Orange County Housing Report: If It’s Not Compelling, It’s Not Selling
The housing market may be hot, yet many homeowners are not having any success.
36% of the active listing inventory has been on the market for more than two months.
The market is currently sizzling hot with an overall Expected Market Time of 46 days, the hottest market since 2013. Yet, many sellers are not finding success. Incredibly, 36% of all currently active listings have been exposed to the market for more than two months. Sitting on the market for over 60 days is to be expected in the luxury ranges, yet there are plenty of sellers having trouble selling in the lower ranges as well.
Between 25% to 35% of all homes priced below $1 million have been listed for sale for more than two months and are still waiting for the right buyer to bring an acceptable offer to purchase. For homes priced above $1.5 million, nearly 50% of all listings have been marketed for over 60 days.
If the market is so hot, how come so many homes are just sitting without success? The logical conclusion must be price. Price a home too high and it simply does not sell. In most cases, that is only part of the problem.
As long as the price is right, the closer a home looks to model perfect, the faster the home will fly off the market. Unfortunately, not every home shows like a model.
When a home does not have the look and feel of a model home, it must be reflected in arriving at the Fair Market Value. A home’s Fair Market Value is determined by its location, age, condition, and improvements. Homeowners can do nothing to change the location and age of a home, that’s a given; however, they can address the condition and amenities.
Buyers are willing to pay a premium for homes that are turnkey and have that model feel. The sellers will net more money by addressing the deferred maintenance and their home will sell more quickly.
If a seller does not address any deferred maintenance, then the price must be adjusted accordingly. Buyers subtract a lot more than it costs to take care of the deferred maintenance. It is very inconvenient and time consuming for buyers to tackle repairs after the close of escrow. It makes sense that a seller with deferred maintenance ultimately nets less money in the sale of their home.
WARNING TO SELLERS: price is the most important factor in successfully selling. Overprice a home in a sizzling hot seller’s market, and sellers will not find success. Instead, they will simply sit and waste valuable market time.
Active Listing Inventory: Decreased by 1% in the last two weeks
The active listing inventory shed 65 homes in the past two weeks, down 1%, and now sits at 4,645, the lowest level for a July since tracking began in 2004. From the end of May to today, the inventory has dropped by 399 homes or 8%.
In the past 5-years, it has increased by an average of 7%. The drop is due to strong demand and the fact that COVID-19 is suppressing homeowners from selling their homes.
Last year at this time, there were 7,561 homes on the market, 2,916 more than today, a 63% difference. There were a lot more choices for buyers last year.
Demand: The surge is diminishing with a 3% rise in the past two weeks
Demand, the number of new pending sales over the prior month, increased from 2,975 to 3,050, an additional 58 pending sales, up 3% in two weeks. This is the highest demand reading since June 2015, and the highest July level since 2012. It also is the smallest two-week gain since demand turned around at the end of April.
Demand is reaching a high for 2020 and will level off soon. Expect demand to remain strong through August when school resumes and housing transitions into the Autumn Market. Housing will still be robust, fueled by record-low mortgage rates, just not as strong as today.
Last year, there were 589 fewer pending sales than today, 19% less.
In the past two weeks, the Expected Market Time dropped from 47 to 46 days, a Hot Seller’s Market (less than 60 days), where sellers get to call the shots during the negotiating process and home values are on the rise. Last year the Expected Market Time was at 92 days, much slower than today.
Luxury End: Demand continued its unbelievable climb
In the past two-weeks, demand for homes above $1.25 million increased by 78 pending sales, up 16%, and now totals 554. This luxury demand level is unprecedented. The luxury market is healthy and strong.
Year over year, luxury demand is up by 209 pending sales or 61%, and the active luxury listing inventory is down by 763 homes or 30%. The Expected Market Time last year was at 219 days, much slower than today.
- For homes priced between $1.25 million and $1.5 million, in the past two weeks, the Expected Market Time decreased from 80 to 60 days.
- For homes priced between $1.5 million and $2 million, the Expected Market Time decreased from 83 to 71 days.
- For homes priced between $2 million and $4 million, the Expected Market Time decreased from 128 to 113 days.
- For homes priced above $4 million, the Expected Market Time increased from 239 to 249 days.
Not sure what this means for your situation? Contact me and we can go over it in as much detail as you’d like.
Data and comments provided by Steven Thomas, Reports On Housing – All Rights Reserved. Copyright 2020