The Orange County Market's Heating Up
Heating Up Fast: With a low housing supply and fierce demand, the housing market is accelerating fast.
All of the ornaments are tucked away, and most of those New Year’s resolutions have fallen victim to everyday life. Emerging from the fog of all of the holiday distractions are buyers eager and ready to purchase their next home.
In just two weeks, demand has increased 22% while supply has only increased 2%. To understand why the market is changing so rapidly, let’s go to Econ 101 - supply and demand. When there is very little supply and tremendous demand, prices rise, which favors sellers. Since 2012, the supply of homes on the market has been severely constrained and demand, propped up by historically low interest rates, has been through the roof. When the supply of homes is low and demand is high, the expected market time falls. That is precisely what is occurring right now.
During the Holiday Market, the supply of homes was low and so was demand. Now that the holidays are in the rearview mirror, the supply of homes has remained at chronically low levels, while demand is rapidly rising. As a result, the expected market time is falling like a rock. In just two weeks, the expected market time for all price ranges combined dropped from 77 days to 64, knocking on the door of an extremely hot seller’s market.
For homes priced below $1 million, the market is already hot and will only grow hotter. The higher price ranges will also heat up, but will not sizzle like the lower ranges. Above $1.5 million, the market will improve, but will be a lot more sluggish.
The housing market is forging its way to the absolute best time to sell, from about mid-February through mid-May. From mid-May through June, a deluge of sellers enter the fray, exceeding the number of pending sales, and the expected market time actually rises. Going back to “supply and demand,” demand remains steady and while the supply, resulting in rising market time. It is still a great time to sell, just not as hot as earlier in the year. From July through the remainder of 2018, the expected market time will remain elevated.
It is extremely important to note that placing a home on the market during the hottest time of the year does not guarantee success. It is still all about price. A stunning 25% of all homes that have been placed into escrow so far this year had to reduce their asking price at least once.
The market is not titling in favor of buyers and will not anytime soon. Buyers should approach the market with a ton of patience and the mindset that they will eventually persevere. It may take writing offers on 10 different homes, but in the end will be worth it. Interest rates are still at historically low rates, but this gift will not last forever. Waiting is not the answer.
Orange County Summary
- There are 25% fewer homes on the market below $500,000 today compared to last year at this time and demand is down by 28%. 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, skyrocketed in the past two weeks by adding an additional 317 pending sells, up 22%. The average pending price is $902,385.
- The average list price for all of Orange County remained at $1.8 million over the past two weeks. 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 40 days. This range represents 37% of the active inventory and 59% of demand.
- For homes priced between $750,000 and $1 million, the expected market time is 55 days, a hot seller’s market (fewer than 60 days). This range represents 17% of the active inventory and 20% of demand.
- For homes priced between $1 million to $1.25 million, the expected market time is 68 days, a slight seller’s market (between 60 and 90 days).
- For luxury homes priced between $1.25 million and $1.5 million, the expected market time dropped from 157 days to 112. For homes priced between $1.5 million and $2 million, the expected market time decreased from 188 to 145 days. For luxury homes priced between $2 million and $4 million, the expected market time decreased from 285 days to 221 days. For luxury homes priced above $4 million, the expected market time fell from 695 to 355 days.
- The luxury end, all homes above $1.25 million, accounts for 37% of the inventory and only 13% of demand.
- The expected market time for all homes in Orange County dropped from 77 days to 64 in the past two weeks, a slight seller’s market (60 to 90 days). From here, we can expect the market time to drop dramatically through mid-February.
- There were 2,269 closed residential resales in January, down by 9% from January 2017, 2,484 closed sales. The sales to list price ratio was 97.3% for all of Orange County.