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Many believe that the rapidly slowing housing market will lead to crashing home values, yet the facts do not support this theory. So many are jumping to the immediate conclusion that as housing slows, values will eventually plunge like they did during the Great Recession.
Collectively, homeowners across the country were sitting in a much different position prior to the Great Recession compared to where they stand today. To best understand the differences let us take a closer look and compare the two.
First, the direction of housing has everything to do with supply and demand. Prior to the Great Recession, the inventory climbed to over five times where it stands today. There was a glut of homes on the market. Like today, demand was muted, but was due to the deterioration of lending standards. When low demand was pit against a glut of available homes, the market lined up heavily in favor of buyers and prices sank. Back then there were low or no down payments, fraudulent lending practices, and loose lending standards and programs, allowing anyone to get a loan and purchase a home.
Yes, supply is rising. Demand is muted. The housing market is slowing. The number of offers received is dropping. The number of offers over the asking price is falling. Sales are down. The number of price reductions has been steadily climbing. The pace of housing, the Expected Market Time has slipped from an Insane Seller’s Market in March when it was at 19 days to a Hot Seller’s Market today at 56 days.
Even if housing were to slip into a Slight Buyer’s Market, it would have to be at those levels for months before prices start to decline. Homeowners are in a very strong position with plenty of equity, low mortgage rates, high credit scores, good jobs, and money in the bank. There will be no reason to panic. Values will not plunge.
Orange County Housing Market Summary:
- The active listing inventory continued to surge higher posting its largest gain of the year of 432 homes, up 14%, and now totals 3,491 homes, its highest level since November 2020. In May, there were 16% fewer homes that came on the market compared to the 3-year average prior to COVID (2017 to 2019), 654 fewer. Last year, there were 2,388 homes on the market, 1,103 fewer homes, or 32% less. The 3-year average prior to COVID (2017 to 2019) was 6,633, or 90% more.
- Demand, the number of pending sales over the prior month, decreased by 159 pending sales in the past two weeks, down 8%, and now totals 1,861, its largest drop in 2022. This is the lowest level at this time of year since tracking began in 2004. Last year, there were 2,906 pending sales, 56% more than today. The 3-year average prior to COVID (2017 to 2019) was 2,679, or 44% more.
- With supply soaring higher and demand falling, the Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, surged from 45 to 46 days in the past couple of weeks, a Hot Seller’s Market (less than 60 days). Housing is rapidly cooling, and the market time is at its highest level since June of 2020. It was at 25 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 35 days. This range represents 17% of the active inventory and 28% 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 27% of demand.
- For homes priced between $1 million to $1.25 million, the Expected Market Time is 53 days, a Hot Seller’s Market. This range represents 13% of the active inventory and 13% of demand.
- For homes priced between $1.25 million to $1.5 million, the Expected Market Time is 53 days, a Hot Seller’s Market. This range represents 11% of the active inventory and 12% of demand.
- For homes priced between $1.5 million to $2 million, the Expected Market Time is 78 days, a Slight Seller’s Market (between 60 and 90 days). This range represents 12% of the active inventory and 9% of demand.
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