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Buyers now have the upper hand when negotiating in today’s market, which means sellers must painstakingly arrive at the asking price to be successful.
For nearly two years sellers got away with arbitrarily pricing a home where nearly everything sold instantly, with multiple offers, and closed sales prices way above their asking price. It was an auction-like atmosphere. There were throngs of buyers that viewed nearly everything that hit the market. Homes were listed FOR-SALE and, in some cases, buyers were only allowed to see a home during a three-hour window on a Saturday, and then all offers had to be submitted by the following Tuesday at 5 PM. After sifting through 10, 20, 30, or more offers, only one lucky buyer won. All the other buyers had to go back to the drawing board.
Attention Sellers: To find success, sellers must price their homes according to its Fair Market Value. Pricing a home accurately is more important today than any other year since the end of the Great Recession. Negotiations are now leaning in favor of buyers, prices are slowly falling, and with affordability taking a drastic hit, buyers are unwilling to stretch, and they will do their due diligence in approaching any offer to purchase. Sellers also must be patient. The housing market is no longer instantaneous. The closer a home looks to a model, the faster it will sell. Pricing a home at the last comparable sale, yet it needs a lot of work, will simply not sell in today’s market. As a result, sellers have a choice. They can either invest in their home and update it prior to placing it on the market, or they can adjust the price to reflect the work that needs to be done. Buyers will also subtract for the hassle to do it themselves.
With the market leaning in the buyers favor and values slowly falling, careful pricing is crucial.
- The active listing inventory in the past couple of weeks increased by 10 homes, nearly unchanged, and now sits at 3,656. In September, there were 24% fewer homes that came on the market compared to the 3-year average prior to COVID (2017 to 2019), 728 less. Last year, there were 2,042 homes on the market, 1,614 fewer homes, or 44% less. The 3-year average prior to COVID (2017 to 2019) was 6,306, or 72% more.
- Demand, the number of pending sales over the prior month, plunged by 171 pending sales in the past two weeks, down 11%, and now totals 1,427, its largest drop of the year. It is the lowest reading for mid-October since 2007. Last year, there were 2,515 pending sales, 76% more than today. The 3-year average prior to COVID (2017 to 2019) was 2,206, or 55% more.
- With demand plunging, the Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, increased from 68 to 77 days in the past couple of weeks, its highest level since mid-May 2020. It was at 24 days last year, much stronger than today.
- For homes priced below $750,000, the Expected Market Time increased from 51 to 59 days. This range represents 22% of the active inventory and 28% of demand.
- For homes priced between $750,000 and $1 million, the Expected Market Time increased from 54 to 64 days. This range represents 23% of the active inventory and 28% of demand.
- For homes priced between $1 million to $1.25 million, the Expected Market Time increased from 58 to 71 days. 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 remained unchanged at 73 days. 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 increased from 86 to 93 days. This range represents 11% 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 decreased from 133 to 123 days. For homes priced between $4 million and $8 million, the Expected Market Time increased from 215 to 284 days. For homes priced above $8 million, the Expected Market Time decreased from 454 to 308 days.
- The luxury end, all homes above $2 million, accounts for 21% of the inventory and 10% of demand.
- Distressed homes, both short sales and foreclosures combined, made up only 0.12% of all listings and 0.6% of demand. There is only 1 foreclosure and 2 short sales available to purchase today in all of Orange County, 3 total distressed home on the active market, down 3 from two weeks ago. Last year there were 11 total distressed homes on the market, similar to today.