Tag Archives: Orange County Real Estate Market

Orange County Housing Report October 12th, 2018

Orange County Housing Report:
“Oktober-Housingfest Cancelled”

Orange County Housing Report October 12th, 2018

The momentum of the housing market has paved the way for cooler Autumn and Holiday Markets.

No End of Year Surge: There will not be a sudden surge in closed sales for the remainder of the year.

It is that time of the year. The days are growing shorter, the leaves are changing, and Halloween decorations have emerged. Autumn has arrived. Just as the seasons change, so does the housing market. The Spring and Summer Markets are officially in the rearview mirror. There’s very little of 2018 that remains.

Housing’s Autumn Market runs from the end of August through mid-November. Typically, this is the season when the active inventory drops along with demand. The Expected Market Time (from listing a home to opening escrow) does not change much. The number of monthly closed sales slows from the highs of spring and summer. They fall from September to October and drop from October to November. Some years’ experience a surge in closed sales from November to December.

This surge in closed sales is because of an increase in pending sales, demand, during October, an “Oktoberfest” for housing. Yet, 2018 is shaping up to be a completely different year, and the remainder of the year will prove to be no exception. The current momentum and market trends have paved the way for a slower end to 2018. There were 2,108 closed resales in September. That’s down a staggering 24% compared to the 2,734 closed sales last year. The last time there were fewer sales dates to 2007 when there were only 1,334. Today’s housing market looks a lot like 2006 in terms of sales. In comparing monthly closed sales at the end of the year, December is on average down 8% compared to September. There wasn’t much of an Oktoberfest surge in 2016 and 2017. The last time there was any type of a surge dates to 2013 through 2015, when there was a sharp rise in closed sales from November to December.

The rest of 2018 will be more of the same, muted buyer demand, longer market times, a lingering supply of homes, and a large drop in closed sales compared to last year. Demand (the number of pending sales over the prior month) is down by 15% compared to last year. The Expected Market Time has risen to 105 days, the highest level since September 2011. It was at 67 days last year. And, the active listing inventory is at 7,201 homes, 34% higher than last year’s 5,382.

A falling supply of homes and falling demand normally occurs during the Autumn Market. While demand has fallen as expected, the active inventory just peaked and has not begun its usual drop. The peak in the active listing inventory predictably occurs anywhere from July to August. This year, it happened two weeks ago at 7,207 homes. It has remained at that level and has shed only six homes since, sitting at 7,201 homes today. With only demand dropping, the Expected Market Time has been climbing when normally it tends to remain the same. At 105 days, the Orange County housing market is no longer a Seller’s Market; instead, it is a Balanced Market that does not favor buyers or sellers.

Today’s sellers need to understand that housing is not going to suddenly tilt back in their favor. There will be fewer closed sales for the remainder of the year. Demand will be muted, and it will continue to fall. The inventory will start to drop a bit, but it will remain elevated with a lot more competition. It is going to take a lot longer to find success. Only sellers who are accurately priced according to their Fair Market Values, and pack plenty of patience, will achieve their goal in selling. Carefully pricing is critical. 64% of all closed sales in September reduced their asking price at least once. This is a time when sellers need to look in the mirror and be certain that they are willing to do what it takes to get their homes sold, knowing that there will not be a sudden surge in activity. There will be no Oktober-Housingfest this year.

Active Inventory: The active inventory finally peaked.

Typically, the active listing inventory peaks in July or August, but not in 2018. Instead, the inventory reached a peak two weeks ago at 7,207 homes. It has only shed six homes since and sits at 7,201 homes today, virtually unchanged. From here expect the active inventory to start to drop slowly, picking up momentum as the year continues to unwind. The late peak means that the inventory will remain elevated compared to 2017 for the remainder of the year. As a result, 2019 will start with a lot more homes on the market compared to recent years.

Last year at this time, there were 5,382 homes on the market, 1,819 fewer. That means that there are 34% more homes available today. The year over year difference continues to grow each week. The trend of more homes on the market year over year is here to stay.

Demand:  Demand dropped 5% in the past two-weeks.                                                              

In the past two-weeks, demand, the number of pending sales over the prior month, decreased by 117 pending sales, a 5% drop. Demand now totals 2,050, the lowest demand reading for this time of the year since 2007. The housing market has shifted from a supply problem, not enough homes on the market, to a demand problem, not enough pending sales. Interest rates have climbed to their highest levels since 2011. Higher rates and higher values have weakened affordability, impacting demand tremendously.

Last year at this time, demand was at 2,426 pending sales, 15% more than today, or 376 additional pending sales.

The expected market time, the amount of time it would take for a home that comes onto the market today to be placedinto escrow down the road, increased from 100 to 105 days in the past two-weeks, a Balanced Market (between 90 and 120 days). Last year, the expected market time was at 67 days, drastically different than today.

Luxury End:  Both luxury demand and luxury supply dropped in the past two-weeks.

In the past two-weeks, demand for homes above $1.25 million decreased by 24 pending sales, an 11% drop, and now totals 279. The luxury home inventory decreased by 29 homes and now totals 2,125, a 1% drop. The overall expected market time for homes priced above $1.25 million increased from 205 to 228 daysover the past two-weeks.

Year over year, luxury demand is down by 24 pending sales, or 8%,and the active luxury listing inventory is up by an additional 238 homes, or 13%. The expected market time last year was at 187 days, better than today.

For homes priced between $1.25 million and $1.5 million, the expected market time increased from 134 to 143 days. For homes priced between $1.5 million and $2 million, the expected market time increased from 164 to 170 days. For homes priced between $2 million and $4 million, the expected market time increased from 291 to 384 days. For homes priced above $4 million, the expected market time increased from 328 to 354 days. At 354 days, a seller would be looking at placing their home into escrow around the end of August 2019.

Orange County Housing Market Summary: 

  • The active listing inventory decreased by 6 homes in the past two weeks, almost identical, and now totals 7,201. The inventory finally reached a peak for 2018. Normally it peaks between July and August. Last year, there were 5,382 homes on the market, 1,819 fewer than today.
  • So far this year, 14% fewer homes have come on the market below $500,000 compared to last year, andthere have been 26% fewer closed sales. Fewer and fewer homes and condominiums are now pricedbelow $500,000. This price range is slowly vanishing.
  • Demand, the number of pending sales over the prior month, decreased in the past two-weeks by 117 pending sales, and now totals 2,050. Demand peaked in mid-May at 2,726 pending sales. Last year, there were 2,426 pending sales, 15% more than today.
  • The average list price for all of Orange County remained at $1.5 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 still a slight Seller’s Market (less than 90 days) with an expected market time of 77 days. This range represents 42% of the active inventory and 58% of demand.
  • For homes priced between $750,000 and $1 million, the expected market time is 98 days, a Balanced Market (between 90 to 120 days). This range represents 20% of the active inventory and 21% of demand.
  • For homes priced between $1 million to $1.25 million, the expected market time is 116 days, a Balanced Market.
  • For luxury homes priced between $1.25 million and $1.5 million, the expected market time increased from 134 to 143 days. For homes priced between $1.5 million and $2 million, the expected market time increased from 164 to 170 days. For luxury homes priced between $2 million and $4 million, the expected market time increased from 291 to 384 days. For luxury homes priced above $4 million, the expected market time increased from 328 to 354 days.
  • The luxury end, all homes above $1.25 million, accounts for 30% of the inventory and only 14% of demand.
  • The expected market time for all homes in Orange County increased from 100 to 105 days, a Balanced Market (between 90 to 120 days).
  • Distressed homes, both short sales and foreclosures combined, made up only 1.1% of all listings and 1% of demand. There are only 30 foreclosures and 48 short sales available to purchase today in all of Orange County, 78 total distressed homes on the active market, up by 10 from two-weeks ago. Last year there were 81 total distressed homes on the market, 4% more than today.
  • There were 2,090 closed residential resales in September, 24% fewer than September 2017’s 2,746. September marked a 25% drop over August 2018. The sales to list price ratio was 96.9% for all of Orange County. Foreclosures accounted for just 0.4% of all closed sales, andshort sales accounted for 0.3%. That means that 99.3% of all sales were good ol’ fashioned sellers with equity

 

Orange County Housing Report September 19th, 2018

Orange County Housing Report:
“Crickets…”

Orange County Housing Report September 19th, 2018

Sellers are learning a lesson about patience: just because your pole is in the water,
does not mean you will immediately reel in a fish.

A Much Slower Market: With an Expected Market Time of 98 days for all of Orange County, sellers really need to pack their patience.

Sitting on the edge of a lake fishing, time stops. Sometimes the fishing is great and the bucket is filled with fish. There are days when after fishing for hours, only one is reeled onto the dock. But, there are days, after trying every kind of bait, fishing produces absolutely nothing. A big part of fishing is all about using the bait that is working and being extremely patient.

Today’s sellers remind me of a kid that goes fishing for the very first time. After five minutes with their pole in the water, they inquire, “How long before I catch a fish?” They quickly realize that fishing is not instantaneous and that it requires quite a bit of time and persistence. Current sellers have heard about how great the fishing had been and how the housing market was generating instantaneous, multiple offers. For years, up until May of this year, sellers had been selling their homes at or near their list prices, and sometimes fetched even more. Yet, the housing market has evolved. The hot Seller’s Market is in the past and is not coming back anytime soon.

In looking at the Expected Market Time, the amount of time it would take to place a home on the market today and open up escrow down the road, it has grown from a low of 51 days at the end of February, to 98 days today. Anything above 90 days is a Balanced Market, one that does not favor sellers or buyers. Basically, the Expected Market Time is the current velocity of the housing market. The overall speed of housing has slowed considerably over time. It is a function of supply and demand. The market slows when supply increases. It also slows when demand decreases. When supply increases and demand drops at the same time, the market rapidly slows; and, that is precisely what occurred from May through today. The supply has climbed from 5,730 homes in May to 7,070 today, a 23% increase and its highest level since August 2016. In the meantime, demand dropped from 2,726 pending sales to 2,162, a 21% drop and its lowest level for this time of the year since 2007.

Sellers need to recalibrate their expectations. First, the best “bait” that is working today is price. Pricing at or extremely close to a home’s Fair Market Value is critical. Next, sellers must pack their patience. Often, sellers are required to keep their poles in the water and wait for the right buyer to come along. The market, for the most part, is not delivering instant success regardless of how well a home is priced. Another issue is that many sellers are still stretching their asking prices, either wishing they could achieve more than the most recent comparable sale, or they are leaving a little room for negotiations. Both strategies result in not accomplishing the goal in selling. As a result, price reductions are rampant. 44% of the entire active listing inventory has reduced their asking price at least once.

A stiff warning to buyers: it is still not a buyer’s market, so paying at or very close to a home’s Fair Market Value is vital in securing a home. Buyers who are busy writing offers below recent comparable sales are wasting everybody’s time, including their own. The market is balanced. Yes, there are a few more choices, but there is not a glut of inventory. A surplus of inventory is needed to push the market in the buyer’s favor. Today’s market is not even close to generating a surplus of homes. In fact, the inventory has not even reached the long-term average of 8,000 homes and is about to peak for the year. Sellers are not desperate and are not going to cave to a buyer looking for a deal.

The bottom line, the market has shifted. Sellers need to adjust their expectations and buyers should not get ahead of themselves.

Active Inventory: The active inventory grew by 1% in the past two weeks.

The active listing inventory continued its climb in the past two weeks, adding 69 homes, or 1%, and now totals 7,070, the highest level since August 2016. The 1% increase is the smallest increase this year, indicating that the inventory is reaching a peak for 2018. Housing is now transitioning into the Autumn Market with fewer homes entering the fray and many sellers throwing in the towel and pulling their homes off the market after not finding success in both the spring and summer.

Last year at this time, there were 5,639 homes on the market, 1,431 fewer. That means that there are 25% more homes available today. The year over year difference continues to grow each week. The trend of more homes on the market year over year is here to stay.

Demand:  Demand dropped by an astonishing 8% in the past couple of weeks.                        

In the past two-weeks, demand, the number of pending sales over the prior 30-days, decreased by 188 pending sale, 8%, its largest drop of the year. Demand now totals 2,162, the lowest demand reading for this time of the year since 2007. The supply problem that everybody had talked about has evolved into a demand problem with very low readings starting in May of this year. With higher mortgage rates and property values, buyers are not as motivated to purchase as they have been.

Last year at this time, demand was at 2,624 pending sales, 21% more than today, or 462 additional pending sales. The expected market time, the amount of time it would take for a home that comes onto the market today to be placed into escrow down the road, increased from 89 to 98 days in the past two weeks, its highest level for this time of the year since 2011 and is a Balanced Market (between 90 and 120 days). Last year, the expected market time was at 64 days, considerably hotter than today.

Luxury End:  Luxury demand dropped significantly over the past two weeks.

In the past two weeks, demand for homes above $1.25 million decreased by 26 pending sales, down 8%, and now totals 319. It has dropped 27% since reaching a height for 2018 in mid-May. The luxury home inventory increased by 11 homes and now totals 2,144. The overall expected market time for homes priced above $1.25 million increased from 185 to 202 days over the past two weeks.

Year over year, luxury demand is down by 39 pending sales or 11%, and the active luxury listing inventory is up by an additional 165 homes or 8%. The expected market time last year was at 166 days, much better than today. For homes priced between $1.25 million and $1.5 million, the expected market time increased from 110 to 124 days. For homes priced between $1.5 million and $2 million, the expected market time increased from 135 to 174 days. For homes priced between $2 million and $4 million, the expected market time decreased from 274 to 257 days. For homes priced above $4 million, the expected market time decreased from 470 to 449 days. At 449 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 69 homes in the past two weeks, up 1%, and now totals 7,070. Expect the inventory to peak right around now, the start of the Autumn Market. Last year, there were 5,639 homes on the market, 1,431 fewer than today.
  • So far this year, 16% fewer homes have come on the market below $500,000 compared to last year, and there have been 25% fewer closed sales. Fewer and fewer homes and condominiums are now priced below $500,000. This price range is slowly vanishing.
  • Demand, the number of pending sales over the prior month, decreased in the past two-weeks by 188 pending sales, 8%, its largest drop of the year, and now totals 2,162. Demand peaked in mid-May at 2,726 pending sales. Last year, there were 2,624 pending sales, 21% more than today.
  • The average list price for all of Orange County dropped to $1.5 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 still a slight Seller’s Market (less than 90 days) with an expected market time of 72 days. This range represents 41% of the active inventory and 56% of demand.
  • For homes priced between $750,000 and $1 million, the expected market time is 90 days, a Balanced Market (between 90 to 120 days). This range represents 20% of the active inventory and 22% of demand.
  • For homes priced between $1 million to $1.25 million, the expected market time is 113 days, a Balanced Market.
  • For luxury homes priced between $1.25 million and $1.5 million, the expected market time increased from 110 to 124 days. For homes priced between $1.5 million and $2 million, the expected market time increased from 135 to 174 days. For luxury homes priced between $2 million and $4 million, the expected market time decreased from 274 to 257 days. For luxury homes priced above $4 million, the expected market time decreased from 470 to 449 days.
  • The luxury end, all homes above $1.25 million, accounts for 31% of the inventory and only 14% of demand.
  • The expected market time for all homes in Orange County increased from 89 to 98 days, a Balanced Market (between 90 to 120 days).
  • Distressed homes, both short sales, and foreclosures combined, made up only 0.8% of all listings and 1.4% of demand. There are only 22 foreclosures and 34 short sales available to purchase today in all of Orange County, 56 total distressed homes on the active market, down by two from two-weeks ago. Last year there were 87 total distressed homes on the market, 55% more than today.
  • There were 2,784 closed residential resales in August, 11% fewer than August 2017’s 3,116. August marked a 1% increase over July 2018. The sales to list price ratio was 97.8% for all of Orange County. Foreclosures accounted for just 0.4% of all closed sales, and short sales accounted for 0.6%. That means that 99% of all sales were good ol’ fashioned sellers with equity.

Orange County Housing Report September 5th, 2018

Orange County Housing Report:
“Just Waiting”

Orange County Housing Report September 5th, 2018

Sellers are not used to waiting, but it is a trend that has evolved this year and is here to stay.

 

Sitting on the Market: A surprising 37% of the active listing inventory has been on the market for more than two months.

For years, sellers have been in control of the housing market. Multiple offers were generated almost instantaneously after hammering in the FOR SALE sign. Homes flew off the market in the blink of an eye. Frustrated buyers had to cut back their expectations after writing offer after offer with no success. It felt like housing was unstoppable and would continue its relentless climb. That is until the spring of 2018.

This year has been all about the evolution of housing from a brisk paced, hot, Seller’s Market to a much more normal, Balanced Market. The trouble is nobody really remembers a “normal” market. It is where homes must be priced well, or they will sit. There is no room for error. In a hot seller’s market, homeowners get away with stretching their asking prices. With very little inventory and heated demand, buyers were willing to pay extra just to secure their piece of the “American Dream.”

Today, housing is much more balanced, a market that does not favor sellers or buyers. Overprice and sit. Sellers that pad the price to leave room for negotiations will sit. Sellers who ignore their professional REALTOR® and arbitrarily pick a price will sit. Ignore real estate fundamentals like location, condition, and upgrades, and sellers will be stuck without success.

Of course, everyone expects Sellers in the luxury ranges to play the waiting game; however, many sellers in the most affordable price ranges are sitting on the market and waiting as well. Below $500,000, it is 28% of the market. Between $500,000 and $750,000, it is 24% of the market. About a third of all sellers between $750,000 and $1 million have been on the market for over two months. From there, the share of sellers who have been waiting to find success grows, from 40% to 68%.
An unbelievable 37% of all homes on the active listing inventory have been exposed to the market for more than 60-days. That is high considering 39% of the active listing market has come on within the last 30-days.

For the rest of the year, the percentages will just grow in every price range. That is because housing is now transitioning into the Autumn Market. This season of real estate begins with the kids going back to school. It is no longer the most advantageous time for families to move, so many would be buyers stop their search for the time being. On average, demand drops by 11% from the end of August to the start of October. With less demand, there are fewer sellers who are able to find success. As a result, more sellers find themselves sitting and waiting.

With both the Spring and Summer Markets in the rearview mirror, many sellers realize that the best time of the year to sell is now in the past. For the remainder of the year, carefully pricing is absolutely crucial. There will be more homeowners this year who will not be able to isolate a buyer willing to purchase and their contracts to sell will expire. In the real estate trenches, they are called “expired listings.” Expect the number of expired listings this year to spike compared to the rest of the housing run.

Sellers have a choice: price their homes according to the Fair Market Value or throw in the towel and pull their homes off of the market. It sounds simple, but many sellers quite simply cannot get out of their own ways, unwilling to listen to the real estate experts and do what it takes to achieve their goals in selling.

Buyers need to be aware that while it is no longer a hot seller’s market, it is not a buyer’s market either. Looking for a “deal” is a waste of time. They too need to look at offering to purchase at a home’s Fair Market Value. Anything less, and they will not be successful in securing their piece of the “American Dream.”

Active Inventory: The active inventory grew by 2% in the past two weeks.

The active listing inventory continued its climb in the past two weeks, adding 108 homes, or 2%, and now totals 7,001, eclipsing the 7,000 level for the first time since September 2016. This may be the peak for the active listing inventory for 2018. From here, housing transitions into the Autumn Market with fewer homes entering the fray and many sellers throwing in the towel and pulling their homes off the market after not finding success in both the spring and summer. Although it is technically not autumn until Saturday, September, September 22, the Autumn Housing Market starts now, as the kids go back to school, and runs to Thanksgiving. From there, the market downshifts further and transitions into the Holiday Market when even fewer homeowners opt to sell their homes.

Last year at this time, there were 5,862 homes on the market, 1,139 fewer. That means that there are 19% more homes available today. The year over year difference continues to grow each week. The trend of more homes on the market year over year is here to stay.

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

In the past two-weeks, demand, the number of pending sales over the prior 30-days, decreased by 44 pending sales, 2%, and now totals 2,350, the lowest demand reading for this time of the year since 2007. This year the emphasis of a supply problem, not enough homes on the market, has evolved into a demand problem, not enough pending sales. With higher mortgage rates and higher values, buyers are not as excited to purchase as they have been over the past 6-year run.

Last year at this time, demand was at 2,825 pending sales, 20% more than today, or 475 additional pending sales.

The expected market time, the amount of time it would take for a home that comes onto the market today to be placed into escrow down the road, increased from 86 to 89 days in the past two weeks. Last year, the expected market time was at 62 days, substantially hotter than today.

Luxury End:  Luxury demand increased over the past two weeks.

In the past two weeks, demand for homes above $1.25 million increased by 14 pending sales, up 4%, and now totals 345, its highest level since the end of June. It’s still down 21% from the end of May height in luxury demand. The luxury home inventory decreased by 19 homes and now totals 2,133. The overall expected market time for homes priced above $1.25 million decreased from 195 to 185 days over the past two weeks.

Year over year, luxury demand is down by 40 pending sales or 10%, and the active luxury listing inventory is up by an additional 131 homes or 7%. The expected market time last year was at 156 days, much better than today.

For homes priced between $1.25 million and $1.5 million, the expected market time increased from 93 to 110 days. For homes priced between $1.5 million and $2 million, the expected market time decreased from 183 to 135 days. For homes priced between $2 million and $4 million, the expected market time decreased from 294 to 274 days. For homes priced above $4 million, the expected market time decreased from 523 to 470 days. At 470 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 108 homes in the past two weeks, up 2%, and now totals 7,001. Expect the inventory to peak right around now, the start of the Autumn Market. Last year, there were 5,862 homes on the market, 1,139 fewer than today.
  • This year, 16% fewer homes have come on the market below $500,000 compared to last year, and there have been 25% fewer closed sales so far this year. Fewer and fewer homes and condominiums are now priced below $500,000. This price range is slowly vanishing.
  • Demand, the number of pending sales over the prior month, decreased in the past two-weeks by 44 pending sales, 2%, and now totals 2,350. Demand peaked in mid-May at 2,726 pending sales. Last year, there were 2,825 pending sales, 20% more than today.
  • The average list price for all of Orange County remained at $1.6 million over the past two weeks. This number is high due to the mix of homes in the luxury ranges that sit on the market and do not move as quickly as the lower end.
  • For homes priced below $750,000, the market is still a seller’s market (less than 90 days) with an expected market time of 65 days. This range represents 40% of the active inventory and 55% of demand.
  • For homes priced between $750,000 and $1 million, the expected market time is 82 days. This range represents 21% of the active inventory and 22% of demand.
  • For homes priced between $1 million to $1.25 million, the expected market time is 101 days, a balanced market (between 90 to 120 days).
  • For luxury homes priced between $1.25 million and $1.5 million, the expected market time increased from 93 to 110 days. For homes priced between $1.5 million and $2 million, the expected market time decreased from 183 to 135 days. For luxury homes priced between $2 million and $4 million, the expected market time decreased from 294 to 274 days. For luxury homes priced above $4 million, the expected market time decreased from 523 to 470 days.
  • The luxury end, all homes above $1.25 million, accounts for 30% of the inventory and only 15% of demand.
  • The expected market time for all homes in Orange County increased from 86 to 89 days in the past two weeks and is just about a balanced market (from 90 to 120 days).
  • Distressed homes, both short sales, and foreclosures combined, made up only 0.8% of all listings and 1.6% of demand. There are only 21 foreclosures and 37 short sales available to purchase today in all of Orange County, 58 total distressed homes on the active market, down by one from two weeks ago. Last year there were 82 total distressed homes on the market, 41% more than today.
  • There were 2,766 closed residential resales in July, nearly identical to July 2017’s 2,768 closed sales. July marked a 3% decrease from June 2018. The sales to list price ratio was 97.8% for all of Orange County. Foreclosures accounted for just 0.4% of all closed sales, and short sales accounted for 0.5%. That means that 99.1% of all sales were good ol’ fashioned sellers with equity.

 

Orange County Housing Report August 21st, 2018

Orange County Housing Report:
“It’s a Demand Problem”

Orange County Housing Report August 21st, 2018

The focus has shifted from not enough homes on the market to extremely soft demand.

 

A Demand Problem: Demand was 20% higher last year and 23% higher two years ago at this time.

Everybody has been acutely aware that there have not been enough homes on the market for years now. The storyline has been the same year in and year out: with only a trickle of homes coming on the market, buyers have been tripping over themselves to purchase them. REALTORS® have become accustomed to 50, or 100, or even more, potential buyers touring their Open Houses. Multiple offers have been the norm. In the lower ranges, it was customary for homes that were priced well to lure 10 to 20 offers. It was no wonder that values have skyrocketed over the last 6½ years.

The type of market and home values are determined by supply and demand, and housing has been experiencing a supply problem for years. Quite simply, not enough homeowners have been entering the real estate arena since 2012. It has been a hot Seller’s Market ever since. Unfortunately, everybody has become used to the market lining up heavily in the seller’s favor. It has everyone’s expectations out of whack. The expectation is for the Seller’s Market to continue forever. That is just now how economics and housing works.

Suddenly, in 2018, the market evolved. The year started like every other year of the housing run, there were not enough homes on the market. But, this year the inventory climbed at a very fast pace during the Spring and Summer markets, the fastest since 2008. The active inventory has more than doubled this year and sits at 6,893 homes today, but it is still shy of the long-term average of 8,000 homes. Nonetheless, the market was redefining itself. The supply problem morphed into a demand problem.

As the inventory was increasing rapidly in the spring, the number of pending sales was subdued. Demand, the number of pending sales over the prior month were slightly off from the very beginning of the year. It slowed further in February but did not really become apparent until April when the year over year difference widened. At that point, REALTORS® in the trenches and sellers began to feel a noticeable shift in the market. The “normal” market that everybody had been used to with a steady stream of buyers, instantaneous, multiple offers, and sellers wondering if they had underpriced their homes even though they had achieved a record sales price for the neighborhood, was quickly vanishing.

Even though everybody has become accustomed to a hot seller’s market, it is NOT a normal market. Today, we are experiencing a “NORMAL” market, also referred to as a Balanced Market, one that does not really favor sellers or buyers. That is where housing has evolved to today. It is a market where properly pricing is fundamental in order to find success. Both buyers and sellers need to carefully approach the market. Sellers cannot stretch their asking prices, like so many do today, or they will just sit. Buyers cannot bring in low, unrealistic offers either, or they will never buy. It is not a buyer’s market. Homes will sell at their Fair Market Values. Buyers are willing to pay very close to the last comparable sale, so sellers need to meet them thereby pricing their homes appropriately.

How did we get here? Home values have increased by 80% from the lows of 2011. Appreciation has been off the charts for a very long time. The increase in values has outstripped the rise in incomes substantially. That simply cannot continue forever. Affordability has been further rocked by a healthy rise in interest rates. Today’s rate of 4.75% is a lot higher than last year’s 3.9%. With higher interest rates and home values reaching record levels, buyers are not as eager to purchase. Instead, they are carefully approaching the housing market. They do not want to overpay.

It is time for everybody’s expectations to adjust. A normal housing market is here, and it looks like it’s not going to evolve further anytime soon. That means that one of four homes on the market will not find success. Sellers will have to recalibrate and often reduce their asking prices to be more in line with reality. In fact, 13% of the entire active listing inventory reduced their asking price just last week. Slowly but surely, everybody will get used to the normal, balanced market. Those that realign their expectations today will find success.

Active Inventory: The active inventory grew by 2% in the past two weeks.

The active listing inventory continued its climb in the past two weeks, adding 134 homes, or 2%, and now totals 6,893, its highest level since September 2016. Expect the active inventory to peak within the next few weeks. From there, housing transitions into the Autumn Market with fewer homes entering the fray and many sellers throwing in the towel and pulling their homes off the market after not finding success in both the spring and summer.

Last year at this time, there were 5,877 homes on the market, 1,016 fewer. That means that there are 17% more homes available today. The year over year difference is growing week by week. The trend of more homes on the market year over year is here to stay.

Demand:  Demand did not change over the past two weeks.                                                     

In the past two-weeks, demand, the number of pending sales over the prior 30-days, increased by 1 pending sale and now totals 2,394, the lowest demand reading for this time of the year since 2007. Lackluster demand that has not been seen since 2007 is a trend that started in April and looks to continue. Expect demand to drop further from now through the end of the year. Typically, demand downshifts from here because the best time to sell is in the rearview mirror. Fewer families desire to make a move once the kids are back in school, which for many starts as early as next week. Many families pull out of the house hunt in August and demand drops.

Last year at this time, demand was at 2,890 pending sales, 21% more than today, or 496 additional pending sales.

The expected market time, the amount of time it would take for a home that comes onto the market today to be placed into escrow down the road, increased from 85 to 86 days in the past two weeks. Last year, the expected market time was at 61 days, substantially hotter than today.

Luxury End:  Luxury demand increased, and the inventory dropped.   

In the past two weeks, demand for homes above $1.25 million increased by 18 pending sales, up 6%, and now totals 331, nearly identical to one month ago. It’s still down 24% from the end of May. The luxury home inventory decreased by 40 homes and now totals 2,152. The overall expected market time for homes priced above $1.25 million decreased from 210 to 195 days over the past two weeks.

Year over year, luxury demand is down by 38 pending sales or 10%, and the active luxury listing inventory is up by an additional 80 homes or 4%. The expected market time last year was at 168 days, much better than today.

For homes priced between $1.25 million and $1.5 million, the expected market time decreased from 107 to 93 days. For homes priced between $1.5 million and $2 million, the expected market time decreased from 187 to 183 days. For homes priced between $2 million and $4 million, the expected market time decreased from 300 to 294 days. For homes priced above $4 million, the expected market time decreased from 718 to 523 days. At 523 days, a seller would be looking at placing their home into escrow around mid-January 2020.

Orange County Housing Market Summary:

  • The active listing inventory increased by 134 homes in the past two weeks, up 2%, and now totals 6,893. Expect the inventory to peak within the next few weeks. Last year, there were 5,877 homes on the market, 1,016 fewer than today.
  • This year, 16% fewer homes have come on the market below $500,000 compared to last year, and there have been 25% fewer closed sales so far this year. Fewer and fewer homes and condominiums are now priced below $500,000. This price range is slowly vanishing.
  • Demand, the number of pending sales over the prior month, increased in the past two-weeks by 1 pending sale and now totals 2,394. Demand peaked in mid-May at 2,726 pending sales. Last year, there were 2,890 pending sales, 21% more than today.
  • The average list price for all of Orange County remained at $1.6 million over the past two weeks. This number is high due to the mix of homes in the luxury ranges that sit on the market and do not move as quickly as the lower end.
  • For homes priced below $750,000, the market is still a seller’s market (less than 90 days). This range represents 39% of the active inventory and 56% of demand.
  • For homes priced between $750,000 and $1 million, the expected market time is 84 days. This range represents 21% of the active inventory and 21% of demand.
  • For homes priced between $1 million to $1.25 million, the expected market time is 94 days, a balanced market (between 90 to 120 days).
  • For luxury homes priced between $1.25 million and $1.5 million, the expected market time decreased from 107 to 93 days. For homes priced between $1.5 million and $2 million, the expected market time decreased from 187 to 183 days. For luxury homes priced between $2 million and $4 million, the expected market time decreased from 300 to 294 days. For luxury homes priced above $4 million, the expected market time decreased from 718 to 523 days.
  • The luxury end, all homes above $1.25 million, accounts for 31% of the inventory and only 14% of demand.
  • The expected market time for all homes in Orange County increased from 85 to 86 days in the past two weeks and is just about a balanced market (from 90 to 120 days).
  • Distressed homes, both short sales and foreclosures combined, made up only 0.9% of all listings and 1.5% of demand. There are only 24 foreclosures and 35 short sales available to purchase today in all of Orange County, 59 total distressed homes on the active market, identical to two weeks ago. Last year there were 88 total distressed homes on the market, 49% more than today.
  • There were 2,766 closed residential resales in July, nearly identical to July 2017’s 2,768 closed sales. July marked a 3% decrease from June 2018. The sales to list price ratio was 97.8% for all of Orange County. Foreclosures accounted for just 0.4% of all closed sales, and short sales accounted for 0.5%. That means that 99.1% of all sales were good ol’ fashioned sellers with equity.

 

Orange County Housing Report August 1st, 2018

Orange County Housing Report:
“A Balanced Market”

Orange County Housing Report August 1st, 2018

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

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The expected market time, the amount of time it would take for a home that comes onto the market today to be placed into escrow down the road, increased from 80 to 85 days in the past two weeks. At 85 days, it is a slight seller’s market (between 60 to 90 days) where sellers still get to call the shots, but appreciation is muted. Last year at this time, the expected market time was at 63 days, substantially hotter than today.

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

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

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

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

Orange County Housing Market Summary: 

  • The active listing inventory increased by 180 homes in the past two weeks, up 3%, and now totals 6,759. Expect the inventory to increase from now through mid-August. Last year, there were 5,967 homes on the market, 792 fewer than today.
  • This year, 18% fewer homes have come on the market below $500,000 today compared to last year, and there have been 26% fewer closed sales so far this year. Fewer and fewer homes and condominiums are now priced below $500,000. This price range is slowly vanishing.
  • Demand, the number of pending sales over the prior month, decreased in the past two-weeks by 61 pending sales, down 2%, and now totals 2,393. Demand peaked in mid-May at 2,726 pending sales. Last year, there were 2,835 pending sales, 18% more than today.
  • The average list price for all of Orange County remained at $1.6 million over the past two weeks. This number is high due to the mix of homes in the luxury ranges that sit on the market and do not move as quickly as the lower end.
  • For homes priced below $750,000, the market is hot with an expected market time of just 57 days, but is knocking on the door of a slight seller’s market (60-90 days). This range represents 38% of the active inventory and 56% of demand.
  • For homes priced between $750,000 and $1 million, the expected market time is 76 days, a slight seller’s market (between 60 and 90 days). This range represents 20% of the active inventory and 22% of demand.
  • For homes priced between $1 million to $1.25 million, the expected market time is 95 days, a balanced market (between 90 to 120 days).
  • For luxury homes priced between $1.25 million and $1.5 million, the expected market time decreased from 126 to 107 days. For homes priced between $1.5 million and $2 million, the expected market time increased from 163 to 187 days. For luxury homes priced between $2 million and $4 million, the expected market time increased from 250 to 300 days. For luxury homes priced above $4 million, the expected market time increased from 511 to 718 days.
  • The luxury end, all homes above $1.25 million, accounts for 32% of the inventory and only 13% of demand.
  • The expected market time for all homes in Orange County increased from 80 to 85 days in the past two weeks, a slight seller’s market (from 60 to 90 days).
  • Distressed homes, both short sales and foreclosures combined, made up only 0.9% of all listings and 1.4% of demand. There are only 27 foreclosures and 32 short sales available to purchase today in all of Orange County, 59 total distressed homes on the active market, down five in the past two weeks. Last year there were 88 total distressed homes on the market, 49% more than today.
  • There were 2,851 closed residential resales in June, down by 12% from June 2017’s 3,229 closed sales. June marked a 1% decrease from May 2018. The sales to list price ratio was 98.2% for all of Orange County. Foreclosures accounted for just 0.2% of all closed sales, andshort sales accounted for 0.7%. That means that 99.1% of all sales were good ol’ fashioned sellers with equity.

 

Orange County Housing Report July 20th, 2018

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

Orange County Housing Report July 20th, 2018

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

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Orange County Housing Market Summary:

  • The active listing inventory increased by 217 homes in the past two weeks, up 3%, and now totals 6,579. Expect the inventory to increase from now through mid-August. Last year, there were 5,983 homes on the market, 596 fewer than today.
  • This year, 18% fewer homes have come on the market below $500,000 today compared to last year, andthere have been 26% fewer closed sales so far this year. Fewer and fewer homes and condominiums are now pricedbelow $500,000. This price range is slowly vanishing.
  • Demand, the number of pending sales over the prior month, decreased in the past two-weeks by 150 pending sales, down 6%, and now totals 2,454. Demand peaked in mid-May at 2,726 pending sales. Last year, there were 2,838 pending sales, 16% more than today.
  • The average list price for all of Orange County dropped to $1.6 million over the past two-weeks. This number is high due to the mix of homes in the luxury ranges that sit on the market and do not move as quickly as the lower end.
  • For homes priced below $750,000, the market is HOT with an expected market time of just 54 days, but is knocking on the door of a slight seller’s market (60-90 days). This range represents 37% of the active inventory and 56% of demand.
  • For homes priced between $750,000 and $1 million, the expected market time is 72 days, a slight seller’s market (between 60 and 90 days). This range represents 20% of the active inventory and 22% of demand.
  • For homes priced between $1 million to $1.25 million, the expected market time is 101 days, a balanced market (between 90 to 120 days).
  • For luxury homes priced between $1.25 million and $1.5 million, the expected market time increased from 113 to 126 days. For homes priced between $1.5 million and $2 million, the expected market time increased from 150 to 163 days. For luxury homes priced between $2 million and $4 million, the expected market time increased from 225 to 250 days. For luxury homes priced above $4 million, the expected market time increased from 427 to 511 days.
  • The luxury end, all homes above $1.25 million, accounts for 33% of the inventory and only 14% of demand.
  • The expected market time for all homes in Orange County increased from 73 to 80 days in the past two weeks, a slight seller’s market (from 60 to 90 days).
  • Distressed homes, both short sales and foreclosures combined, made up only 1% of all listings and 1.3% of demand. There are only 28 foreclosures and 36 short sales available to purchase today in all of Orange County, 64 total distressed homes on the active market, up six in the past two weeks. Last year there were 76 total distressed homes on the market, 19% more than today.
  • There were 2,851 closed residential resales in June, down by 12% from June 2017’s 3,229 closed sales. June marked a 1% decrease from May 2018. The sales to list price ratio was 98.2% for all of Orange County. Foreclosures accounted for just 0.2% of all closed sales, andshort sales accounted for 0.7%. That means that 99.1% of all sales were good ol’ fashioned sellers with equity.

 

 

Orange County Housing Report July 6th, 2018

Orange County Housing Report:
“A Buyers Market?”

Orange County Housing Report July 6th, 2018

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

 

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

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

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

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

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

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

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

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

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

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

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

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

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

Last year at this time, demand was at 2,885 pending sales, 11% more than today, or 281 pending sales. This is why REALTORS® in the trenches have articulated how the market is a bit more sluggish this year compared to 2017.

The expected market time, the amount of time it would take for a home that comes onto the market today to be placedinto escrow down the road, increased from 68 to 73 days in the past two-weeks. At 73 days, it is a slight seller’s market (between 60 to 90 days) where sellers still get to call the shots, but appreciation is muted. Last year at this time, the expected market time was at 62 days, a lot hotter than today.

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

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

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

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

Orange County Housing Market Summary:

  • The active listing inventory increased by 257 homes in the past two weeks, up 4%, and now totals 6,362. Expect the inventory to increase from now through mid-August. Last year, there were 5,936 homes on the market, 426 fewer than today.
  • This year, 19% fewer homes have come on the market below $500,000 today compared to last year, andthere have been 25% fewer closed sales so far this year. Fewer and fewer homes and condominiums are now pricedbelow $500,000. This price range is slowly vanishing.
  • Demand, the number of pending sales over the prior month, decreased in the past two-weeks by 95 pending sales, down 4%, and now totals 2,604. Demand peaked in mid-May at 2,726 pending sales. Last year, there were 2,885 pending sales, 11% more than today.
  • The average list price for all of Orange County remained at $1.7 million over the past two-weeks. This number is high due to the mix of homes in the luxury ranges that sit on the market and do not move as quickly as the lower end.
  • For homes priced below $750,000, the market is HOT with an expected market time of just 48 days. This range represents 36% of the active inventory and 55% of demand.
  • For homes priced between $750,000 and $1 million, the expected market time is 64 days, a slight seller’s market (between 60 and 90 days). This range represents 20% of the active inventory and 22% of demand.
  • For homes priced between $1 million to $1.25 million, the expected market time is 85 days, a slight seller’s market.
  • For luxury homes priced between $1.25 million and $1.5 million, the expected market time increased from 111 to 113 days. For homes priced between $1.5 million and $2 million, the expected market time decreased from 162 to 150 days. For luxury homes priced between $2 million and $4 million, the expected market time increased from 183 to 225 days. For luxury homes priced above $4 million, the expected market time increased from 368 to 427 days.
  • The luxury end, all homes above $1.25 million, accounts for 34% of the inventory and only 14% of demand.
  • The expected market time for all homes in Orange County increased from 68 to 73 days in the past two weeks, a slight seller’s market (from 60 to 90 days).
  • Distressed homes, both short sales and foreclosures combined, made up only 0.9% of all listings and 1.4% of demand. There are only 25 foreclosures and 33 short sales available to purchase today in all of Orange County, 58 total distressed homes on the active market, up eight in the past two weeks. Last year there were 76 total distressed homes on the market, 31% more than today.
  • There were 2,871closed residential resales in May, down by 9% from May 2019’s 3,147 closed sales. May marked a 10% increase from April 2018. The sales to list price ratio was 98.5% for all of Orange County. Foreclosures accounted for just 0.5% of all closed sales, andshort sales accounted for 0.7%. That means that 98.8% of all sales were good ol’ fashioned sellers with equity.

 

This Month in Real Estate – April 2017

This Month in Real Estate – April 2017

Check out the National Numbers for April, 2017