Blog

Is The Market Shifting?

The Orange County Housing Market has been gaining momentum nonstop for over five years. It has been like the initial hill on a roller coaster; clickety clack, clickety clack, clicket clack. It seems as if the housing market could increase forever. Yet, many buyers believe the housing market ascent has to reach a peak soon. It is completely understandable where these buyers are coming from, and they are right. The market will eventually reverse course and depreciate. The question boils down to “when?” The answer is, “not anytime soon.”

The housing market constantly changes. There are peaks and there are troughs. There are times when buyers are in control, and there are times when sellers are in control. The skeptical buyers who are waiting for an end to this madness find many reasons for a housing downturn on the horizon. They point to record prices. They recall mid-2007 when the housing market began to unravel; however, prior to it unraveling, almost everybody felt like the market would increase forever. Very few economists and prognosticators forecasted a crippling housing downturn. Currently, the Orange County housing market has reached record heights and has been appreciating for over five years now.

To better understand why the market is poised to continue to accelerate forward, it is best to dust off that old Econ 101 book that details supply and demand. When there is too much supply and demand is low, it favors the buyer. When there is not enough supply and demand is high, it favors the seller. With years of a lack of supply of homes and red-hot demand, it is no wonder that it has been a hot sellers market for quite some time now.

temp-post-image

Currently, there are 5,936 homes on the market, the lowest level for this time of the year since 2013. Back then there were 4,732 homes on the market and it was even more difficult for buyers to secure a home than it is today. For the market to move away from a seller’s market and towards a balanced market, there needs to be at least 8,000 homes on the market for a sustainable amount of time. A higher supply of active listings would shift us into a balanced market, where neither buyers or sellers control the market. With more supply often comes softer demand. Increasing supply and decreasing demand, would eventually shift us into a buyer’s market.

For proper perspective, at the end of June 2007, there were 17,250 homes on the market and the expected market time was over 9-months (that is the amount of time a home is on the market prior to being placed into escrow). Demand (the last month of pending sales) was at 1,894 back then compared to 2,885 today. The current expected market time is 62 days, quite a bit different than a decade ago.

The trend of a lack of inventory and red-hot demand stoked by ultra low interest rates, does not look like it will change course anytime soon. This holds true for just about any property priced below $1.25 million that is in great condition, nicely appointed, in a good location, and priced close to its Fair Market Value. And, in the lower price ranges, buyers are tripping over each other to purchase. Buyers waiting on the market to change, are in for a long wait.

temp-post-image

Active listing inventory added an additional 31 homes in the past two-weeks, a 1% increase, and now sits at 5,936. The biggest issue for Orange County housing this year has been a real lack of inventory. Thus far this year, there have been 6% fewer homes placed on the market. In the past month alone, there have been 10% fewer homes placed on the market. This issue has prevented additional closed sales and has undermined the performance of housing this year.

We can expect the inventory to continue to rise throughout the Summer Market until it reaches a peak around mid-August. From there, the market will transition into the Autumn Market, from mid-August through Thanksgiving, where traditionally we see fewer homes on the market. This time last year, there were 7,104 homes on the market, 20% more than today.

Demand, the number of homes placed into escrow within the prior month, decreased by 52 pending sales in the past two-weeks and now totals 2,885, a 2% decline. With 22% fewer homes that have been placed on the market so far this year below $500,000, demand is now off by 17%. This market has been under-performing all year due to a real lack of inventory. We can expect demand to drop slightly from now through the end of the summer.

Last year at this time, there were 2 more pending sales totaling 2,887, almost identical. The expected market time increased from 60 to 62 days in the past couple of weeks, last year it was at 74 days. At 62 days, the market is no longer a HOT seller’s market, but a tepid seller’s market.

temp-post-image

The Steven Thomas Report

855-508-1133
Team@REServicePros.com

TEXT 714-505-8243

Contact Us