Orange County Housing Report: Hot in December?
Even in the Holiday Market, there are hot price ranges where homes fly off the market.
Read more in this Orange County Housing Report for December 20th, 2016
The Holiday Market has officially arrived for housing in Orange County. There are fewer and fewer homes on the market every day. The active inventory has dropped 32% since September. As a result, demand has dropped considerably as well, 27%. This is the time of year where activity comes to a crawl and the number of new pending deals falls to its lowest level of the year. With very limited activity now, January and February are notoriously the leanest months for closed sales.
The slow Holiday Market will only begin to thaw after the first few weeks of the New Year and does not really find its legs until after the Super Bowl, around mid-February. Until then, it will be more of the same, very few homes on the market and muted demand.
Yet, there are stories today of homes hitting the market and instantaneously receiving a steady stream of buyer activity, multiple offers, and bidding wars ensue. That is happening today, in the midst of all of the holiday hoopla. If it is the Holiday Market, the slowest time of the year, then how can some homes be generating so much activity?
It’s all about price.
Homes and condominiums that are priced in the lower ranges are HOT, even today. For detached homes, that is anything below $750,000. For condominiums, it’s anything priced below $500,000. And, it is hot in areas and cities where more of the housing stock is located in the lower ranges as well.
Take a look at Aliso Viejo, for example, where there are only 44 homes on the market today for potential buyers to view, and demand (the number of pending sales over the prior month) is at 51 pending sales. With a low inventory and strong demand, the expected market time (how long it would take for a home that came on the market today to be placed into escrow) is at 26 days. An expected market time below two months is considered extremely HOT, a deep seller’s market. In Orange County, there are 15 cities and areas that fall within this sizzling classification. What do they all have in common?
They all have an averages sales price that can be found in the hotter lower ranges.
The Aliso Viejo example has an average price of $538,000. In those 15 cities and areas, the highest average sales price is Fountain Valley at $719,000, still within the hotter, lower ranges. As the average sales price creeps higher, so does the market time. Huntington Beach has an expected market time of 67 days and an average sales price of $789,000. That’s still a seller’s market, just not as hot.
Homes with average sales prices above $1 million are experiencing a much longer expected market time. For example, Newport Coast has 105 homes on the market and demand at 20 pending sales. The expected market time is 158 days, a little over 5 months.
The bottom line is this: homes and condominiums located within the lower price points are HOT in spite of the time of the year. For those sellers licking their chops looking to pounce on this opportunity, there is a WARNING: only properties that are priced right, in good condition, and are nicely upgraded, will fly off the market. If a home or condominium sits on the market and does not generate an offer, it’s typically because of the price. A home that sits on the market and needs a little bit of work, probably needs to soften their price.
For homes priced in the higher ranges, pricing is even more crucial, and so is patience.
Luxury End: Luxury demand dropped by 3% and the inventory dropped by 7%.
In the past two weeks, demand for homes above $1 million decreased from 367 to 355 pending sales, a 3% drop, and its lowest level since the end of January. The luxury home inventory dropped from 2,000 homes to 1,862, a 7% drop, its lowest level since the start of February. With a larger drop in the supply of luxury homes, the expected market time decreased from 164 days to 158 days for all homes priced above $1 million.
For homes priced between $1 million to $1.5 million, the expected market time in the past couple of weeks decreased from 101 days to 94 days. For homes priced between $1.5 million to $2 million, the expected market time increased from 188 days to 193 days. For homes priced above $2 million, the expected market time decreased from 296 days to 279 days. Based upon today’s supply and demand for luxury homes with an expected market time of 279 days, a seller is looking at placing their home in escrow around the end of September of 2017.
Active Inventory: In the past couple of weeks, the active inventory dropped by 7%.
Due to the timing of the year, the active inventory dropped by 388 homes, or 7%, in the past couple of weeks and now totals 4,789, its lowest level since mid-January. In the past month, the inventory has shed 866 homes, 15%. Fewer sellers are coming on the market and many unsuccessful sellers are throwing in the towel after being exposed to the market for months. This sharp drop will continue until it bottoms out on New Year’s Day.
Last year at this time there were 4,972 homes on the market, 4% more.
Demand: In the past month, demand dropped by 15%.
Demand, the number of new pending sales over the prior month, decreased from 2,116 to 1,984, a drop of 132, or 6%. That’s the second biggest drop of the year and its lowest level since the end of January. Two week ago was the biggest drop. This is the time of year where demand slows considerably. We can expect demand to continue to steadily drop before bottoming out on New Year’s Day.
Last year at this time, there were 29 fewer pending sales, totaling 1,955.
With a giant drop in both the active inventory and demand, the expected market time only dropped slightly from 73 days to 72, still a slight seller’s market.
Orange County Housing Market Summary:
- The active listing inventory experienced its second largest drop of the year in the past couple of weeks, shedding 388 homes, or 7%, and now totals 4,789, the lowest level since mid-January. The inventory will continue to drop through the end of the year until it bottoms out on New Year’s Day.
- There are 25% fewer homes on the market below $500,000 compared to last year at this time and demand is down by 10% as well. Fewer and fewer homes and condominiums can now be found priced below $500,000.
- Demand, the number of pending sales over the prior month, experienced its second largest drop of the year in the past couple of weeks, declining by 132 pending sales, or 6%, and now totals 1,984. Demand was at 1,955 pending sales last year. Today’s demand is 1% stronger than last year. The average pending price is $828,266.
- The average list price for all of Orange County is $1.6 million, the highest level ever for the county.
- For homes priced below $750,000, the market is HOT with an expected market time of only 49 days. This range represents 44% of the active inventory and 66% of demand.
- For homes priced between $750,000 and $1 million, the expected market time is 75 days, a slight seller’s market (between 60 and 90 days). This range represents 17% of the active inventory and 17% of demand.
- For luxury homes priced between $1 million to $1.5 million, the expected market time is at 94 days, decreasing by 7 days in the past couple of weeks. For homes priced between $1.5 million to $2 million, the expected market time increased from 188 days to 193 days. For luxury homes priced above $2 million, the expected market time decreased from 296 days to 279 days.
- The luxury end, all homes above $1 million, accounts for 39% of the inventory and only 17% of demand.
- The expected market time for all homes in Orange County decreased slightly in the past couple of weeks from 73 days to 72 days, a slight seller’s market (between 60 and 90 days).
- Distressed homes, both short sales and foreclosures combined, make up only 3% of all listings and 3% of demand. There are 44 foreclosures and 82 short sales available to purchase today in all of Orange County, that’s 126 total distressed homes on the active market, up 6 in the past two weeks. Last year there were 182 total distressed sales, 44% more.
- There were 2,459 closed sales in November, a 5% drop from October, but up 26% compared to the 1,937 closed sales posted in November 2015. The sales to list price ratio was 97.3% for all of Orange County. Foreclosures accounted for just .9% of all closed sales and short sales accounted for .8%. That means that 98.3% of all sales were good ol’ fashioned equity sellers.