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The lower, entry-level price ranges have been slowly disappearing with far fewer closed sales and homeowners choosing not to sell their homes.
While the inflation rate may be cooling, higher prices are here to stay and housing is no exception. According to Freddie Mac’s Home Price Index, since the summer of 2019, the Los Angeles/Orange County metro has increased by 40%. As home prices climbed, what was considered the entry-level to homeownership slowly diminished over time.
For buyers anticipating more homes in the affordable price ranges coming on the market soon, it is simply not in the cards. The number of opportunities diminishes over time. Buyers who wait will be confronted with fewer available options to purchase. More and more homes are surpassing the $1 million threshold. In 2013, there were 12,075 detached single-family home sales below $750,000, 66% of all detached closed sales, compared to 6,753 in 2019, or 37%. There have only been 374, or 5% of all closings through July of this year.
The lack of homes available in the lower ranges combined with fewer homes placed on the market has resulted in extremely hot market times for all homes priced below $1 million. The Expected Market Time is at 31 days, insanely hot. At 31 days, most homes acquire plenty of attention with throngs of showings, multiple offers, and sales prices at or above their asking prices. It is challenging to isolate a home in the entry-level price ranges today. Yet, as homes continue to appreciate, it will only become more challenging in the future since the lower ranges are slowly fading away.
What we're seeing in San Clemente:
→ 91 active listings
→ Lower price points disappearing
→ 6 homes under $1 mil, average of $669/sf
→ 15 homes $1-1.5 mil, average of $805/sf
→ 23 homes $1.5-2 mil, average of $816/sf
→ Lion's share is 2 mil+ with 47 actives
→ Average price is $1,180/sf
What we can expect:
→ Lower priced homes selling 2-3 times quicker
→ This trend will continue into 2024
→ Interest rates & rent are high
Orange County Housing Market Summary:
- The active listing inventory in the past couple of weeks decrease by 41 homes, down 2%, and now sits at 2,434, its largest drop since April. The inventory may have peaked a couple of weeks ago. It is the lowest mid-August level since tracking began in 2004. In July, 39% fewer homes came on the market compared to the 3-year average before COVID (2017 to 2019), 1,450 less. Last year, there were 4,030 homes on the market, 1,596 more homes, or 66% higher. The 3-year average before COVID (2017 to 2019) was 6,723, or 176% more, nearly triple.
- Demand, the number of pending sales over the prior month, decreased by four pending sales in the past two weeks, nearly unchanged, and now totals 1,849, the lowest mid-August level since tracking began in 2004. Last year, there were 1,849 pending sales, 17% more than today. The 3-year average before COVID (2017 to 2019) was 2,574, or 63% more.
- With supply falling slightly and demand unchanged, the Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, decreased from 47 to 46 days in the past couple of weeks. It was 65 days last year, much slower than today.
- For homes priced below $750,000, the Expected Market Time decreased from 34 to 32 days. This range represents 19% of the active inventory and 27% of demand.
- For homes priced between $750,000 and $1 million, the Expected Market Time remained unchanged at 31 days. This range represents 15% of the active inventory and 23% of demand.
- For homes priced between $1 million to $1.25 million, the Expected Market Time remained unchanged at 33 days. This range represents 10% of the active inventory and 14% of demand.
- For homes priced between $1.25 million to $1.5 million, the Expected Market Time decreased from 44 to 40 days. This range represents 11% of the active inventory and 12% of demand.
- For homes priced between $1.5 million to $2 million, the Expected Market Time remained unchanged at 53 days. This range represents 13% of the active inventory and 12% of demand.
- For homes priced between $2 million and $4 million, the Expected Market Time in the past two weeks increased from 76 to 82 days. For homes priced between $4 million and $6 million, the Expected Market Time increased from 152 to 177 days. For homes priced above $6 million, the Expected Market Time increased from 291 to 378 days.
- The luxury end, all homes above $2 million, account for 32% of the inventory and 13% of demand.
- Distressed homes, both short sales and foreclosures combined, comprised only 0.3% of all listings and 0.3% of demand. Only three foreclosures and four short sales are available today in Orange County, with seven total distressed homes on the active market, unchanged from two weeks ago. Last year there were seven distressed homes on the market, identical to today.