Tuesday, November 28, 2017 / by Shaun Radcliffe
Orange County Housing Report: Not Anytime Soon!
November 19, 2017
Not a Buyer’s Market: Since 2012, the active inventory for Orange County has been extremely limited.
It is time to load the plate with turkey, ham, sweet potatoes, string beans, mashed potatoes, Brussels sprouts, stuffing, and cranberry sauce. Thanksgiving is all about plenty of choices and not enough room on the dinner plate to fit it all. As Americans, we eat more on this day than any other day of the year.
There may be plenty of choices for the Thanksgiving meal, but the Thanksgiving housing market is seriously lacking choices with a razor thin supply of homes for sale. With only 4,714 homes available to purchase in Orange County, buyers in the lower ranges, homes priced below $750,000, are literally waiting on the sidelines for the next home to come on the market. It is a seller’s market for all homes below $1.25 million (88% of all closed sales in 2017 have been below $1.25 million).
The active listing inventory in Orange County has been leaning in the sellers favor since February 2012. That was not only the beginning of the recovery, it was the beginning of a six year run in housing. And, housing is poised to continue its run for a seventh year due to a chronically low inventory.
In order for housing to move away from a seller’s market and transition to a balanced market, one that does not favor a buyer or seller, the active inventory must grow beyond 8,000 homes. When it remains above the 8,000 home threshold, housing will eventually transition into a buyer’s market. However, that is not going to occur anytime soon.
It occurred for about five months back in 2004, not long enough to move from a balanced market to a buyer’s market. It happened again for a couple of months during the Autumn Market of 2005, one of the first cracks in the housing market that lead up to the Great Recession. The active inventory surpassed 8,000 homes again in January 2006 and remained elevated through September 2009, nearly four consecutive years. Even though the Great Recession started in March 2007, the active inventory signaled throughout 2006 that the market was poised for a change.
The active inventory climbed above the 8,000 mark again in February 2010 and remained elevated through January 2012, an additional two years. From there, it dropped like a rock and housing transitioned seemingly overnight from a buyer’s to a seller’s market. It has been a seller’s market ever since and has only surpassed the 8,000 home threshold for four weeks during the summer of 2014, not long enough for anybody to notice.
The bottom line is this: the 8,000 home mark is a level that establishes which way the market is heading. With an only 4,714 homes on the market today, and dropping, the inventory is nowhere close to that mark. In fact, 2018 is going to start with fewer than 4,000 homes, less than the start to this year. And, this year was defined by its lack of homes for sale, especially below $750,000.
Active Inventory: The active inventory dropped by 3% over the past couple of weeks.
The active listing inventory shed 164 homes in the past two weeks and now sits at 4,714, a 3% drop. Since peaking in mid-July, the inventory has discarded 1,269 homes, a healthy 20% drop. With Thanksgiving this week, housing will transition into the Holiday Market and the inventory will drop like a rock from this week through the end of the year. The New Year will start with fewer than 4,000 homes, the second lowest inventory behind 2013.
Last year at this time, there were 5,655 homes on the market, 941 additional homes, or 20% more than today.
Demand: Demand decreased by 4% in the past couple of weeks.
Demand, the number of homes placed into escrow within the prior month, decreased by 95 pending sales, or 4%, in the past two-weeks, and now totals 2,314. With Orange County housing transitioning into the Holiday Market this week, demand will decline and pick up momentum in December. By the start of the New Year, demand will be at its lowest point of the year.
Luxury End: Luxury demand fell sharply in the last couple of weeks.
In the past two weeks, demand for homes above $1.25 million decreased from 325 to 299 pending sales, down 8%. Luxury is already transitioning into the Holiday Market. The luxury home inventory decreased from 1,712 homes to 1,672, a 2% drop in the past two-weeks. Expect both the inventory and demand to drop through the end of the year. The expected market time for all homes priced above $1.25 million increased from 158 days to 168.
For homes priced between $1.25 million and $1.5 million, the expected market time increased from 100 to 112 days. For homes priced between $1.5 million and $2 million, the expected market time decreased from 154 to 143 days. For homes priced between $2 million and $4 million, the expected market time increased from 164 days to 181 days. In addition, for homes priced above $4 million, the expected market time increased from 424 to 466 days. At 466 days, a seller would be looking at placing their home into escrow around the start of March 2019.
Orange County Housing Market Summary:
· The active listing inventory decreased by 164 homes in the past couple of weeks and now totals 4,714. With the start of the Holiday Market this week, the inventory will drop considerably for the remainder of the year. Last year, there were 5,655 homes on the market, 941 more than today.
· There are 32% fewer homes on the market below $500,000 today compared to last year at this time and demand is down by 17%. Fewer and fewer homes and condominiums are now priced below $500,000. This price range is slowly disappearing.
· Demand, the number of pending sales over the prior month, decreased by 95 homes in the past couple of weeks, down 4%, and now totals 2,314. The average pending price is $861,404.
· The average list price for all of Orange County remained at $1.7 million. This number is high due to the mix of homes in the luxury ranges that sit on the market and do not move as quickly as the lower end.
· For homes priced below $750,000, the market is HOT with an expected market time of just 39 days. This range represents 39% of the active inventory and 62% of demand.
For homes priced between $750,000 and $1 million, the expected market time is 57 days, a hot seller’s market (less than 60 days). This range represents 17% of the active inventory and 18% of demand.·
For homes priced between $1 million to $1.25 million, the expected market time is 76 days, a seller’s market.
· For luxury homes priced between $1.25 million and $1.5 million, the expected market time increased from 100 days to 112. For homes priced between $1.5 million and $2 million, the expected market time decreased from 154 to 143 days. For luxury homes priced between $2 million and $4 million, the expected market time increased from 164 days to 181 days. For luxury homes priced above $4 million, the expected market time increased from 424 to 466 days.
· The luxury end, all homes above $1.25 million, accounts for 36% of the inventory and only 13% of demand.
· The expected market time for all homes in Orange County remained at 61 days, a tepid seller’s market (60 to 90 days). From here, we can expect the market time to rise slightly through the end of the year.
· Distressed homes, both short sales and foreclosures combined, make up only 1.4% of all listings and 2.1% of demand. There are only 23 foreclosures and 45 short sales available to purchase today in all of Orange County, that’s 68 total distressed homes on the active market, increasing by 10 in the past two weeks. Last year there were 123 total distressed sales, 81% more than today.
· There were 2,553 closed residential resales in October, down by 1% from October 2016’s 2,575 closed sales. October marked a 7% drop from September 2017, normal for the Autumn Market. The sales to list price ratio was 98.4% for all of Orange County. Foreclosures accounted for just 0.7% of all closed sales and short sales accounted for 1.2%. That means that 98.1% of all sales were good ol’ fashioned sellers with equity.
Have a great week.