Orange County Housing Report | Summer Transition

 

 

 

The distractions of summer impact the housing market. The busiest time of the year in terms of demand, the Spring Market, comes to an end with the conclusion of the school year and graduations. The Summer Market lasts from the end of May to the start of school at the end of August. Summer is when active buyers have pulled away from the frantic pace of housing. Kids are home and parents are busy carpooling to camps, water parks, pools, beaches, and friends’ houses.

 

During the Summer Market demand decreases slightly. There are fewer new escrows opened due to buyers placing their home search tours on pause to take a short break and enjoy all the trappings of summer. With demand dropping, the supply of available homes rises as more homeowners place their homes on the market. Many often mistake the Summer Market as the best time of the year to sell a home. In terms of new escrow activity, it is second to the Spring Market. With an increasing supply and falling demand, the Expected Market Time (the amount of time between hammering in the FOR-SALE sign to opening escrow) increases.

 

In reviewing these trends, many buyers may get ahead of themselves and expect the market to line up in their favor. That is not the case. Instead, the market will remain a Hot Seller’s Market, yet the frantic pace will slow. The changes will be subtle and, over time, will reveal a trend that will result in a shift in the market.

 

The word on the street within the real estate trenches is that there are already signs of the “summer shift.” A home might not sell in 4 days after being exposed to the market for only a weekend. Instead, it may take two weekends. Homes that are grossly overpriced will have to reduce their asking price. Surprisingly, 6% of the active listing inventory had to reduce its asking price over the past week. Many will scratch their collective heads and wonder what is going on in the market. The answer is simple: SUMMER. It happens every year, and it appears as if this year will be no exception.

 

Orange County Housing Market Summary:

• The active listing inventory shed 37 homes in the past two weeks, down 1.6%, and now totals 2,214. In May, there were 17% fewer homes that came on the market compared to the 5-year average between 2015 to 2019 (2020 was skewed due to COVID-19), 702 less. Last year, there were 4,950 homes on the market, 2,736 additional homes, or 124% more.
• Demand, the number of pending sales over the prior month, decreased by 26 pending sales in the past two weeks, down 1%, and now totals 3,057. Rates remain below 3%, maintaining demand’s current brisk pace. Last year, there were 2,529 pending sales, 17% fewer than today. Keep in mind, housing was improving rapidly in May and June as rates dropped to historically low levels.
• The Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, remained unchanged at 22 days in the past couple of weeks, an extremely Hot Seller’s Market (less than 60 days). It was at 74 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 16 days. This range represents 28% 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 20% of the active inventory and 27% of demand.
• For homes priced between $1 million to $1.25 million, the Expected Market Time is 16 days, a Hot Seller’s Market.
• For homes priced between $1.25 million to $1.5 million, the Expected Market Time is 22 days, a Hot Seller’s Market.
• For homes priced between $1.5 million and $2 million, the Expected Market Time remained unchanged at 28 days. For homes priced between $2 million and $4 million, the Expected Market Time increased from 41 to 44 days. For homes priced above $4 million, the Expected Market Time increased from 126 to 134 days.
• The luxury end, all homes above $1.5 million, accounts for 35% of the inventory and 16% 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 4 short sales available to purchase today in all of Orange County, 10 total distressed homes on the active market, no change from two weeks ago. Last year there were 24 total distressed homes on the market, more than today.
• There were 3,237 closed residential resales in May, 134% more than May 2020s 1,386 closed sales. May marked a 7% decline from April 2021. The sales to list price ratio was 100.7% for all of Orange County. Foreclosures accounted for just 0.1% of all closed sales, and short sales accounted for 0.1%. That means that 99.8% of all sales were good ol’ fashioned sellers with equity.

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