Orange County Housing Report: Crickets…
Steven Thomas, September 9, 2018
Sellers are learning a lesson about patience: just because your pole is in the water, does not mean you will immediately reel in a fish.
A Much Slower Market: With an Expected Market Time of 98 days for all of Orange County, sellers really need to pack their patience.
Today’s sellers remind me of a kid that goes fishing for the very first time. After five minutes with their pole in the water they inquire, “How long before I catch a fish?” They quickly realize that fishing is not instantaneous and that it requires quite a bit of time and persistence.
Current sellers have heard about how great the fishing had been and how the housing market was generating instantaneous, multiple offers. For years, up until May of this year, sellers had been selling their homes at or near their list prices, and sometimes fetched even more. Yet, the housing market has evolved. The hot Seller’s Market is in the past and is not coming back anytime soon.
In looking at the Expected Market Time, the amount of time it would take to place a home on the market today and open up escrow down the road, it has grown from a low of 51 days at the end of February, to 98 days today. Anything above 90 days is a Balanced Market, one that does not favor sellers or buyers. Basically, the Expected Market Time is the current velocity of the housing market. The overall speed of housing has slowed considerably over time. It is a function of supply and demand. The market slows when supply increases. It also slows when demand decreases. When supply increases and demand drops at the same time, the market rapidly slows; and, that is precisely what occurred from May through today. The supply has climbed from 5,730 homes in May to 7,070 today, a 23% increase and its highest level since August 2016. In the meantime, demand dropped from 2,726 pending sales to 2,162, a 21% drop and its lowest level for this time of the year since 2007.
Sellers need to recalibrate their expectations. First, the best “bait” that is working today is price. Pricing at or extremely close to a home’s Fair Market Value is critical. Next, sellers must pack their patience. Often, sellers are required to keep their poles in the water and wait for the right buyer to come along.
A stiff warning to buyers: it is still not a buyer’s market, so paying at or very close to a home’s Fair Market Value is vital in securing a home. Buyers who are busy writing offers below recent comparable sales are wasting everybody’s time, including their own. The market is balanced. Yes, there are a few more choices, but there is not a glut of inventory.
The bottom line, the market has shifted. Sellers need to adjust their expectations and buyers should not get ahead of themselves.
Active Inventory: The active inventory grew by 1% in the past two-weeks. The active listing inventory continued its climb in the past two-weeks, adding 69 homes, or 1%, and now totals 7,070, the highest level since August 2016.
Demand: Demand dropped by an astonishing 8% in the past couple of weeks. In the past two-weeks, demand, the number of pending sales over the prior 30-days, decreased by 188 pending sale, 8%, its largest drop of the year.
Luxury End: Luxury demand dropped significantly over the past two-weeks. In the past two-weeks, demand for homes above $1.25 million decreased by 26 pending sales, down 8%, and now totals 319.