This is the time of the year when more sellers come on
the market than any other time of the year.
More Seller Competition: The active listing inventory is rising.
Isn’t it beautiful? Southern California hills are spectacularly adorned in a blanket of bright orange California Poppies. The record rainfall resulted in a “super bloom” like nobody can remember. People are venturing outside to capture the incredible site, hiking and taking selfies along the way. Spring is definitely here!
The record rainfall kept many homeowners from entering the fray and placing their homes on the market. Yet, the deluge of rain is now in the past. That was during the winter, but spring has arrived in housing as well and there is nothing keeping owners from pounding FOR SALE signs in their front yards. Like the blanket of California poppies, this is the time of the year when more FOR SALE signs blanket neighborhoods in Southern California and across the U.S. than any other time of the year.
Nearly a third of all homes that are placed on the market during the year occur from April through June. There has already been an uptick in the number of homes coming on the market within the last couple of weeks. As a result, the active listing inventory in Orange County grew by 5%, adding an additional 344 homes. It now sits at 6,876 homes, its highest level since mid-November of 2018.
Right now, it is the best time of the year to sell a home in terms of buyer demand. Demand is currently increasing as well, growing by 4% in the past two weeks. It will peak by mid-May. Yet, even with increasing demand, it does not mean that the market is getting hotter. In fact, what you see is what you get. The market will not improve any more than where it is today. This is due to the fact that while demand is rising, so is the active listing inventory. The inventory is rising slightly faster than demand. The added seller competition is offsetting any improvement in demand.
In looking at the Expected Market Time for Orange County (that is the number of days from coming on the market to opening escrow), it has dropped like a rock from the beginning of the year, transitioning from a slight Buyer’s Market to a Balanced Market to a slight Seller’s Market, where it stands today. It dropped from 152 days on January 10th to 84 days today.
For those sellers holding their collective breath in anticipation of a hot Spring, that is not going to occur. Instead, it will be a lukewarm housing market. The current Expected Market Time of 84 days is the highest level for this time of the year since 2011. Last year at this time it was a HOT Seller’s Market and the Expected Market Time was at 54 days.
The difference between a slight Seller’s Market (between 60 to 90 days) and a hot Seller’s Market (less than 60 days) is that the number of buyer showings has dropped, the number of multiple offer situations has dropped, home appreciation has stalled and is only slight rising, and open house activity has fallen. It is quite simply not as hot as prior years. Sellers still get to call the shots, but when the market does not move as quickly, home prices do not move as quickly as well.
Sellers need to understand that the market is not going to get better. In fact, by mid-May it will start to slow. That is when demand starts to drop with all the distractions of graduation and summertime. The inventory continues to rise until peaking sometime in July to August. With slightly dropping demand and increasing seller competition in the form of a rising active listing inventory, the Expected Market Time will grow and the market will slow.
The key for sellers is to realistically price their homes right now versus waiting down the road to get realistic when the market is slowing.
Active Inventory: In the past couple of weeks, the active inventory increased by 5%.
In the past two weeks, the active listing inventory increased by 344 homes, up 5%, and now totals 6,876, the largest two week increase since April of last year. This spike is not only because it is the Spring Market; it is also due to the torrential downpours now being in the past and warmer dryer weather ahead in the forecast. We can expect the inventory to continue to climb from here until it peaks sometime this summer between July and August. The inventory will most likely eclipse the 8,000 home level for the first time since 2014 and it may reach heights not seen since the start of 2012, surpassing 8,500 homes.
Last year at this time there were 4,708 homes on the market. That means that there are 46% more homes available today. This is the highest level of homes on the market for this time of the year since 2011.
Demand: In the past couple of weeks, demand increased by 4%.
Demand, the number of new pending sales over the prior month, continued to rise, increasing by 95 pending sales in the past two weeks, up 4%, and now totals 2,445. Demand is not growing as rapidly after soaring for the first two-and-a-half months of this year, coming off lows not seen since 2008. Demand also slows as it draws closer to its peak, sometime in May. From there, demand will slowly diminish through the rest of the Spring and Summer Markets.
The retreat in interest rates this year has helped demand considerably. As a result, housing has evolved from a slight Buyer’s Market to a slight Seller’s Market, where it stands today. Part of why the market has not developed further to a hot Seller’s Market is that there still is buyer apprehension in approaching housing. They are careful not to overpay and are looking to offer as close to a home’s Fair Market Value as possible. They are not willing to stretch the asking price, which is why homes are currently not appreciating as fast as they have in prior years.
Last year at this time, there were 157 additional pending sales, 6% more than today.
Luxury End: The luxury inventory is climbing faster than luxury demand.
In the past two-weeks, demand for homes above $1.25 million increased by 18 pending sales, a 5% increase, and now totals 370, its highest level since mid-June 2018. The increase in demand was offset by a spike in the luxury home inventory of 120, and now totals 2,210, a 6% increase. The overall expected market time for homes priced above $1.25 million increased from 178 days to 179 over the past two-weeks, a slight increase.
Year over year, luxury demand is up by 17 pending sales, or 5%, and the active luxury listing inventory is up by an additional 351 homes, or 19%. There is a lot more seller competition so far this year compared to 2018. The expected market time last year was at 158 days, better than today.
For homes priced between $1.25 million and $1.5 million, in the past two-weeks, the expected market time increased from 103 to 109 days. For homes priced between $1.5 million and $2 million, the expected market time increased from 146 to 154 days. For homes priced between $2 million and $4 million, the expected market time decreased from 233 to 222 days. For homes priced above $4 million, the expected market time decreased from 562 to 466 days. At 466 days, a seller would be looking at placing their home into escrow around July of 2020.
Orange County Housing Market Summary:
- The active listing inventory increased by 344 homes in the past two weeks, up 5%, and now totals 6,876. Last year, there were 4,708 homes on the market, 2,168 fewer than today. There are 46% more homes than last year.
- So far this year, 3% 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 95 pending sales in the past two-weeks, up 4%, and now totals 2,445, its lowest level for this time of the year since 2008. Last year, there were 2,602 pending sales, 6% more than today.
- The Expected Market Time for all of Orange County increased from 83 days two weeks ago to 84 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 62 days. This range represents 41% of the active inventory and 55% of demand.
- For homes priced between $750,000 and $1 million, the expected market time is 73 days, a slight Seller’s Market. This range represents 18% of the active inventory and 21% of demand.
- For homes priced between $1 million to $1.25 million, the expected market time is 90 days, a slight Seller’s Market.
- For luxury homes priced between $1.25 million and $1.5 million, in the past two weeks, the expected market time increased from 103 to 109 days. For homes priced between $1.5 million and $2 million, the expected market time increased from 146 to 154 days. For luxury homes priced between $2 million and $4 million, the expected market time decreased from 230 to 222 days. For luxury homes priced above $4 million, the expected market time decreased from 562 to 466 days.
- The luxury end, all homes above $1.25 million, accounts for 32% of the inventory and only 16% of demand.
- Distressed homes, both short sales and foreclosures combined, made up only 0.8% of all listings and 1.8% of demand. There are only 19 foreclosures and 30 short sales available to purchase today in all of Orange County, 49 total distressed homes on the active market, down two from two-weeks ago. Last year there were 39 total distressed homes on the market, slightly less than today.
- There were 2,265 closed residential resales in March, 13% fewer than March 2018’s 2,613 closed sales. March marked a 47% increase from February 2019. The sales to list price ratio was 97.3% 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.
Have a great week.
Quantitative Economics and Decision Sciences
Cell : 949.874.8221
Report courtesy of Steven Thomas Reports on Housing. Information deemed reliable but not guaranteed.