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Significantly higher mortgage rates are preventing a massive number of homeowners from selling their homes, and the trend has only grown more problematic recently.
A lack of sellers due to the pandemic is understandable for 2020 and 2021. With vaccines and boosters, 90% of Americans today see COVID as a manageable problem (Axios-Ipsos, September 2022). Yet, far fewer homeowners are placing their homes on the market in 2022. This trend has persisted and became more severe over the past couple of months. Through August, there are 5,473 missing sellers in Orange County compared to the 3-year average prior to COVID, 19% less.
The trend of fewer sellers coming to market has prevented the active inventory from growing and reaching pre-pandemic levels. The inventory had grown from a record low of 954 homes to start the year to 4,069 homes until reaching a peak at the start of August, a 327% rise, but still far from inventory levels prior to COVID. The 3-year average prior to COVID was 6,520 homes, 79% higher, or an additional 2,882 compared to today’s 3,638 level. If the typical number of homeowners would have come on the market this year, more sellers would have accumulated on the market and the increased competition would have led to a larger erosion of home values. It is yet another twist in this wild post-pandemic housing market.
“Hunkering down," an unexpected trend that emerged this year and appears to be here to stay until there is forced selling down the road or mortgage rates fall back down to earth.
- The active listing inventory in the past couple of weeks decreased by 304 homes, down 2%, and now sits at 3,638, its lowest level since June. In August, there were 30% fewer homes that came on the market compared to the 3-year average prior to COVID (2017 to 2019), 1,054 less. Last year, there were 2,289 homes on the market, 1,349 fewer homes, or 37% less. The 3-year average prior to COVID (2017 to 2019) was 6,520, or 79% more.
- Demand, the number of pending sales over the prior month, decreased by 75 pending sales in the past two weeks, down 4%, and now totals 1,756. It is still the lowest reading for mid- September since 2007. Last year, there were 2,623 pending sales, 49% more than today. The 3-year average prior to COVID (2017 to 2019) was 2,363, or 35% more.
- With demand dropping faster than the supply of homes, the Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, increased from 61 to 62 days in the past couple of weeks, a Slight Seller’s Market (between 60 and 90 days). It was at 26 days last year, much stronger 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 43 days. This range represents 20% of the active inventory and 29% of demand.
- For homes priced between $750,000 and $1 million, the Expected Market Time is 51 days, a Hot Seller’s Market. This range represents 24% of the active inventory and 29% of demand.
- For homes priced between $1 million to $1.25 million, the Expected Market Time is 54 days, a Hot Seller’s Market. 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 is 62 days, a Slight Seller’s Market. This range represents 11% of the active inventory and 11% of demand.
- For homes priced between $1.5 million to $2 million, the Expected Market Time is 85 days, a Slight Seller’s Market. This range represents 12% of the active inventory and 9% of demand.
- For homes priced between $2 million and $4 million, the Expected Market Time in the past two weeks increased from 91 to 113 days. For homes priced between $4 million and $8 million, the Expected Market Time increased from 161 to 220 days. For homes priced above $8 million, the Expected Market Time decreased from 407 to 325 days.
- The luxury end, all homes above $2 million, accounts for 22% of the inventory and 9% of demand.
- Distressed homes, both short sales and foreclosures combined, made up only 0.2% of all listings and 0.1% of demand. There are only 5 foreclosures and 3 short sales available to purchase today in all of Orange County, 8 total distressed home on the active market, unchanged from two weeks ago. Last year there were 13 total distressed homes on the market, similar to today.