Where are the home buyers? Is the best way to start this recap! As sellers are not used to waiting, but it is a trend that has evolved this year and is here to stay.
A surprising 37% of the active listing inventory has been on the market for more than two months, something we have not seen in Orange County for some time.
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.”
Below is a summary of the each segment of the OC Real Estate Market:
The active listing inventory increased by 108 homes in the past two weeks, up 2%, and now totals 7,001. Expect the inventory to peak right around now, the start of the Autumn Market. Last year, there were 5,862 homes on the market, 1,139 fewer than today.
· This year, 16% fewer homes have come on the market below $500,000 compared to last year, and there have been 25% fewer closed sales so far this year. Fewer and fewer homes and condominiums are now priced below $500,000. This price range is slowly vanishing.
· Demand, the number of pending sales over the prior month, decreased in the past two-weeks by 44 pending sales, 2%, and now totals 2,350. Demand peaked in mid-May at 2,726 pending sales. Last year, there were 2,825 pending sales, 20% more than today.
· The average list price for all of Orange County remained at $1.6 million over the past two-weeks. This number is high due to the mix of homes in the luxury ranges that sit on the market and do not move as quickly as the lower end.
· For homes priced below $750,000, the market is still a seller’s market (less than 90 days) with an expected market time of 65 days. This range represents 40% of the active inventory and 55% of demand.
· For homes priced between $750,000 and $1 million, the expected market time is 82 days. This range represents 21% of the active inventory and 22% of demand.
· For homes priced between $1 million to $1.25 million, the expected market time is 101 days, a balanced market (between 90 to 120 days).
· For luxury homes priced between $1.25 million and $1.5 million, the expected market time increased from 93 to 110 days. For homes priced between $1.5 million and $2 million, the expected market time decreased from 183 to 135 days. For luxury homes priced between $2 million and $4 million, the expected market time decreased from 294 to 274 days. For luxury homes priced above $4 million, the expected market time decreased from 523 to 470 days.
· The luxury end, all homes above $1.25 million, accounts for 30% of the inventory and only 15% of demand.
· The expected market time for all homes in Orange County increased from 86 to 89 days in the past two weeks and is just about a balanced market (from 90 to 120 days).
· Distressed homes, both short sales and foreclosures combined, made up only 0.8% of all listings and 1.6% of demand. There are only 21 foreclosures and 37 short sales available to purchase today in all of Orange County, 58 total distressed homes on the active market, down by one from two weeks ago. Last year there were 82 total distressed homes on the market, 41% more than today.
· There were 2,766 closed residential resales in July, nearly identical to July 2017’s 2,768 closed sales. July marked a 3% decrease from June 2018. The sales to list price ratio was 97.8% for all of Orange County. Foreclosures accounted for just 0.4% of all closed sales, and short sales accounted for 0.5%. That means that 99.1% of all sales were good ol’ fashioned sellers with equity.
This shift shouldn't be looked at negatively, it is opening up opportunities for all those buyers who could not compete during the HOT Sellers Market. As well, if you have been holding off on moving up, with the increased inventory, you are still able to sell with the majority of the equity increase you had over the last few years, but purchase at some of a reduced price.
If you agree opportunities are ahead, let's grab a cup of coffee and review your goals and the market in your area. We promise to provide you with an in-depth knowledge of the market and a strategy to ensure your goals are met. Don't hesitate to contact us direct!
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