Many buyers are sitting on the sidelines in anticipation of a major housing downturn even though the facts illustrate it simply is not going to happen.
No Bubble: Housing data illustrates that there is not a housing bubble on the horizon.
It has happened to just about everybody. Driving down the road, unaware of your current speed, a look in the rearview mirror reveals there’s a police car with sirens blazing pulling you over. After receiving the ticket and driving away, for quite some time your driving habits change. You are more cautious, more aware of your surroundings, anticipating at any moment that, inevitably, you will be pulled over again.
The housing market is not as hot today as it was from 2012 through 2017, but that does not mean that the housing is in a bubble. Demand is only slightly sluggish today and the active listing inventory is dropping fast. The storyline since 2012 is that there is a supply problem, not enough homes on the market. That story is true today and will continue in 2020. And, the low interest rate environment with mortgage rates below 4% has substantially helped home affordability and will fuel the housing market for quite some time.
The bottom line:today’s housing data illustrates a housing market that is on very strong footing. There is no bubble. The inventory is low, buyer demand is not weak, the Expected Market Time is low, and mortgage rates are at historically low levels.
Orange County Housing Market Summary:
– The active listing inventory decreased by 204 homes in the past two-weeks, down 3%, and now totals 6,412. Last year, there were 7,292 homes on the market, 880 more than today.
– Demand, the number of pending sales over the prior month, downshifted considerably in the past two-weeks and decreased by 60 pending sales, down 3%, and now totals 2,251. Last year, there were 1,974 pending sales, 12% fewer than today.
– The Expected Market Time for all of Orange County dropped from 86 to 85 days, a slight Seller’s Market (between 60 to 90 days). It was at 111 days last year and climbing, a much slower market.
– For homes priced below $750,000, the market is a hot Seller’s Market (less than 60 days) with an expected market time of 56 days. This range represents 38% of the active inventory and 57% of demand.
– For homes priced between $750,000 and $1 million, the expected market time is 70 days, a slight Seller’s Market. This range represents 19% of the active inventory and 23% of demand.
– For homes priced between $1 million to $1.25 million, the expected market time is 109 days, a Balanced Market.
– For luxury homes priced between $1.25 million and $1.5 million, in the past two weeks, the Expected Market Time decreased from 121 to 118 days. For homes priced between $1.5 million and $2 million, the Expected Market Time increased from 171 to 200 days. For luxury homes priced between $2 million and $4 million, the Expected Market Time decreased from 332 to 316 days. For luxury homes priced above $4 million, the Expected Market Time increased from 557 to 619 days.
– The luxury end, all homes above $1.25 million, accounts for 34% of the inventory and only 12% of demand.
– Distressed homes, both short sales and foreclosures combined, made up only 0.98% of all listings and 1.1% of demand. There are only 23 foreclosures and 32 short sales available to purchase today in all of Orange County, 55 total distressed homes on the active market, down 1 in the past two-weeks. Last year there were 70 total distressed homes on the market, a bit more than today.
– There were 2,564 closed residential resales in September, 22% more than September 2018’s 2,090 closed sales. September marked a 10% drop compared to August 2019. The sales to list price ratio was 97.2% for all of Orange County. Foreclosures accounted for just 0.2% of all closed sales, and short sales accounted for 0.3%. That means that 99.5% of all sales were good ol’ fashioned sellers with equity.
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