Orange County Housing Report: A HOT Summer
The Summer Market: The Summer Market has been the hottest since the heydays of housing prior to the Great Recession.
As expected, the Orange County housing market slowed in July a bit, transitioning from the red hot Spring Market to the beginning of the Summer Market. It was still cruising, just not as fast as the spring. August typically looks a lot like July, maybe increasing a smidgeon, but still slower than the peak of the real estate market, March through mid-June. This cyclical phenomenon is easily explained by logically looking at the timing of the year. There are plenty of summertime distractions, especially in Southern California, from splashing around in the waves to traveling on the annual family vacation. The distractions lead to less buyer activity and demand drops
This year has been quite a bit different as demand increased by 5% in the past month. It feels like June, the tail end of the Spring Market, and not at all a typical summer. Demand has not been this high since 2012 when it reached 3,544 pending sales; however, 17% were short sales that took a very long time to sell and often never closed. Today, only 1.2% of demand are short sales. Stripping short sales from demand, the last time it was this high dates all the way back to 2005, prior to the great recession.
Many may wonder why housing is so hot this summer. Now that housing has been restored and distressed properties are only an asterisk, the market has been blossoming. Throw in rock bottom interest rates, even lower than last year, and you have a recipe for strong demand.
Low interest rates are only part of the reason for hot demand. This year, like every year since 2008, fewer homeowners are opting to sell. There are 30% fewer homes on the market compared to 2000 through 2007. People are staying in their homes a lot longer and are just not moving.
With a low supply of homes and strong demand, it’s no wonder that there’s a heat wave in housing.
Luxury End: Luxury demand has increased by 11% in the past month.
The peak in the Orange County luxury inventory occurred a month ago at 2,756 homes. Since then, the inventory of homes above $1 million has dropped by 3% and now totals 2,666. With elevated demand and fewer luxury homes coming on the market, look for the trend in a falling luxury inventory to continue.
Active Inventory: The inventory appears to have peaked early.
Typically, the active inventory peaks from mid to late August. But, with stronger demand for this time of year, the inventory has actually been falling over the prior month. More homes placed in escrow means fewer homes that remain within the active inventory.