be not enough homeowners opting to place their homes on the market. As a result, the active inventory will not reach the long-term 8,000 home average. Expect the inventory to peak in July between 6,500 to 7,000 homes.
  • Demand –with an anemic inventory and buyers anxious to cash in on historically low rates (many wrongly see the Federal Reserve increases in the short-term rate as a precursor to higher mortgage rates), demand will be strong throughout the Spring and Summer Markets. Buyers will be willing to stretch slightly in price compared to the most recent sale; so, expect appreciation around 4 to 5% for the year. Demand will be strongest, and most appreciation will occur, from April through August, and then will downshift during the Autumn and Holiday Markets.
  • Housing Cycle – the housing market will follow a normal housing cycle. The strongest demand coupled with plenty of fresh inventory will occur during the Spring Market. This will be followed by slightly less demand and a continued new supply of homes in the Summer Market. From there, demand will drop further along with fewer homes entering the fray in the Autumn Market. Finally, all the distractions of the Holiday Market will be punctuated with the lowest demand of the year and few homeowners opting to sell.
  • Closed Sales – the number of successful, closed sales will be similar to 2017, just over 31,000. There will be slightly more “move-up” sellers, which will prove to be a wise decision as mortgage rates rise down the road and affordability starts to erode.
  • Luxury Market – luxury sales will increase slightly from 2017’s record. The Spring Market will be the strongest for luxury, and the second half of the year will be quite a bit more sluggish.
  • Distressed Inventory – the distressed inventory will remain low with a very similar level of successful short sales and foreclosures, representing just less than 2% of all sales.
The bottom line, 2018 will fill a whole lot like 2017 with not enough homes on the market and buyers tripping over each other to purchase. Multiple offers will be the norm for homes priced below $1 million. Once again, the market will heavily favor sellers and buyers will have to pack their patience in order to isolate their piece of the American Dream.

Happy New Year!

Orange County Housing Report December 5th, 2017

Orange County Housing Report:

“A Holiday Lull”

The Holiday Market is in full swing, bringing a lot less inventory and the lowest level of new deals for the year.

Orange County Housing Report December 5th, 2017

The Holiday Slowdown: Year in and year out December is notoriously the slowest month of the year in terms of demand and new sellers placing their homes on the market. 

In a blink, the housing market transitioned from the Autumn Market to the Holiday/Winter Market. As everybody carved the turkey and filled their bellies with a smorgasbord of food, we ushered in a dramatic shift in housing. This is the time of the year when housing takes a back seat to all of the distractions of the holidays.

Christmas lights now trim neighborhood rooflines. The local mall parking lots are filled to capacity. The US postal service now delivers twice a day. Amazon boxes are dropped off at nearly every door. From holiday parties to gift lists for loved ones, it is a busy time of year as we exchange presents and get ready to usher in 2018. Yet, it is the slowest month of the year for housing.

The active inventory dropped by 8%, 391 homes, in just the past two weeks, the largest drop of the year. From Thanksgiving to New Year’s Day, the average drop since 2013 has been 23%, 1,373 homes. Why does the active inventory drop so dramatically in December? Homeowners instinctively avoid placing their homes on the market this month. Most homeowners want to cash in on “the best time of the year” to sell a home, the Spring Market. As a result, they wait to sell their home. They are only partially right. The Spring Market is the most active time of the year where demand (new pending transactions) reaches a peak for the year, but there is also a surge in new FOR SALE signs, competition. In reality, housing is still hot today for all homes priced below $1 million.

Not only are there fewer homeowners entering the fray in December, many sellers who have been unsuccessful in 2017 opt to throw in the towel and pull their homes off the market. These two combined forces result in an enormous drop in the active inventory.Similarly, demand, the number of pending sales over the prior month, also drops dramatically in December. It dropped by 10%, 232 pending sales, in the past couple of weeks, the largest drop off the year as well. Since 2013, the average drop from Thanksgiving to New Year’s Day has been 34%. There are two forces contributing to this massive drop in December demand. First, there are simply not enough homes on the market and there are fewer and fewer choices every day. Second, many buyers are ready for a holiday break. They are a bit worn out from the scorching hot real estate market and the constant search for their piece of the American Dream. They step aside and enjoy the season.

The bottom line: the holiday lull is here, so set your expectations accordingly.

Active Inventory: The active inventory dropped by 8% over the past couple of weeks.
The active listing inventory shed 391 homes in the past two weeks and now sits at 4,323, the largest drop of the year. Since peaking in mid-July, the inventory has plunged by 1,660 homes, a tremendous 28% drop. The Holiday Market is officially here. Expect the inventory to continue to descend dramatically for the remainder of the year. As a result, the New Year will start with fewer than 4,000 homes, the second lowest inventory behind 2013.Last year at this time, there were 5,177 homes on the market, 854 additional homes, or 20% more than today.Demand:  Demand decreased by 10% in the past couple of weeks.
Yes, the Holiday Market has arrived. In the past two weeks, demand, the number of new escrows over the prior month, decreased by 232 pending sales, or 10%, and now totals 2,082. Like the active inventory, demand just experienced its biggest drop of the year. The decline will continue through the end of the month. By the start of 2018, demand will be at its lowest point in a year.Last year at this time, demand was at 2,116 pending sales, 34 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, increased slightly from 61 to 62 days, a slight seller’s market with mild appreciation. Last year’s expected market time was at 73 days.Luxury End:  Luxury demand plunged in the last couple of weeks. 
In the past two weeks, demand for homes above $1.25 million decreased from 299 to 236 pending sales, down 21%. The beginning of the Holiday Market walloped luxury demand. The luxury home inventory decreased from 1,672 homes to 1,585, a 5% drop in the past two-weeks. Expect both the inventory and demand to continue to drop through the end of the year. The expected market time for all homes priced above $1.25 million increased from 168 days to 201.For homes priced between $1.25 million and $1.5 million, the expected market time increased from 112 to 129 days. For homes priced between $1.5 million and $2 million, the expected market time increased from 143 to 169 days. For homes priced between $2 million and $4 million, the expected market time increased from 181 days to 246 days. In addition, for homes priced above $4 million, the expected market time decreased from 466 to 437 days. At 466 days, a seller would be looking at placing their home into escrow around the mid-February 2019.

Orange County Housing Market Summary:
  • The active listing inventory decreased by 391 homes in the past couple of weeks and now totals 4,323, the largest drop of the year. Expect the inventory to drop considerably for the remainder of the year. Last year, there were 5,177 homes on the market, 854 more than today.
  • There are 32% fewer homes on the market below $500,000 today compared to last year at this time and demand is down by 9%. Fewer and fewer homes and condominiums are now priced below $500,000. This price range is slowly disappearing.ol’ fashioned sellers with equity.
  • Demand, the number of pending sales over the prior month, plunged by 232 in the past couple of weeks, down 10%, and now totals 2,082. The average pending price is $841,391.
  • The average list price for all of Orange County increased to $1.8 million, a new record. This number is high due to the mix of homes in the luxury ranges that sit on the market and do not move as quickly as the lower end.
  • For homes priced below $750,000, the market is HOT with an expected market time of just 39 days. This range represents 39% of the active inventory and 63% of demand.
  • For homes priced between $750,000 and $1 million, the expected market time is 54 days, a hot seller’s market (less than 60 days). This range represents 16% of the active inventory and 19% of demand.
  • For homes priced between $1 million to $1.25 million, the expected market time is 71 days, a slight seller’s market.
  • For luxury homes priced between $1.25 million and $1.5 million, the expected market time increased from 112 days to 129. For homes priced between $1.5 million and $2 million, the expected market time increased from 143 to 169 days. For luxury homes priced between $2 million and $4 million, the expected market time increased from 181 days to 246 days. For luxury homes priced above $4 million, the expected market time decreased from 466 to 437 days.
  • The luxury end, all homes above $1.25 million, accounts for 37% of the inventory and only 11% of demand.
  • The expected market time for all homes in Orange County increased slightly from 61 days to 62, a tepid seller’s market (60 to 90 days). From here, we can expect the market time to rise slightly through the end of the year.
  • Distressed homes, both short sales and foreclosures combined, make up only 1.5% of all listings and 2.3% of demand. There are only 21 foreclosures and 43 short sales available to purchase today in all of Orange County, that’s 64 total distressed homes on the active market, dropping by 4 in the past two weeks. Last year there were 120 total distressed sales, 88% more than today.
  • There were 2,553 closed residential resales in October, down by 1% from October 2016’s 2,575 closed sales. October marked a 7% drop from September 2017, normal for the Autumn Market. The sales to list price ratio was 98.4% for all of Orange County. Foreclosures accounted for just 0.7% of all closed sales and short sales accounted for 1.2%. That means that 98.1% of all sales were good

Orange County Housing Report November 21st, 2017

Orange County Housing Report:

“Not Anytime Soon!”

With an unrelenting lack of supply of homes FOR SALE, it will
not be a buyer’s market anytime soon.

Orange County Housing Report November 21st, 2017

 

Not a Buyer’s Market: Since 2012, the active inventory for Orange County has been extremely limited.

It is time to load the plate with turkey, ham, sweet potatoes, string beans, mashed potatoes, Brussels sprouts, stuffing, and cranberry sauce. Thanksgiving is all about plenty of choices and not enough room on the dinner plate to fit it all. As Americans, we eat more on this day than any other day of the year.

There may be plenty of choices for the Thanksgiving meal, but the Thanksgiving housing market is seriously lacking choices with a razor-thin supply of homes for sale. With only 4,714 homes available to purchase in Orange County, buyers in the lower ranges, homes priced below $750,000, are literally waiting on the sidelines for the next home to come on the market. It is a seller’s market for all homes below $1.25 million (88% of all closed sales in 2017 have been below $1.25 million).

The active listing inventory in Orange County has been leaning in the sellers favor since February 2012. That was not only the beginning of the recovery, it was the beginning of a six-year run in housing. And, housing is poised to continue its run for a seventh year due to a chronically low inventory.

In order for housing to move away from a seller’s market and transition to a balanced market, one that does not favor a buyer or seller, the active inventory must grow beyond 8,000 homes. When it remains above the 8,000 home threshold, housing will eventually transition into a buyer’s market. However, that is not going to occur anytime soon.

 

It occurred for about five months back in 2004, not long enough to move from a balanced market to a buyer’s market. It happened again for a couple of months during the Autumn Market of 2005, one of the first cracks in the housing market that lead up to the Great Recession. The active inventory surpassed 8,000 homes again in January 2006 and remained elevated through September 2009, nearly four consecutive years. Even though the Great Recession started in March 2007, the active inventory signaled throughout 2006 that the market was poised for a change.

The active inventory climbed above the 8,000 mark again in February 2010 and remained elevated through January 2012, an additional two years. From there, it dropped like a rock and housing transitioned seemingly overnight from a buyer’s to a seller’s market. It has been a seller’s market ever since and has only surpassed the 8,000 home threshold for four weeks during the summer of 2014, not long enough for anybody to notice.

The bottom line is this: the 8,000 home mark is a level that establishes which way the market is heading. With an only 4,714 homes on the market today, and dropping, the inventory is nowhere close to that mark. In fact, 2018 is going to start with fewer than 4,000 homes, less than the start to this year. And, this year was defined by its lack of homes for sale, especially below $750,000.

Everybody is wondering, “When will Orange County housing become a buyer’s market?” The answer is, quite simply, “not anytime soon.”

Active Inventory: The active inventory dropped by 3% over the past couple of weeks.
The active listing inventory shed 164 homes in the past two weeks and now sits at 4,714, a 3% drop. Since peaking in mid-July, the inventory has discarded 1,269 homes, a healthy 20% drop. With Thanksgiving this week, housing will transition into the Holiday Market and the inventory will drop like a rock from this week through the end of the year. The New Year will start with fewer than 4,000 homes, the second lowest inventory behind 2013.

Last year at this time, there were 5,655 homes on the market, 941 additional homes, or 20% more than today.

Demand:  Demand decreased by 4% in the past couple of weeks.
Demand, the number of homes placed into escrow within the prior month, decreased by 95 pending sales, or 4%, in the past two-weeks, and now totals 2,314. With Orange County housing transitioning into the Holiday Market this week, demand will decline and pick up momentum in December. By the start of the New Year, demand will be at its lowest point of the year.

Last year at this time, demand was at 2,339 pending sales, 25 more than today. That is not that big of a difference considering that there are far fewer choices on the market today compared to one year ago.

The expected market time, the amount of time it would take for a home that comes onto the market today to be placed into escrow, remained the same at 61 homes, still on the cusp of a hot seller’s market. Last year’s expected market time was at 73 days.

Luxury End:  Luxury demand fell sharply in the last couple of weeks.
In the past two weeks, demand for homes above $1.25 million decreased from 325 to 299 pending sales, down 8%. Luxury is already transitioning into the Holiday Market. The luxury home inventory decreased from 1,712 homes to 1,672, a 2% drop in the past two-weeks. Expect both the inventory and demand to drop by the end of the year. The expected market time for all homes priced above $1.25 million increased from 158 days to 168.

For homes priced between $1.25 million and $1.5 million, the expected market time increased from 100 to 112 days. For homes priced between $1.5 million and $2 million, the expected market time decreased from 154 to 143 days. For homes priced between $2 million and $4 million, the expected market time increased from 164 days to 181 days. In addition, for homes priced above $4 million, the expected market time increased from 424 to 466 days. At 466 days, a seller would be looking at placing their home into escrow around the start of March 2019.

 

Orange County Housing Market Summary:

  • The active listing inventory decreased by 164 homes in the past couple of weeks and now totals 4,714. With the start of the Holiday Market this week, the inventory will drop considerably for the remainder of the year. Last year, there were 5,655 homes on the market, 941 more than today.
  • There are 32% fewer homes on the market below $500,000 today compared to last year at this time and demand is down by 17%. Fewer and fewer homes and condominiums are now priced below $500,000. This price range is slowly disappearing.
  • Demand, the number of pending sales over the prior month, decreased by 95 homes in the past couple of weeks, down 4%, and now totals 2,314. The average pending price is $861,404.
  • The average list price for all of Orange County remained at $1.7 million. This number is high due to the mix of homes in the luxury ranges that sit on the market and do not move as quickly as the lower end.
  • For homes priced below $750,000, the market is HOT with an expected market time of just 39 days. This range represents 39% of the active inventory and 62% of demand.
  • For homes priced between $750,000 and $1 million, the expected market time is 57 days, a hot seller’s market (less than 60 days). This range represents 17% of the active inventory and 18% of demand.
  • For homes priced between $1 million to $1.25 million, the expected market time is 76 days, a seller’s market.
  • For luxury homes priced between $1.25 million and $1.5 million, the expected market time increased from 100 days to 112. For homes priced between $1.5 million and $2 million, the expected market time decreased from 154 to 143 days. For luxury homes priced between $2 million and $4 million, the expected market time increased from 164 days to 181 days. For luxury homes priced above $4 million, the expected market time increased from 424 to 466 days.
  • The luxury end, all homes above $1.25 million, accounts for 36% of the inventory and only 13% of demand.
  • The expected market time for all homes in Orange County remained at 61 days, a tepid seller’s market (60 to 90 days). From here, we can expect the market time to rise slightly through the end of the year.
  • Distressed homes, both short sales and foreclosures combined, make up only 1.4% of all listings and 2.1% of demand. There are only 23 foreclosures and 45 short sales available to purchase today in all of Orange County, that’s 68 total distressed homes on the active market, increasing by 10 in the past two weeks. Last year there were 123 total distressed sales, 81% more than today.
  • There were 2,553 closed residential resales in October, down by 1% from October 2016’s 2,575 closed sales. October marked a 7% drop from September 2017, normal for the Autumn Market. The sales to list price ratio was 98.4% for all of Orange County. Foreclosures accounted for just 0.7% of all closed sales and short sales accounted for 1.2%. That means that 98.1% of all sales were good ol’ fashioned sellers with equity.

 

 

 

 

 

 

Orange County Housing Report November 7th, 2017

Orange County Housing Report:

“Hot in November?!?!”

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

Orange County Housing Report November 7th, 2017

 

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

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

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

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

 

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

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

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

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

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

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

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

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

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

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

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

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

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

Demand, the number of homes placed into escrow within the prior month, increased by 16 pending sales, or 1%, in the past two-weeks, and now totals 2,409. Demand will remain close to this level for the next month before it starts its seasonal drop from Thanksgiving week through the end of 2017.

Last year at this time, demand was at 2,468 pending sales, 59 more than today. That is not that big of a difference considering that there are far fewer choices on the market today compared to one year ago.

The expected market time, the amount of time it would take for a home that comes onto the market today to be placed into escrow, dropped from 65 to 61 days, on the cusp of a hot seller’s market. Last year’s expected market time was at 72 days.

Luxury End:  Luxury supply plummets while demand rises.

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

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

 

Orange County Housing Market Summary:

  • The active listing inventory decreased by 337 homes in the past couple of weeks, the largest drop of the year, and now totals 4,878. The trend is down for the remainder of the year. Last year, there were 5,955 homes on the market, 1,077 more than today.
  • There are 36% fewer homes on the market below $500,000 today compared to last year at this time and demand is down by 16%. Fewer and fewer homes and condominiums are now priced below $500,000. This price range is slowly disappearing.
  • Demand, the number of pending sales over the prior month, increased by 16 homes in the past couple of weeks, up 1%, and now totals 2,409. The average pending price is $879,146.
  • The average list price for all of Orange County remained at $1.7 million. This number is high due to the mix of homes in the luxury ranges that sit on the market and do not move as quickly as the lower end.
  • For homes priced below $750,000, the market is HOT with an expected market time of just 40 days. This range represents 40% of the active inventory and 61% of demand.
  • For homes priced between $750,000 and $1 million, the expected market time is 51 days, a hot seller’s market (less than 60 days). This range represents 17% of the active inventory and 20% of demand.
  • For homes priced between $1 million to $1.25 million, the expected market time is 85 days, an extremely slight seller’s market with very slow appreciation.
  • For luxury homes priced between $1.25 million and $1.5 million, the expected market time decreased from 111 days to 100. For homes priced between $1.5 million and $2 million, the expected market time decreased from 173 to 154 days. For luxury homes priced between $2 million and $4 million, the expected market time decreased from 218 days to 164 days. For luxury homes priced above $4 million, the expected market time increased from 326 to 424 days.
  • The luxury end, all homes above $1.25 million, accounts for 35% of the inventory and only 13% of demand.
  • The expected market time for all homes in Orange County decreased in the past couple of weeks from 65 days to 61 days, a tepid seller’s market (60 to 90 days). From here, we can expect the market time to remain relatively flat, rising slightly by year’s end.
  • Distressed homes, both short sales and foreclosures combined, make up only 1.2% of all listings and 2.3% of demand. There are only 20 foreclosures and 38 short sales available to purchase today in all of Orange County, that’s 58 total distressed homes on the active market, decreasing by 9 in the past two weeks. Last year there were 133 total distressed sales, 129% more than today.
  • There were 2,543 closed residential resales in October, down by 1% from October 2016’s 2,575 closed sales. October marked a 7% drop from September 2017, normal for the Autumn Market. The sales to list price ratio was 98.2% for all of Orange County. Foreclosures accounted for just 0.7% of all closed sales and short sales accounted for 1.2%. That means that 98.1% of all sales were good ol’ fashioned sellers with equity.