Supply and Demand: A low supply is confronted with low demand.
Life has changed. Public schools, private schools, day care, universities, date night, dine-in restaurants, sporting events, organized sports, concerts, movie theaters, trips to the mall, amusement parks, public pools, beaches, neighborhood parks, travel, and frozen yogurt have all been put on hold. The “stay at home” order has affected every aspect of daily life. The Orange County housing market is no different.
Demand is defined as the past 30-days of pending sales activity. Up to this point, demand readings have included weeks prior to the order when the housing market was still hitting on all cylinders. The market was scorching hot at the very beginning of march despite the state of emergency that was declared. The market began to decelerate in the second week of March. By March 19th, with the kids already at home and preparing for online learning, housing demand slowed to a COVID-19 crawl. It was at inherent demand levels.
Now that it has been more than four weeks of virus suppressed demand, the Orange County demand readings are a true depiction of the number of pending sales that will take place under the “stay at home” circumstances. The current reading is an accurate indicator of the current market until the economy begins to reopen down the road. There is a broad housing market interruption due to the Coronavirus that has had a major impact on the velocity of the market, demand, and the supply of homes, the active inventory. Both have been impacted significantly. Yes, demand is at ultra-low, anemic levels, but so is the active listing inventory. Buyers are not writing that many offers, and fewer homeowners are pounding FOR SALE signs in their front yards.
As a result of everyday life grinding to a halt, demand dropped by 55% in the past month, from 2,398 pending sales to 1,080. These demand levels were last seen in 2007. Since the “stay at home” order on March 19th, the number of homes placed on the market dropped by 52% compared to the prior 5-year average. That is 1,972 fewer homeowners entering the fray. Consequently, the active inventory has only grown by 185 homes in the past four weeks, a 4% rise, and the inventory now sits at 4,344 homes. While demand may be at Great Recession levels, the inventory is not growing like it did in 2006 through 2008 when it reached nearly 18,000 homes.
Orange County Housing Market Summary:
- The active listing inventory increased by 161 homes in the past two-weeks, up 4%, and now totals 4,344. In the past fourweeks, 52% fewer homes were placed on the market compared to the prior 5-year average. Last year, there were 6,933 homes on the market, 2,589 more than today, a 60% difference.
- Demand, the number of pending sales over the prior month, decreased by 504 pending sales in the past two-weeks, down 32%, and now totals 1,080. In the past 5-years, demand has increased an average of 4%. The drop is due to the Coronavirus. Last year, there were 2,724 pending sales, 152% more than today.
- The Expected Market Time for all of Orange County increased from 79 days to 121, a slight Seller’s Market (between 120 and 150 days). The increase is due to the Coronavirus. It was at 76 days last year, much better than today.
- For homes priced below $750,000, the market is a slight Seller’s Market (between 60 and 90 days) with an expected market time of 77 days. This range represents 36% of the active inventory and 56% of demand.
- For homes priced between $750,000 and $1 million, the expected market time is 96 days, a Balanced Market (between 90 and 120 days). This range represents 19% of the active inventory and 24% of demand.
- For homes priced between $1 million to $1.25 million, the expected market time is 185 days, a Buyer’s Market (greater than 150 days).
- For luxury homes priced between $1.25 million and $1.5 million, in the past two weeks, the Expected Market Time increased from 120 to 205 days. For homes priced between $1.5 million and $2 million, the Expected Market Time increased from 140 to 252 days. For luxury homes priced between $2 million and $4 million, the Expected Market Time increased from 323 to 363 days. For luxury homes priced above $4 million, the Expected Market Time increased from 903 to 1,118 days.
- The luxury end, all homes above $1.25 million, accounts for 35% of the inventory and only 13% of demand.
- Distressed homes, both short sales and foreclosures combined, made up only 0.9% of all listings and 1.7% of demand. There are only 18 foreclosure s and 23 short sales available to purchase today in all of Orange County, 41 total distressed homes on the active market, down 4 from two-weeks ago. Last year there were 59 total distressed homes on the market, slightly more than today.
- There were 2,383 closed residential resales in March, 5% more than March 2019’s 2,277 closed sales. March marked a 17% increase compared to February 2020. The sales to list price ratio was 98.4% for all of Orange County. Foreclosures accounted for just 0.4% of all closed sales, and short sales accounted for 0.5%. That means that 99.1% of all sales were good ol’ fashioned sellers with equity.
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