June 29, 2020 / By Steven Thomas
After grinding to a complete halt, the luxury market is pumping on all cylinders.
Luxury Strength: The upper end of the housing market is strong with plenty of demand.
The luxury housing market in Orange County came to screeching halt in mid-April. It appeared as if luxury housing had perished in 2020 and would not be revived until 2021 at the earliest. The Expected Market Time (the amount of time between hammering in the FOR-SALE sign to opening escrow) increased to 322 days for all homes priced above $1.25 million. Fear and uncertainty shrouded the upper end amidst the COVID-19 pandemic and California’s “stay at home” order. It left many luxury sellers in disbelief, wondering if they would ever be able to sell their homes without major price cuts.
Yet, the market began to improve after bottoming in April. Slowly but surely demand picked up in every price range. Luxury was revived on the backs of increased confidence in Wall Street, a low mortgage rate environment, and the realization of the importance of “home” in the middle of a pandemic. Everybody is acutely aware of the significance of the home office, additional living space, a larger yard, and the many amenities that make life at home more enjoyable.
In taking a closer look at luxury, today’s Expected Market Time is at its lowest point in years, 111 days. That sounds high compared to the overall Orange County housing market at 47 days, but it is extremely strong for the upper end, and quite an improvement from the 322 day mark reached in mid-April, the middle of the Spring Market. . Last year, the luxury Expected Market Time was at 217 days at the end of June, and the lowest level for 2019 was achieved in April at 161 days.
Luxury has dramatically improved and it is not because there are fewer homeowners placing their homes on the market, limiting the supply of available homes. That is true for the market as a whole, with 21% fewer homes placed on the market compared to the 5-year average. However, for luxury, there have been 2% more homes placed on the market compared to the 5-year average. It all boils down to demand, the last 30-days of pending sales activity.
It is important to note that the upper end still takes a lot longer to sale compared to the lower ranges. Multiple offers and a steady stream of buyers are not as common. This is simply because there are fewer potential buyers that can afford a higher priced home.
As in all price ranges, success is determined by motivation. Many luxury sellers claim that they “don’t have to sell” to help rationalize their price. They stretch their asking price and sit on the market, generating little activity and no offers. Sellers who are motivated will price their homes according to their Fair Market Value.
Orange County’s luxury market has not only returned, it is pumping on all cylinders. While it may not be as sizzling hot as the lower ranges, it is the most favorable environment for luxury in years.
Active Inventory: The current active inventory decreased by 5% in the past two-weeks.
Demand: The surge in demand continues to rocket upward.
Luxury End: Luxury demand continues to climb.