Orange County Housing Report: Last Call!!
Last Call: In order for sellers to cash in on the most lucrative time to sell a home during the year, they better open up escrow soon.
It is that time of the year for the family vacation. That includes airports, long lines at the TSA checkpoint, connections, and a bit of stress and anxiety. Inevitably, countless travelers with kids in tow will find themselves running to their connecting flight. The sense of urgency is intense. As if to mock the situation, the flight crew announces, “LAST CALL for flight 93!” Frantically many will barely make it, gasping for air while boarding the plane. Still others will arrive at the gate only to find that the “cabin door has been closed.”
This is also the time of year when many sellers come on the market thinking they have an ample amount of time to market their home to take advantage of the Summer Market, but that simply is not the case. Yes, summer has just begun, but the Summer Market for housing already started in May. The housing market shifts from away from the Spring Market with the distractions of the end of the school year, especially graduations. From there, the distractions of summer and the family activities take hold: family vacations, trips to the beach, trips to the pool, family reunions, summer camps, and picnics. Life gets in the way for many that are looking to purchase a home. As a result, housing downshifts from the best time of the year to sell, the spring, to the second-best time of the year, summer.
Right around the corner is the Autumn Market. For housing, that begins as soon as the kids go back to school, which is the end of August. As soon as school starts, it is no longer the most advantageous time of the year to move a family. As a result, many buyers put searching for a home on hold until the following year. Once school starts, it is just too disruptive for a family move. Changing schools is out of the question for too many families; it is just too disruptive. So, buyers want to close escrow by the end of August. Most escrow are between 30 to 45 days, meaning they need to open escrow by the end of July.
For sellers to take advantage of the second-best time of the year to sell, they need to open escrow by July 31st, six weeks from now. Pricing a home correctly is absolutely fundamental to cash in on the housing market and find success. This year, similar to 2018, the market is a bit different compared to what everybody has heard. The ultra-hot Southern California housing market with rapid appreciation, zillions of offers, and only days on the market before opening escrow are in the rearview mirror. That was the housing markets of 2012 through 2017.
Orange County housing today is characterized by a bit more inventory, 23% more than last year, and muted demand, 20% less than 2012 through 2017. The local housing market feels a lot more sluggish. Sellers need to keep in mind that they are still fetching record prices, but they cannot get away with stretching their asking price like prior years. For the sellers that overprice, even slightly, expect to sit on the market with less activity and no offers.
Many sellers enter the housing fray in July, thinking they have plenty of time to cash in on the Summer Market. What they do not understand is that they need to close escrow by August 31st. They have an extremely limited amount of time to isolate a buyer, negotiate the sell, and then open escrow. They are down to a few short weeks. For those sellers that are late to the housing party, they certainly better be priced right on the money. Starting off overpriced means that they will have to reduce their asking price to be successful. That reduction may come too late, mid-August. That’s when demand is already dropping and so are their chances of achieving their goal in selling.
LAST CALL to take advantage of the second-best time of the year to sell a home!!
Active Inventory: The current active inventory is unchanged in the past two weeks.
In the past two weeks, the active listing inventory increased by only 14 homes, nearly unchanged, and now totals 7,493. Typically, this is the time of the year when the active listing inventory is rising until peaking sometime between July and August; however, within the past four-weeks, 7% fewer homes have come on the market compared to last year. Only time will tell if that is just an anomaly or a developing trend.
Last year at this time there were 6,105 homes on the market. That means that there are 23% more homes available today. This is the highest level of homes on the market for this time of the year since 2011.
Demand: In the past four weeks, demand grew by 1%.
Demand, the number of new pending sales over the prior month, increased by 15 pending sales in the past four weeks, up 1%, and now totals 2,661. Muted demand was the theme last year and it continues to be the theme in 2019. Demand will slowly drop from here, which will pick up steam in September during the Autumn Market.
Last year at this time, there were 38 more pending sales, 1% more than today. Two years ago, it was 10% stronger than today.
The current Expected Market Time decreased from 85 days to 84 days in the past two weeks, a slight Seller’s Market. It is still the highest reading for this time of the year since 2011. Last year, the Expected Market Time was at 68 days, better than today.
Luxury End: The luxury market improved slightly in the past couple of weeks.
In the past two-weeks, demand for homes above $1.25 million increased by 17 pending sales, a 4% increase, and now totals 406, the second highest level for 2019 compared to mid-April’s 424. The luxury home inventory grew by 14 homes and now totals 2,522, a 1% increase and the highest level of the year. The overall expected market time for homes priced above $1.25 million decreased from 193 days to 186 over the past two-weeks, a slight drop, but still quite sluggish.
Year over year, luxury demand is up by 17 pending sales, or 4%, and the active luxury listing inventory is up by an additional 357 homes, or 16%. Extra seller competition and muted demand in the luxury ranges in 2019 is a trend that has endured. The expected market time last year was at 167 days, a bit better than today.
For homes priced between $1.25 million and $1.5 million, in the past two-weeks, the Expected Market Time increased from 107 to 118 days. For homes priced between $1.5 million and $2 million, the Expected Market Time decreased from 167 to 149 days. For homes priced between $2 million and $4 million, the Expected Market Time decreased from 302 to 254 days. For homes priced above $4 million, the Expected Market Time increased from 419 to 441 days. At 441 days, a seller would be looking at placing their home into escrow around the end of August 2020.
Orange County Housing Market Summary:
- The active listing inventory increased by 14 homes in the past two weeks, nearly unchanged, and now totals 7,493, the highest level since September 2014. Last year, there were 6,105 homes on the market, 1,388 fewer than today. There are 23% more homes than last year.
- Demand, the number of pending sales over the prior month, increased by 15 pending sales in the past two-weeks, up 1%, and now totals 2,661. Last year, there were 2,699 pending sales, 1% more than today.
- The Expected Market Time for all of Orange County decreased from 85 days two weeks ago to 84 days today, a slight Seller’s Market (between 60 to 90 days) and the highest level for this time of the year since 2011. It was at 68 days last year.
- For homes priced below $750,000, the market is a slight Seller’s Market (between 60 and 90 days) with an expected market time of 61 days. This range represents 39% of the active inventory and 54% of demand.
- For homes priced between $750,000 and $1 million, the expected market time is 70 days, a slight Seller’s Market. This range represents 18% of the active inventory and 22% of demand.
- For homes priced between $1 million to $1.25 million, the expected market time is 92 days, a Balanced Market.
- For luxury homes priced between $1.25 million and $1.5 million, in the past two weeks, the Expected Market Time increased from 107 to 118 days. For homes priced between $1.5 million and $2 million, the Expected Market Time decreased from 167 to 149 days. For luxury homes priced between $2 million and $4 million, the Expected Market Time decreased from 302 to 254 days. For luxury homes priced above $4 million, the Expected Market Time increased from 419 to 441 days.
- The luxury end, all homes above $1.25 million, accounts for 34% of the inventory and only 16% of demand.
- Distressed homes, both short sales and foreclosures combined, made up only 0.7% of all listings and 1.4% of demand. There are only 21 foreclosures and 32 short sales available to purchase today in all of Orange County, 53 total distressed homes on the active market, down 12 in the last two-weeks. Last year there were 50 total distressed homes on the market, nearly identical to today.
- There were 2,929 closed residential resales in May, 2% more than May 2018’s 2,870 closed sales. April marked a 15% increase from April 2019. The sales to list price ratio was 97.6% for all of Orange County. Foreclosures accounted for just 0.8% of all closed sales, and short sales accounted for 0.6%. That means that 98.6% of all sales were good ol’ fashioned sellers with equity.