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Housing is in the middle of the Summer Market when seasonally, the inventory rises, demand slowly declines, and market times grow longer from week to week.
In nearly every market across the country, including Orange County, spring is the hottest time of the year for housing. Buyers transact year-round, but their preference, especially families, is to pull the trigger on isolating a home during the spring that ultimately closes in the summer. That is when the kids are out of school, the perfect time for a household move. Even if it requires a school change, the best time is when they are transitioning between grade levels. Throw into the mix the list of summer activities, including travel, and the goal of purchasing a home often takes a back seat to all the fun. As a result, demand drops from its Spring Market peak.
Since demand found its peak during the spring and the inventory has yet to reach its peak, the market has slowed considerably in the past couple of months. In fact, since May, the Expected Market Time, the time between coming on the market and becoming a pending sale, has grown from 42 days to 56 days today. While housing may be faster compared to the 3-year pre-COVID average of 78 days, at 56 days, most homes are not snapped up instantly. Sellers expecting a hot summer housing market like this year and last year’s early Spring Markets may be unaware that the market has slowed considerably. Overzealous sellers who stretch their asking price without carefully considering the current market dynamics and the need to meticulously pour over all recent pending and closed sales activity to arrive at a home’s true Fair Market Value will not find success until they adjust their expectations. That is precisely why 29% of the active inventory has reduced the asking price at least once. The number of price reductions has also been growing from week to week.
The housing market has been downshifting. There are more open houses. As long as they are priced properly, only homes that are in tip-top shape with all the bells and whistles and are genuinely turnkey, ready to be moved into with very little work, fly off the market. For everyone else, the Summer Market feels a bit more subdued.
What we're seeing:
→ Demand has flatlined
→ Active inventory has slowed down
→ More price reductions are happening
→ This pace is normal for the summer
→ Homes coming on the market are accurately priced
→ Buyers and Sellers market
What we can expect:
→ End of July through August demand will increase
→ Rise in pending listings
→ No change in the interest rates
→ Overpriced listings will stay on the market longer
Orange County Housing Market Summary:
- The active listing inventory in the past couple of weeks jumped by 262 homes, up 9%, and now sits at 3,048, its highest level since December 2022. In May, 36% fewer homes came on the market compared to the 3-year average before COVID (2017 to 2019), 1,497 less. 358 more sellers came on the market this May compared to May 2023. Last year, there were 2,281 homes on the market, 767 fewer homes, or 25% less. The 3-year average before COVID (2017 to 2019) was 6,633, or 118% extra, more than double.
- Demand, the number of pending sales over the prior month, decreased by 25 pending sales in the past two weeks, down 2%, and now totals 1,615. Last year, there were 1,602 pending sales, 1% less. The 3-year average before COVID (2017 to 2019) was 2,679, or 66% more.
- With supply rising and demand falling, the Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, increased from 51 to 57 days in the past couple of weeks. It was 43 days last year, faster than today. The 3-year average before COVID (2017 to 2019) was 75 days, slower than today.
- In the past two weeks, the Expected Market Time for homes priced below $750,000 increased from 38 to 42 days. This range represents 17% of the active inventory and 23% of demand.
- The Expected Market Time for homes priced between $750,000 and $1 million remained unchanged at 33 days. This range represents 14% of the active inventory and 23% of demand.
- The Expected Market Time for homes priced between $1 million and $1.25 million increased from 34 to 39 days. This range represents 9% of the active inventory and 13% of demand.
- The Expected Market Time for homes priced between $1.25 million and $1.5 million increased from 42 to 45 days. This range represents 11% of the active inventory and 13% of demand.
- The Expected Market Time for homes priced between $1.5 million and $2 million increased from 48 to 55 days. This range represents 13% of the active inventory and 13% of demand.
- In the past two weeks, the expected market time for homes priced between $2 million and $4 million increased from 86 to 104 days. For homes priced between $4 million and $6 million, the Expected Market Time increased from 167 to 197 days. For homes priced above $6 million, the Expected Market Time increased from 476 to 715 days.
- The luxury end, all homes above $2 million, account for 36% of the inventory and 14% of demand.
- Distressed homes, both short sales and foreclosures combined, comprised only 0.2% of all listings and 0.2% of demand. Only three foreclosures and two short sales are available today in Orange County, with five total distressed homes on the active market, down two from two weeks ago. Last year, seven distressed homes were on the market, similar to today.
- There were 2,127 closed residential resales in May, up 5% compared to May 2023’s 2,030 and up 8% from April 2024. The sales-to-list price ratio was 100.3% for Orange County. Foreclosures accounted for 0.1% of all closed sales, and short sales accounted for 0.1%. That means that 99.8% of all sales were good ol’ fashioned sellers with equity.