Orange County Housing Report: A Warm December
The housing market is a lot hotter than many think and 2020 is going to line up heavily in favor of sellers.
While it may be true that demand drops to its lowest point of the year by the end of December, so does the active inventory. The muted demand is offset by a drop in supply. This year the inventory has dropped by 40% since July, shedding 3,055 homes. Demand (last 30-days of pending sales) dropped by only 22%, 556 escrows. As a result, the Expected Market Time (the amount of time it would take from hammering in the for sale sign to opening escrow) dropped from 91 days in July to 70 days in the middle of December. Housing is actually hotter today than it was in July!
What happened? How is housing hotter today than July? With mortgage rates dropping all year, the housing market slowly thawed. The thaw continued through the Autumn Market as rates reached their lowest levels of the year and remained between 3.5% and 3.75%. Demand climbed and the housing inventory dropped. That is the recipe for a Seller’s Market where housing stands today.
Year-over-year, the differences are staggering. Active listing inventory is down by 36% compared to December 2018. There are 1,836 fewer homes on the market. Demand is up by 29% year over year. That is an extra 441 escrows. And, the Expected Market Time is down by 44%.
It was a slight Buyer’s Market last year with an Expected Market Time of 127 days. Today, it is at 70 days, a slight Seller’s Market. It is important to note that both a “slight” Seller’s Market and “slight” Buyer’s Market means that homes are not appreciating or depreciating much at all; instead, it just indicates who can call more of the shots.
While the December housing market may be the slowest time of the year in terms of activity, ultimately it tees up the coming Spring Market. The New Year will start with very low inventory and decent demand. And, with rates projected to remain around 3.75% next year, the market will tilt further in favor of sellers.
The bottom line: a housing warm front has arrived in Orange County, paving the way for a hot Spring Market in 2020.
Active Inventory: The current active inventory dropped by 18% in a month.
The active listing inventory shed 988 homes in the past month and now sits at 4,546, an 18% drop. The inventory has not been this low since March 2018. It is poised to drop to around 4,000 homes, a very low-level eclipsed by only 2013 and 2018. Expect the inventory to continue to drop through the end of the year.
Last year at this time, there were 6,395 homes on the market, 1,849 more than today, or a 41% difference. The inventory is MUCH different than last year when buyers had a lot more choices.
Demand: In the past two-weeks, demand dropped by 10%.
With so many holiday distractions, demand, the number of new pending sales over the prior month, dropped by 221 pending sales, or 10%, in the past two weeks, its largest drop of the year and now sits at 1,949. Expect demand to continue to drop through the end of December and will not rise until after ringing in a New Year.
Last year, there were 441 fewer pending sales than today, 23% less.
In the past two weeks, the Expected Market Time increased from 68 to 70 days, a slight Seller’s Market (60 to 90 days), where home values are only appreciating slightly, and sellers get to call more of the shots during the negotiating process. 70 days beats the socks off last year when the Expected Market Time was at 127 days and continuing to climb, a much slower market that favored buyers.
Luxury End: Both luxury demand and the luxury inventory are continuing to drop right now.
In the past two-weeks, demand for homes above $1.25 million decreased by 22 pending sales, a 7% drop, and now totals 284. The luxury home inventory decreased by 145 homes and now totals 1,695, down 8%, and its lowest level of the year. With both demand and the luxury inventory dropping, the overall Expected Market Time for homes priced above $1.25 million decreased slightly from 180 days to 179 over the past two weeks.
Year over year, luxury demand is up by 98 pending sales or 53%, and the active luxury listing inventory is down by 237 homes or 12%. The Expected Market Time last year was at 312 days and climbing, substantially slower than today.
For homes priced between $1.25 million and $1.5 million, in the past two weeks, the Expected Market Time increased from 79 to 120 days. For homes priced between $1.5 million and $2 million, the Expected Market Time decreased from 125 to 117 days. For homes priced between $2 million and $4 million, the Expected Market Time decreased from 285 to 223 days. For homes priced above $4 million, the Expected Market Time increased from 387 to 518 days. At 518 days, a seller would be looking at placing their home into escrow around May 2021.
Not sure what this means for your situation? Contact me and we can go over it in as much detail as you’d like.
REALTOR® | Negotiation Expert (RENE)
Data and comments provided by Steven Thomas, Reports On Housing – All Rights Reserved. Copyright 2019.