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The Orange County inventory has been on the rise and is starting to pick up steam, unlike last year when it continuously dropped through mid-April.
Orange County has endured an inventory drought for several years now. Yet, finally, there is rain in the forecast, more homes are coming on the market, and the inventory is slowly rising. The drought of available homes to purchase has not ended, but at least it has been moving in the right direction. For buyers experiencing the drought firsthand, any rise in the number homes to look at is a welcome relief.
From the start of the year to today, the active inventory has risen from 1,785 to 2,084 homes, a rise of 17% or 299 homes. Mortgage rates bounced between 6.63% and 7.16%. Last year, the inventory dropped from 2,530 to 2,168 homes, down 362 homes or 14%, while mortgage rates fluctuated between 5.99% and 7.1%. It was 2022 when the inventory changed the most, rising from 1,100, a record low start, to 1,556, up 41% or 456 homes. That was when mortgage rates soared from 3.29% at the beginning of January to nearly 4.5% by mid-March. The low mortgage rate environment was quickly coming to an end.
The inventory has been rising partly due to the higher mortgage rate environment, as rates have eclipsed the 7% mark several times over the past month, and also because more homeowners are opting to sell their homes. When rates surpass the psychological 7% barrier, the inventory grows.
Even though the market is exceptionally hot and negotiations favor sellers, a growing inventory indicates some sellers are overzealous and lingering on the market, stretching their asking price too high. With higher rates, many buyers are not biting when pricing is out of bounds. That is precisely why 22% of the active inventory has adjusted their price lower at least once. With a climbing inventory, sellers must price appropriately to secure success.
What we know:
→ Active inventory increased last two weeks
→ Demand also increased past couple of weeks
→ Market is dependent on interest rates
→ Still is a low inventory and high demand
→ Last year demand increased before rates moved up
What we can expect:
→ Inventory typically increases going into summer
→ Rates will potentially be going down
→ Bell shaped curve will flatten if rates go down
→ Strong spring market going into summer
Orange County Housing Market Summary:
- The active listing inventory in the past couple of weeks increased by 92 homes, up 5%, and now sits at 2,084. It is still the second-lowest mid-February reading since tracking began in 2004, only behind 2022. In February, 38% fewer homes came on the market compared to the 3-year average before COVID (2017 to 2019), 1,178 less. 199 more sellers came on the market this February compared to 2023. Last year, there were 2,168 homes on the market, 84 more homes, or 4% higher. The 3-year average before COVID (2017 to 2019) was 5,286, or 154% extra, more than double.
- Demand, the number of pending sales over the prior month, increased by 62 pending sales in the past two weeks, up 4%, and now totals 1,538, the lowest mid-March reading since tracking began. Last year, there were 1,567 pending sales, 2% more than today. The 3-year average before COVID (2017 to 2019) was 2,517, or 64% more.
- With supply rising faster than demand, the Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, increased from 40 to 41 days in the past couple of weeks. It was 42 days last year, similar to today. The 3-year average before COVID (2017 to 2019) was 63 days, slower than today.
- The Expected Market Time for homes priced below $750,000 decreased from 35 to 31 days. This range represents 20% of the active inventory and 26% of demand.
- The Expected Market Time for homes priced between $750,000 and $1 million increased from 22 to 27 days. This range represents 14% of the active inventory and 20% of demand.
- The Expected Market Time for homes priced between $1 million and $1.25 million remained unchanged at 29 days. This range represents 10% of the active inventory and 14% of demand.
- The Expected Market Time for homes priced between $1.25 million and $1.5 million decreased from 38 to 33 days. This range represents 9% of the active inventory and 12% of demand.
- The Expected Market Time for homes priced between $1.5 million and $2 million decreased from 39 to 35 days. This range represents 11% of the active inventory and 13% of demand.
- In the past two weeks, the expected market time for homes priced between $2 million and $4 million increased from 58 to 66 days. For homes priced between $4 million and $6 million, the Expected Market Time increased from 97 to 118 days. For homes priced above $6 million, the Expected Market Time increased from 269 to 341 days.
- The luxury end, all homes above $2 million, account for 36% of the inventory and 15% of demand.
- Distressed homes, both short sales and foreclosures combined, comprised only 0.2% of all listings and 0.1% of demand. Only five foreclosures and no short sales are available today in Orange County, with five total distressed homes on the active market, unchanged from two weeks ago. Last year, ten distressed homes were on the market, similar to today.