Orange County Housing Report: The Temperature is Rising
Getting Hot: The market is getting hot below $1 million.
With interest rates at lows not seen since October 2016, there are no clouds in the sky and housing is already really hot. The Spring Market has officially arrived in Orange County. Some price ranges are really feeling the intense heat of blistering buyer demand. Housing has not been this hot since April 2018, nearly two years ago.
Once again buyers are tripping over themselves to purchase. Homes that are priced well according to their condition, location, and upgrades, are fetching multiple offers within the first couple of days. The bidding war days are back. When a home generates 15 offers to purchase, there is only one winner, meaning 14 buyers need to go back to the drawing board. After a couple of failed attempts, many buyers sharpen their pencils and write extremely aggressive offers, willing to stretch the price a little bit, even if it means paying more than the most recent comparable sale. This market can be extremely frustrating for a buyer. It is all due to hot buyer demand fueled by low mortgage rates. Patience and a comprehensive strategy are a buyer’s bet in finding success.
The expected market time (the time between hammering in the for sale sign and opening escrow) for all of Orange County is now at 55 days. When the expected market time drops below 60 days, the market is considered a rock-solid seller’s market with steady price appreciation. Last year, Orange County never dipped below the 60-day threshold. It appears as if 2020 is going to be much hotter than the last couple of years.
There are many price ranges that have dipped below 60-days. For detached homes, it is everything below $1.5 million, 84% of current detached demand. For attached homes, it is everything between $250,000 to $1 million, 87% of attached demand. When the expected market time dips below 40 days, the market shifts to a sizzling hot seller’s market with rapid price appreciation. Everything between $500,000 and $1 million is SCORCHING for detached homes, 59% of demand, and all townhomes between $500,000 to $750,000, 39% of demand. These price ranges are experiencing the most intense buyer activity. More offers are generated, bidding wars are intense, and homes are flying off the shelves.
The market does not lean in the seller’s favor for detached homes priced above $1.5 million and condominiums priced above $1 million, luxury housing. They represent 30% of the inventory and only 9% of demand. The higher the price, the slower the market. Yet, the luxury market has improved considerably since the start of the year and the Expected Market Time has been consistently dropping.
Warning to Buyers: with an extremely low mortgage rate environment, the market is not going to change anytime soon and tilt in the buyer’s favor. The market is lined up in favor of sellers with tremendous demand and a very low supply of available homes to purchase. Do not sit on the fence and wait for the market to change. Values are on the rise. Many buyers talk about “timing the market.” That is an exercise in futility and will result in prospective buyers kicking themselves down the road and wishing that they had pulled the trigger sooner.
Warning to 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, maximizing demand immediately upon coming on the market.
Active Inventory: The current active inventory actually dropped by 18 homes in the past two-weeks.
The active listing inventory decreased by 18 homes in the past two-weeks, nearly unchanged, and now sits at 4,005. The only reason the active inventory increases have not yet materialized much this year is due to the insane amount of buyer demand. Homes are coming off the market and placed into escrow as quickly as they are coming on. But, now that the Spring Market is officially here with the start of February and both the Super Bowl and the holiday season firmly in the rearview mirror, more homes will enter the fray and pop on the market. Yet, based upon current buyer demand, the inventory will not vividly rise.
Last year at this time, there were 6,100 homes on the market, 2,095 more than today, a 52% difference. There were a lot of choices for buyers last year.
Demand: In the past two-weeks demand exploded upward by 28%.
Demand, the number of new pending sales over the prior month, climbed from 1,702 to 2,173, an additional 471 pending sales, up 28%. It was the largest increase in two years. Demand is on the rise, which will continue until peaking in late April to mid-May. The market is rapidly getting hotter because demand has been surging while the inventory has remained flat.
Last year, there were 382 fewer pending sales than today, 18% less.
In the past two-weeks the Expected Market Time plummeted from 71 to 55 days, a HOT Seller’s Market (less than 60 days), where home values are appreciating, and sellers get to call the shots during the negotiating process. Last year the Expected Market Time was at 102 days, a much slower market than today.
Luxury End: Luxury demand continued to rapidly climb in the past two-weeks.
In the past two-weeks, demand for homes above $1.25 million increased by 86 pending sales, a 30% jump, and now totals 370. The luxury home inventory increased by only 25 homes and now totals 1,547, up 2%. With demand soaring and the inventory only rising slightly, the overall Expected Market Time for homes priced above $1.25 million plunged from 161 to 125 days in the past couple of weeks.
Year over year, luxury demand is up by 121 pending sales, or 49%, and the active luxury listing inventory is down by 315 homes, or 17%. The Expected Market Time last year was at 224 days, remarkably 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 83 to 63 days. For homes priced between $1.5 million and $2 million, the Expected Market Time decreased from 144 to 117 days. For homes priced between $2 million and $4 million, the Expected Market Time decreased from 181 to 143 days. For homes priced above $4 million, the Expected Market Time decreased from 468 to 391 days. At 391 days, a seller would be looking at placing their home into escrow around March 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 2020.