Appreciation: With strong demand and an incredibly low inventory, the market will continue to lean heavily in favor of sellers, resulting in home values rising.
When there is a scarcity of something popular for sale, the price goes up. More people are desirous of a good than the number of goods available. If that sounds familiar, it is from the echoing lecture halls of Econ 101. It is basic supply and demand. When very little supply is matched with unbelievably strong demand, prices go up. That is precisely what is occurring in the housing market today.
There is a scarcity of homes for sale. Multiple offers are the norm. It is not uncommon to hear that 15 offers are generated on a home that just hit the market. When this occurs, a bidding war ensues. It is as if a mini-auction occurs. The highest and best offer wins and 14 buyers must go back to the drawing board and continue their search for a home. More buyers are desirous of homes than the number of homes available. As a result, home values have been on the rise since June. That is when the Expected Market Time (the time between pounding in the FOR-SALE sign to opening escrow) first dropped below the 60-day threshold, a Hot Seller’s Market.
The Expected Market Time is the speed of the market. The lower the Expected Market Time, the faster the market. It takes into consideration both the current inventory of homes available to purchase and the buyer's demand to pull the trigger and buy a home (the last 30-days of pending sales). Today, it sits at 40 days, far below the 60-day threshold that indicates a Hot Seller’s Market, a market where sellers get to call the shots and values are on the rise.
Orange County Housing Market Summary:
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The active listing inventory decreased by 60 homes in the past two weeks, down 1%, and now totals 4,153, its lowest level for a start to October since tracking began in 2004. COVID-19 is not suppressing the inventory; in September there were 21% more homes that came on the market compared to last year. This trend evolved in August when there were 14% more homes year over year. Last year, there were 6,616 homes on the market, 2,463 additional homes, or 59% more.
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Demand, the number of pending sales over the prior month, decreased by 2 pending sales in the past two weeks, nearly unchanged, and now totals 3,254. COVID-19 currently has no effect on demand. Record low rates are fueling today’s exceptional demand. Last year, there were 2,311 pending sales, 29% fewer than today.
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The Expected Market Time for all of Orange County decreased from 39 days to 38, a Hot Seller’s Market (less than 60 days). It was at 86 days last year, much slower than today.
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For homes priced below $750,000, the market is a hot Seller’s Market (less than 60 days) with an expected market time of 28 days. This range represents 34% of the active inventory and 47% of demand.
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For homes priced between $750,000 and $1 million, the expected market time is 27 days, a hot Seller’s Market. This range represents 18% of the active inventory and 26% of demand.
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For homes priced between $1 million to $1.25 million, the expected market time is 37 days, a hot Seller’s Market.
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For luxury homes priced between $1.25 million and $1.5 million, in the past two weeks, the Expected Market Time increased from 47 to 48 days. For homes priced between $1.5 million and $2 million, the Expected Market Time decreased from 63 to 61 days. For luxury homes priced between $2 million and $4 million, the Expected Market Time decreased from 106 to 100 days. For luxury homes priced above $4 million, the Expected Market Time increased from 234 to 315 days.
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The luxury end, all homes above $1.25 million, accounts for 39% of the inventory and only 17% of demand.
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Distressed homes, both short sales, and foreclosures combined, made up only 0.4% of all listings and 0.4% of demand. There are only 8 foreclosures and 8 short sales available to purchase today in all of Orange County, 16 total distressed homes on the active market, up 2 from two weeks ago. Last year there were 54 total distressed homes on the market, more than today.
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There were 3,153 closed residential resales in August, 12% more than August 2019’s 2,823 closed sales. August marked a 5% increase compared to July 2020. The sales to list price ratio was 98.8% for all of Orange County. Foreclosures accounted for just 0.2% of all closed sales, and short sales accounted for 0.2%. That means that 99.6% of all sales were good ol’ fashioned sellers with equity.
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