Orange County Housing Report: OC Housing is Sizzling
With a very limited inventory, the Orange County housing market is extremely hot and values are on the rise.
Find out more in this Orange County Housing Report for February 28th, 2017.
Hot Housing Market: Everything on the market below $1 million is selling like hotcakes, and below $750,000 is nothing short of nuts.
The current Orange County housing market is scorching hot and has not been this good since July 2013. Once again, buyers are tripping over themselves to purchase. Homes that hit the market are fetching multiple offers within the first couple of days. Some buyers are writing offers on homes unseen. Others are waiving the appraisal contingency (still mandatory if they are getting a loan; so, if the appraisal comes in low, the buyer will have to bring in more money in order to close). When a home is priced at or close to its Fair Market Value, the purchase price is often higher than the asking price.
We are back to the bidding war days. When 10 offers to purchase are generated, there is only one victor. Nine buyers walk away and have to continue the pursuit of their dream home. This market can be extremely frustrating for a buyer. After a couple of failed attempts, many buyers sharpen their pencils and are willing to stretch in price even if it means paying more than the most recent comparable pending or closed sale. That is the nature of a housing market with very little inventory and very high demand.
The expected market time (the amount of time it would take for a newly listed home today to be placed into escrow) for all of Orange County is now at 50 days. When the expected market time drops below 60 days, the market is considered a solid seller’s market with steady price appreciation. Last year, Orange County was only below the 60-day threshold for about eight weeks, from mid-March through mid-May and never dropped below 55 days. It appears as if 2017 is going to be much hotter than the last few years.
When the expected market time dips below 30 days, the market shifts to a sizzling hot seller’s market with rapid price appreciation. In the past decade, the overall housing market has never reached this level, but many price ranges have. That is the case today as well. Not all of Orange County is considered “hot;” however, condominiums and detached homes priced below $500,000 are sizzling. This range represents 15% of the active listing inventory and 29% of demand.
Condominiums priced between $500,000 and $750,000, and detached homes priced between $500,000 and $1 million, are considered “solid” seller’s markets with expected market times between 30 and 60 days. They represent 24% of the current active inventory and 36% of demand. Both condominiums and detached homes priced between $500,000 and $750,000 are knocking on the door of a sizzling hot seller’s market with expected market times just above the 30-day threshold. That price range is starting to feel very hot and could easily drop below 30-days in the coming weeks.
Condominiums priced between $750,000 and $1 million and detached homes priced between $1 million and $1.5 million are currently experiencing a slight seller’s market, between 60 and 90 days. They represent 18% of the active listing inventory and 12% of demand. A slight seller’s market is characterized by slow, methodical price appreciation.
The market does not lean in the seller’s favor for detached homes priced above $1.5 million and condominiums priced above $1 million. The higher the price, the slower the market. They represent 30% of the inventory and only 9% of demand.
Buyers and sellers alike need to understand the market that they are working with in order to approach it with proper expectations. A buyer looking to purchase a $650,000 home is going to encounter a much different market than a buyer looking to purchase a $2 million home. Similarly, a condominium seller at $450,000 is going to experience a much different market than a condominium seller at $800,000.
A warning for buyers: do not expect the market dynamics to change much in the coming months. Even when more homes come on the market during the spring, there will be an increase in buyer activity as well.
A warning for sellers: do not stretch the asking price much at all. Overpriced, overzealous list prices result in wasted market time and do not generate offers. Pricing at or close to the Fair Market Value is the wisest formula for success.
Active Inventory: Within the past couple of weeks, the active inventory only increased by 12 homes.
Since January 1st, the active inventory has only grown by 389 homes. Within the past couple of weeks, it remained almost the same, growing by only 12 homes, a 0% increase, and now sits at 4,460. Once again, nearly everything that is coming on the market at or close to its Fair Market Value is being placed into escrow almost immediately.
Part of the issue is that, so far this year, 8% fewer homes have come on the market compared to last year at this time. The combination of a limited supply of homes coming on the market and ferocious demand has created the current sizzling hot Orange County housing market. More and more homeowners will come onto the market this spring through mid-August.
Last year at this time, there were 5,271 homes on the market, 15% more. Two years ago, there were 973 more homes on the market, or 18% more.
Demand: Demand is HOT, increasing by 10% in the past two weeks.
The only thing holding back current demand is the lack of supply of homes. There are simply not enough new sellers coming on the market. Even with very few choices right now, buyers are pouncing on everything new that hits the market that is reasonably priced and in decent condition.
Demand, the number of homes placed into escrow within the prior month, increased by 248 pending sales in the past couple of weeks, or 10%, and now totals 2,651. With an increase in demand and an inventory that remained the same, the expected market time dropped from 56 days to 50 days, a solid seller’s market.
Last year at this time, there were 2,584 total sales, 67 fewer than today, or 3% less.
Luxury End: The luxury market is starting to heat up a bit.
Demand is up for Orange County’s luxury home market with 73 additional pending sales compared to last year at this time, 19% higher. The luxury inventory is up by only 3 homes, nearly identical. The overall expected market time for all homes priced above $1 million is 122 days compared to 144 days last year.
In the past two weeks, demand for homes above $1 million increased from 412 to 465 pending sales, a 13% rise, its highest level since the end of August. The luxury home inventory increased from 1,834 homes to 1,891, its highest level since the start of December 2016. The expected market time decreased in the past couple of weeks from 134 to 122 days.
For homes priced between $1 million to $1.5 million, the expected market time in the past couple of weeks decreased from 80 days to 76 days. For homes priced between $1.5 million to $2 million, the expected market time decreased from 153 to 129 days. For homes priced above $2 million, the expected market time dropped from 252 days to 227 days. At 227 days, a seller would be looking at placing their home in escrow around mid-October.
Orange County Housing Market Summary:
- The active listing inventory increased by 12 homes in the past couple of weeks, a 0% rise, and now totals 4,460. There are 8% fewer homes that have come on the market this year compared to 2016. The inventory should start to rise in March and peak in mid-August.
- There are 44% fewer homes on the market below $500,000 compared to last year at this time and demand is down by 7%. Fewer and fewer homes and condominiums can now be found priced below $500,000. This price range is slowly vanishing.
- Demand, the number of pending sales over the prior month, increased by 10% in the past couple of weeks, adding an additional 248 and now totals 2,651. Today’s demand is 3% higher than last year when it totaled 2,584. The average pending price is $835,152.
- The average list price for all of Orange County is $1.6 million, identical to two weeks ago. This number is high due to the mix of homes in the luxury ranges that sit on the market.
- For homes priced below $750,000, the market is HOT with an expected market time of just 34 days. This range represents 39% of the active inventory and 65% of demand.
- For homes priced between $750,000 and $1 million, the expected market time is 54 days, a seller’s market (less than 60 days). This range represents 19% of the active inventory and 18% of demand.
- For luxury homes priced between $1 million to $1.5 million, the expected market time is at 76 days, dropping by 4 in the past couple of weeks. For homes priced between $1.5 million to $2 million, the expected market time decreased from 153 to 129 days. For luxury homes priced above $2 million, the expected market time decreased from 252 to 227 days.
- The luxury end, all homes above $1 million, accounts for 42% of the inventory and only 17% of demand.
- The expected market time for all homes in Orange County dropped in the past couple of weeks from 56 to 50, a solid seller’s market (less than 60 days).
- Distressed homes, both short sales and foreclosures combined, make up only 1.9% of all listings and 3.2% of demand. There are only 18 foreclosures and 67 short sales available to purchase today in all of Orange County, that’s 85 total distressed homes on the active market, 18 fewer than two weeks ago, a drop of 17% and its lowest level since the start of the Great Recession 10 years ago. Last year there were 152 total distressed sales, 79% more.
- There were 1,905 closed sales in January, a 33% drop from December, but more than the 1,859 closed sales posted in January 2016. The sales to list price ratio was 97.3% for all of Orange County. Foreclosures accounted for just 0.9% of all closed sales and short sales accounted for 2.3%. That means that 96.8% of all sales were good ol’ fashioned equity sellers.