No Crash in Sight

Echelberger Group

12/16/22

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An astonishing 41% of Americans think that the housing market is going to crash in the next 12 months, according to a survey conducted by LendingTree. Even more revealing is that 74% of those who believe there will be a crash think it will be as bad or worse than the “2008 housing market collapse.”
 
The number one reason why a crash will not occur is that there simply are not enough available homes to purchase. Today’s inventory is at 3,182 homes. While there were 57% fewer homes last year, 1,363, the 3-year average prior to COVID is 4,988 homes, 57% more than today. The inventory has been stuck at anemic levels since the beginning of the pandemic. In comparing today’s supply to the two years leading up to the Great Recession, 2006 and 2007, the difference is stunning. The inventory peak in 2006 was 16,006 homes, and it was 17,898 in 2007. The 2021 peak was 2,537 and in 2022 it was 4,069. In sharp contrast to today’s inventory crisis with a lack of available homes, there was an inventory glut that led up to the Great Recession.
 
Even with sky-high mortgage rates and home values on the decline, housing is insulated from a housing crash. Today’s housing stock is built on an extremely strong foundation with years of tight lending standards due to financing laws enacted after the Great Recession, strong credit scores, large down payments, fixed rate mortgages, plenty of nested equity, and limited cash-out refinances. There is no crash in sight because of the strength of the homeowner coupled with a very limited inventory of available homes to purchase today.
 
What we know:
→ People thought market would crash
→ Demand tailed off quickly
→ Inventory remained low
→ Sellers adjusted prices
→ Turnkey & trophy location homes at high prices
→ Charts starting to look similar to pre-covid
 
What we can expect:
→ More homes on the market Jan/Feb
→ Interest rates will balance
→ Buyers will pick up in the spring
→ Not a ton of properties, people are satisfied
 
Orange County Housing Market Summary:
  • The active listing inventory in the past couple of weeks decreased by 104 homes, down 3%, and now sits at 3,182, its lowest level since the start of June. In November, there were 32% fewer homes that came on the market compared to the 3-year average prior to COVID (2017 to 2019), 718 less. Last year, there were 1,363 homes on the market, 1,819 fewer homes, or 57% less. The 3-year average prior to COVID (2017 to 2019) was 4,988, or 57% more.
  • Demand, the number of pending sales over the prior month, plunged by 79 pending sales in the past two weeks, down 7%, and now totals 1,133, its lowest level since April 2020, the start of the pandemic. Last year, there were 1,944 pending sales, 72% more than today. The 3-year average prior to COVID (2017 to 2019) was 1,774, or 57% more.
  • With demand dropping faster than supply, the Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, increased from 81 to 84 days in the past couple of weeks. It was 21 days last year, much stronger than today.
  • For homes priced below $750,000, the Expected Market Time remained unchanged at 62 days. This range represents 23% of the active inventory and 31% of demand.
  • For homes priced between $750,000 and $1 million, the Expected Market Time increased from 68 to 71 days. This range represents 22% of the active inventory and 26% of demand.
  • For homes priced between $1 million to $1.25 million, the Expected Market Time increased from 68 to 80 days. This range represents 12% of the active inventory and 13% of demand.
  • For homes priced between $1.25 million to $1.5 million, the Expected Market Time increased from 73 to 81 days. This range represents 10% of the active inventory and 10% of demand.
  • For homes priced between $1.5 million to $2 million, the Expected Market Time decreased from 99 to 95 days. This range represents 11% of the active inventory and 10% of demand.
  • For homes priced between $2 million and $4 million, the Expected Market Time in the past two weeks decreased from 144 to 138 days. For homes priced between $4 million and $8 million, the Expected Market Time decreased from 527 to 503 days. For homes priced above $8 million, the Expected Market Time decreased from 420 to 386 days.
  • The luxury end, all homes above $2 million, accounts for 24% of the inventory and 10% of demand.
  • Distressed homes, both short sales and foreclosures combined, made up only 0.4% of all listings and 0.3% of demand. There are only 7 foreclosures and 5 short sales available to purchase today in all of Orange County, 12 total distressed homes on the active market, up 4 from two weeks ago. Last year there were 8 total distressed homes on the market, similar to today.

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