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Orange County Housing Report | Wave of Foreclosures

 

The Distressed Market: Foreclosures and short sales make up less than half a percent of the listing inventory and demand.

Due to the recession, everybody is jumping to the worst-case scenario for housing, the inevitable wave of foreclosures to come. It is crucial to immediately point out the simple fact that just because the economy is in the midst of a recession does not mean that the housing market will tank, values must go down, and many homeowners will lose their homes due to foreclosures or short sales. In fact, in the past five recessions, only two have led to declines in real estate values, the recession that began in 1991 and the Great Recession that started in 2008. Both were fueled by asset bubbles in housing that eventually popped. The recession in 1991 was powered by the savings and loan crisis. The Great Recession was driven by subprime lending and risky investments in mortgage securities. Thus, a wave of foreclosures ensued.

Today, the supply of homes to purchase is low, demand is high, and home values are on the rise. Multiple offers are once again the norm. Homes are flying off the market and into escrow. And, tight lending qualifications continue to be the bedrock and strength of housing.

Orange County Housing Market Summary:

  • The active listing inventory decreased by 141 homes in the past two-weeks, down 3%, and now totals 4,449, its lowest level for August since tracking began in 2004. In July, there were 2% more homes placed on the market compared to last year and identical to the 5-year average; thus, COVID-19’s grip on suppressing the inventory has vanished. Last year, there were 7,488 homes on the market, 3,039 additional homes, or 68% more.
  • Demand, the number of pending sales over the prior month, increased by 81 pending sales in the past two-weeks, up 3%, and now totals 3,281, its highest level since September 2012. COVID-19 currently has no effect on demand. Last year, there were 2,606 pending sales, 21% fewer than today.
  • The Expected Market Time for all of Orange County decreased from 43 days to 41, a Hot Seller’s Market (less than 60 days). It was at 89 days last year, much 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 29 days. This range represents 34% of the active inventory and 48% of demand.
  • For homes priced between $750,000 and $1 million, the expected market time is 29 days, a hot Seller’s Market. This range represents 18% of the active inventory and 25% of demand.
  • For homes priced between $1 million to $1.25 million, the expected market time is 42 days, a hot Seller’s Market.
  • For luxury homes priced between $1.25 million and $1.5 million, in the past two weeks, the Expected Market Time decreased from 53 to 49 days. For homes priced between $1.5 million and $2 million, the Expected Market Time decreased from 81 to 68 days. For luxury homes priced between $2 million and $4 million, the Expected Market Time increased from 109 to 115 days. For luxury homes priced above $4 million, the Expected Market Time decreased from 274 to 262 days.
  • The luxury end, all homes above $1.25 million, accounts for 38% of the inventory and only 17% of demand.
  • Distressed homes, both short sales and foreclosures combined, made up only 0.4% of all listings and 0.4% of demand. There are only 11 foreclosures and 7 short sales available to purchase today in all of Orange County, 18 total distressed homes on the active market, down 7 from two-weeks ago. Last year there were 48 total distressed homes on the market, slightly more than today.
  • There were 2,169 closed residential resales in June, 20% fewer than June 2019’s 2,715 closed sales. The sold data is beginning to reflect the recent surge in demand. June marked a 56% increase compared to May 2020. The sales to list price ratio was 97.6% for all of Orange County. Foreclosures accounted for just 0.4% of all closed sales, and short sales accounted for 0.2%. That means that 99.4% of all sales were good ol’ fashioned sellers with equity.

To request to read/download the full report and charts, please email info(at)echelberger(dotted)com.

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