A Rising Inventory: After continuously dropping since last October, the active listing inventory rose by 6%.
The supply of available homes has been experiencing its own severe drought, dropping to levels not seen since records were properly maintained. At this point, any additional FOR-SALE signs hammered into the ground is a welcome relief. In the past two weeks, that is precisely what occurred in Orange County. The active listing inventory rose for the first time since last October, rising from 2,240 to 2,384 homes. The addition of 144 homes was the largest increase since May of last year.
Undoubtedly, for the countless buyers struggling to find a home, the extra inventory is a healthy step in the right direction. It is a new trend that should continue until it reaches a peak later in the year. In Orange County, the inventory typically does not peak until July or August. This year, it may peak even later in the year as mortgage rates are anticipated to rise from 3%, where they stand today, to as high as 3.75% by year’s end. Higher rates will decelerate the housing market and many sellers will languish on the market for a much longer period of time when they overprice. This will ultimately delay the peak. It will remain a Hot Seller’s Market, just not as nutty.
As a result of an increasing supply of homes and a slight drop in demand, the overall Expected Market Time (the time between hammering in the FOR-SALE sign to opening escrow) increased in the past couple of weeks from 21 to 23 days. Currently, the increase may not be that detectable within the real estate trenches, but over time, as more homes accumulate on the market, the market will continue to slowly decelerate. Housing will move away from its crazy, nutty, grossly overheated pace, to a more normal, Hot Seller’s Market. That is a market where sellers need to do a bit more prep work and careful pricing is mandatory.
A Note to Sellers: It is a great time to get ahead of the curve and accurately price a home right out of the starting gates. Overpricing a home is not a sound strategy. Sellers want to expose their properties to as many potential buyers as possible. Accurately pricing permits a seller to obtain as many offers as possible. Multiple offer situations allow offers to be pit against each other and, ultimately, it maximizes the price obtained on a home. Later this year, as the market decelerates, overpricing can lead to fewer multiple offers situations and may even result in remaining on the market without success.
A Note to Buyers: Yes, the current market can be very frustrating, but waiting until more homes come on the market down the road is not the answer. With home values rapidly appreciating and mortgage rates slated to increase as well, buyers who sit on the sideline will ultimately pay more when they reenter down the road. Higher values and higher rates equate to a larger monthly payment. The market is frustrating, but staying the course and continuing to pursue paydirt is the wisest course of action for a buyer in today’s housing market.
The increase in the inventory, whatever the reason, is a much-needed welcome relief to the drought in the supply of homes. This is a new trend that will persist for the next four to six months. There will finally be more choices for buyers.
The increase in the inventory, whatever the reason, is a much-needed welcome relief to the drought in the supply of homes. This is a new trend that will persist for the next four to six months. There will finally be more choices for buyers.
Orange County Housing Market Summary:
-
The active listing inventory increased for the first time since October, adding 144 homes in the past two-weeks, up 6%, and now totals 2,384. It appears as if the inventory bottomed out two weeks ago. In March, there were 5% fewer homes that came on the market compared to 5-year average between 2015 to 2019 (2020 was skewed do to COVID-19), 179 less. Last year, there were 4,344 homes on the market, 1,960 additional homes, or 82% more.
-
Demand, the number of pending sales over the prior month, decreased by 92 pending sales in the past two-weeks, down 3%, and now totals 3,070, its first drop of the year. Even with rates dropping in the past couple of weeks, demand still dropped and may have peaked a couple of weeks ago. Last year, there were 1,990 pending sales, 65% fewer than today. Keep in mind, it was the start of the pandemic too, which negatively affected demand through May.
-
The Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, increased for the first time this year from 21 days to 23, an extremely Hot Seller’s Market (less than 60 days). It was at 121 days last year, slower than today.
-
For homes priced below $750,000, the market is a Hot Seller’s Market (less than 60 days) with an Expected Market Time of 18 days. This range represents 29% of the active inventory and 38% of demand.
-
For homes priced between $750,000 and $1 million, the Expected Market Time is 16 days, a Hot Seller’s Market. This range represents 18% of the active inventory and 26% of demand.
-
For homes priced between $1 million to $1.25 million, the Expected Market Time is 17 days, a Hot Seller’s Market.
-
For homes priced between $1.25 million to $1.5 million, the Expected Market Time is 23 days, a Hot Seller’s Market.
-
For homes priced between $1.5 million and $2 million, the Expected Market Time decreased from 32 to 27 days. For homes priced between $2 million and $4 million, the Expected Market Time decreased from 53 to 45 days. For homes priced above $4 million, the Expected Market Time increased from 132 to 148 days.The luxury end, all homes above $1.5 million, accounts for 37% of the inventory and only 17% of demand.
-
Distressed homes, both short sales and foreclosures combined, made up only 0.5% of all listings and 0.3% of demand. There are only 6 foreclosures and 5 short sales available to purchase today in all of Orange County, 11 total distressed homes on the active market, up 3 from two-weeks ago. Last year there were 41 total distressed homes on the market, more than today.
-
There were 3,212 closed residential resales in March, 35% more than March 2020’s 2,383 closed sales. March marked a 41% rise over February 2021. It was the strongest March closing month since 2005. The sales to list price ratio was 100.3% for all of Orange County. Foreclosures accounted for just 0% of all closed sales, and short sales accounted for 0.09%. That means that 99.91% of all sales were good ol’ fashioned sellers with equity.