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Active inventory, buyer demand, and the number of homeowners willing to sell have been bouncing around a bottom all year, so it is only up from here.
Demand in 2023 has been subdued all year due to the high mortgage rate environment and the lack of homeowners willing to sell. Demand has remained relatively flat, at bare-bones, inherent levels. There are always buyers in every market regardless of where rates climb. Year-over-year numbers have been nearly identical for the past month.
This year’s inventory has also remained relatively flat, dropping by 19% from January through April, when it usually rises. From there, it slowly climbed and did not peak until the beginning of this month at 2,496 homes, 1% below the start of this year. Year over year, there are a lot fewer homes on the market, bare-bones, inherent levels. Like demand, there are always sellers in every market regardless of underlying fundamentals.
Annual comparisons will finally tell a story from this point forward. Housing is scraping the bottom in the number of homes available, buyer demand, and the number of homeowners willing to sell. Any rise in any of these metrics will provide quick insight into the housing market's direction. The economy is anticipated to cool a bit in 2024 from its hotter pace this year. For investors, a cooler economy typically means a flight to safe, long-term investments, 10-year bonds, and mortgage-backed securities. This flight to safety results in mortgage rates falling. As rates fall, demand will rise. If rates fall enough, more homeowners will be willing to sell. It is just a matter of time before something finally changes, and there will be more activity in housing. It will not bounce along the bottom forever.
Orange County Housing Market Summary:
- The active listing inventory in the past couple of weeks plunged by 187 homes, down 7%, and now sits at 2,309, its lowest level since the start of July. It was also the largest drop of the year. In October, 36% fewer homes came on the market compared to the 3-year average before COVID (2017 to 2019), 1,093 less. Last year, there were 3,286 homes on the market, 977 more homes, or 42% higher. The 3-year average before COVID (2017 to 2019) was 5,359, or 132% extra, more than double.
- Demand, the number of pending sales over the prior month, decreased by 50 pending sales in the past two weeks, down 4%, and now totals 1,173, its lowest level since tracking began in 2004. Last year, there were 1,212 pending sales, 3% more than today. The 3-year average before COVID (2017 to 2019) was 1,969, or 68% more.
- With the inventory plunging faster than demand, the Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, decreased from 61 to 59 days in the past couple of weeks. It was 81 days last year, slower than today. The 3-year average before COVID (2017 to 2019) was 85 days, also slower than today.
- For homes priced below $750,000, the Expected Market Time decreased from 45 to 41 days. This range represents 19% of the active inventory and 27% of demand.
- For homes priced between $750,000 and $1 million, the Expected Market Time decreased from 41 to 38 days. This range represents 16% of the active inventory and 24% of demand.
- For homes priced between $1 million and $1.25 million, the Expected Market Time decreased from 46 to 44 days. This range represents 10% of the active inventory and 14% of demand.
- For homes priced between $1.25 million and $1.5 million, the Expected Market Time decreased from 46 to 44 days. This range represents 9% of the active inventory and 12% of demand.
- For homes priced between $1.5 million and $2 million, the Expected Market Time decreased from 70 to 68 days. This range represents 13% of the active inventory and 11% of demand.
- For homes priced between $2 million and $4 million, the Expected Market Time in the past two weeks increased from 103 to 115 days. For homes priced between $4 million and $6 million, the Expected Market Time increased from 231 to 240 days. For homes priced above $6 million, the Expected Market Time decreased from 469 to 444 days.
- The luxury end, all homes above $2 million, account for 33% of the inventory and 12% of demand.
- Distressed homes, both short sales and foreclosures combined, comprised only 0.3% of all listings and 0.1% of demand. Only six foreclosures and two short sales are available today in Orange County, with eight total distressed homes on the active market, up two from two weeks ago. Last year, eight distressed homes were on the market, identical to today.