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In the past few years, there has been a severe inventory crisis initially instigated by the pandemic and now due to the high mortgage rate environment.
Housing shelves have been seemingly empty since entering the pandemic, with very few homes available compared to pre-COVID inventory levels. In 2020 and 2021, fewer homeowners opted to sell their homes amid the pandemic. The inventory finally began to rise in 2022 as rates soared from 3.25% at the start of the year to the mid-5s in June and July. Yet, rates rose further, surpassing 6% in September and 7% in October. Since 89% of all Californians have rates at or below 5% and 71% have rates at or below 4%, only some homeowners have been willing to give up their incredibly low fixed-rate mortgages and sell their homes. This “hunkering down” effect has resulted in a growing number of homeowners staying put.
Sellers need to be careful in navigating today’s housing market. Homes priced according to their Fair Market Value and decent condition will procure plenty of activity and, in many cases, obtain multiple offers. But homes in poor shape with plenty of deferred maintenance, houses with an inferior location, and overpriced homes will sit on the market without success even with today’s hotter market time readings.
What we're seeing:
→ Active inventory declining
→ Better pricing than last year
→ Fickle market
→ DOM stabilizing
→ Fewer buyers
→ Low inventory of luxury properties
What we can expect:
→ Few buyers, low inventory next 30-90 days
→ Rise in inventory late spring
→ Sustaining prices
Orange County Housing Market Summary:
- The active listing inventory in the past couple of weeks decreased by 87 homes, down 4%, and now sits at 2,218, the second-lowest March level since tracking began in 2004 behind last year. In February, 45% fewer homes came on the market compared to the 3-year average before COVID (2017 to 2019), 1,413 less. Last year, there were 1,406 homes on the market, 812 fewer homes, or 37% less. The 3-year average before COVID (2017 to 2019) was 5,119, or 131% more.
- Demand, the number of pending sales over the prior month, decreased by 32 pending sales in the past two weeks, down 2%, and now totals 1,505. Last year, there were 2,195 pending sales, 46% more than today. The 3-year average before COVID (2017 to 2019) was 2,422, or 61% more.
- With the supply falling faster than the drop in demand, the Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, decreased from 45 to 44 days in the past couple of weeks. It was 19 days last year, much stronger than today.
- For homes priced below $750,000, the Expected Market Time increased from 38 to 39 days. This range represents 24% of the active inventory and 27% of demand.
- For homes priced between $750,000 and $1 million, the Expected Market Time decreased from 32 to 29 days. This range represents 18% of the active inventory and 27% of demand.
- For homes priced between $1 million to $1.25 million, the Expected Market Time increased from 33 to 36 days. This range represents 10% of the active inventory and 12% of demand.
- For homes priced between $1.25 million to $1.5 million, the Expected Market Time decreased from 45 to 38 days. This range represents 10% of the active inventory and 11% of demand.
- For homes priced between $1.5 million to $2 million, the Expected Market Time increased from 44 to 48 days. This range represents 11% of the active inventory and 10% of demand.
- For homes priced between $2 million and $4 million, the Expected Market Time in the past two weeks decreased from 82 to 73 days. For homes priced between $4 million and $6 million, the Expected Market Time decreased from 216 to 128 days. For homes priced above $6 million, the Expected Market Time decreased from 347 to 312 days.
- The luxury end, all homes above $2 million, account for 28% of the inventory and 12% of demand.
- Distressed homes, both short sales and foreclosures combined, comprised only 0.5% of all listings and 0.1% of demand. There are only four foreclosures and six short sales available to purchase today in all of Orange County, with ten total distressed homes on the active market, up two from two weeks ago. Last year there were two total distressed homes on the market, similar to today.