Orange County Real Estate Market June 2020

Here are a few FACTS about the Real Estate Market in Orange County for first week of June, 2020

Demand, the number of new pending sales over the prior month, increased from 1,622 to 2,035, an additional 413 pending sales, up an incredible 23% in just two weeks. In the past 4-weeks, demand has added 863 pending sales, a 74% rise. With mortgage rates dropping to 3.15%, an all-time record low, more buyers are entering the market, eager to take advantage of extremely favorable home affordability. Expect demand to continue to increase as more inventory comes on the market.

Last year, there were 611 more pending sales than today, 23% extra. In mid-April, at the low point of the COVID-19 pandemic, demand was off by 60% year over year. The year over year gap is narrowing as the market continues to heat up.

In the past two-weeks the Expected Market Time dropped from 90 to 74 days, a slight Seller’s Market (between 60 and 90 days), where sellers get to call more of the shots during the negotiating process, yet home values are not changing much. Last year the Expected Market Time was at 85 days, slower than today.

  • The active listing inventory increased by 177 homes in the past two-weeks, up 4%, and now totals 5,044. In the past four-weeks, 33% fewer homes were placed on the market compared to the prior 5-year average; thus, COVID-19 is suppressing the inventory. It was 54% fewer four-weeks ago. Last year, there were 7,479 homes on the market, 2,435 more than today, a 48% difference.
  • Demand, the number of pending sales over the prior month, increased by 413 pending sales in the past two-weeks, up 25%, and now totals 2,035. It has grown by 74% in only 4 weeks. COVID-19’s effect on housing is rapidly diminishing. Last year, there were 2,646 pending sales, 23% more than today.
  • The Expected Market Time for all of Orange County decreased from 90 days to 74, a slight Seller’s Market (between 60 and 90 days). The drop was due to the surge in demand outpacing the rise in the supply. It was at 85 days last year, slower than today.
  • For homes priced below $750,000, the market is a hot Seller’s Market (less than 60 days) with an expected market time of 53 days. This range represents 35% of the active inventory and 50% of demand.
  • For homes priced between $750,000 and $1 million, the expected market time is 56 days, a hot Seller’s Market. This range represents 19% of the active inventory and 25% of demand.
  • For homes priced between $1 million to $1.25 million, the expected market time is 83 days, a slight Seller’s Market (between 60 and 90 days).
  • For luxury homes priced between $1.25 million and $1.5 million, in the past two weeks, the Expected Market Time decreased from 129 to 98 days. For homes priced between $1.5 million and $2 million, the Expected Market Time decreased from 158 to 116 days. For luxury homes priced between $2 million and $4 million, the Expected Market Time decreased from 368 to 258 days. For luxury homes priced above $4 million, the Expected Market Time decreased from 540 to 455 days.
  • The luxury end, all homes above $1.25 million, accounts for 35% of the inventory and only 15% of demand.
  • Distressed homes, both short sales and foreclosures combined, made up only 0.8% of all listings and 0.9% of demand. There are only 16 foreclosure s and 22 short sales available to purchase today in all of Orange County, 38 total distressed homes on the active market, down 4 from two-weeks ago. Last year there were 65 total distressed homes on the market, slightly more than today.
  • There were 1,712 closed residential resales in April, 34% fewer than April 2019’s 2,599 closed sales. This is entirely due to COVID-19 suppressing both supply and demand. April marked a 28% drop compared to March 2020. The sales to list price ratio was 98.3% for all of Orange County. Foreclosures accounted for just 0.3% of all closed sales, and short sales accounted for 0.4%. That means that 99.3% of all sales were good ol’ fashioned sellers with equity.

Open House North Tustin Single Level Home

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April 2019 OC Housing Market Summary

Here are some highlights of the current housing market and activity in Orange County:

  • The active listing inventory increased by 166 homes in the past two weeks, up 3%, and now totals 6,532. Last year, there were 4,609 homes on the market, 1,923 fewer than today. There are 42% more homes than last year.
  • So far this year, 4% fewer homes came on the market below $500,000 compared to 2018, and there were 15% fewer closed sales. Fewer and fewer homes and condominiums are now priced below $500,000. This price range is continuing to vanish.
  • Demand, the number of pending sales over the prior month, increased by 78 pending sales in the past two-weeks, up 3%, and now totals 2,350, its lowest level for this time of the year since 2014. Last year, there were 2,538 pending sales, 8% more than today.
  • The Expected Market Time for all of Orange County decreased from 84 days two weeks ago to 83 days today, a slight Seller’s Market (between 60 to 90 days) and the highest level for this time of the year since 2011. It was at 54 days last year.
  • For homes priced below $750,000, the market is a slight Seller’s Market (between 60 and 90 days) with an expected market time of 64 days. This range represents 42% of the active inventory and 54% of demand.
  • For homes priced between $750,000 and $1 million, the expected market time is 66 days, a slight Seller’s Market. This range represents 18% of the active inventory and 22% of demand.
  • For homes priced between $1 million to $1.25 million, the expected market time is 85 days, a slight Seller’s Market.
  • There were 1,543 closed residential resales in February, 15% fewer than February 2018’s 1,820 closed sales. February marked a 6% increase from January 2019. The sales to list price ratio was 97.4% for all of Orange County. Foreclosures accounted for just 0.3% of all closed sales, and short sales accounted for 0.6%. That means that 99.1% of all sales were good ol’ fashioned sellers with equity.

Returning to a Balanced Housing Market in Orange County

For years, sellers have been in control of the housing market. Multiple offers were generated almost instantaneously after hammering in the FOR SALE sign. Homes flew off the market in the blink of an eye. Frustrated buyers had to cut back their expectations after writing offer after offer with no success. It felt like housing was unstoppable and would continue its relentless climb. That is until the spring of 2018.

This year has been all about the evolution of housing from a brisk paced, hot, Seller’s Market to a much more normal, Balanced Market. The trouble is nobody really remembers a “normal” market. It is where homes must be priced well, or they will sit. There is no room for error. In a hot seller’s market, homeowners get away with stretching their asking prices. With very little inventory and heated demand, buyers were willing to pay extra just to secure their piece of the “American Dream.”

Today, housing is much more balanced, a market that does not favor sellers or buyers. Overprice and sit. Sellers that pad the price to leave room for negotiations will sit. Sellers who ignore their professional REALTOR® and arbitrarily pick a price, will sit. Ignore real estate fundamentals like location, condition, and upgrades, and sellers will be stuck without success.

An unbelievable 37% of all homes on the active listing inventory have been exposed to the market for more than 60-days. That is high considering 39% of the active listing market has come on within the last 30-days. Of course, everyone

expects Sellers in the luxury ranges to play the waiting game; however, many sellers in the most affordable price ranges are sitting on the market and waiting as well. Below $500,000, it is 28% of the market. Between $500,000 and $750,000, it is 24% of the market. About a third of all sellers between $750,000 and $1 million have been on the market for over two months. From there, the share of sellers who have been waiting to find success grows, from 40% to 68%.

For the rest of the year, the percentages will just grow in every price range. That is because housing is now transitioning into the Autumn Market. This season of real estate begins with the kids going back to school. It is no longer the most advantageous time for families to move, so many would be buyers stop their search for the time being. On average, demand drops by 11% from the end of August to the start of October. With less demand, there are fewer sellers who are able to find success. As a result, more sellers find themselves sitting and waiting.

With both the Spring and Summer Markets in the rear-view mirror, many sellers realize that the best time of the year to sell is now in the past. For the remainder of the year, carefully pricing is absolutely crucial. There will be more homeowners this year who will not be able to isolate a buyer willing to purchase and their contracts to sell will expire. In the real estate trenches, they are called “expired listings.” Expect the number of expired listings this year to spike compared to the rest of the housing run.

Sellers have a choice: price their homes according to the Fair Market Value or throw in the towel and pull their homes off of the market. It sounds simple, but many sellers quite simply cannot get out of their own ways, unwilling to listen to the real estate experts and do what it takes to achieve their goals in selling.

Buyers need to be aware that while it is no longer a hot seller’s market, it is not a buyer’s market either. Looking for a “deal” is a waste of time. They too need to look at offering to purchase at a home’s Fair Market Value. Anything less, and they will not be successful in securing their piece of the “American Dream.”