The concern is that there will not be a lot of fresh inventory for the remainder of the year. We are continuing to test new lows and buyers that remain in the hunt are going to get no relief from the holiday slowdown. There just are too few homes on the market and buyers have come to the realization that it is finally time to buy. So, many buyers are going to feel like they have the appropriate strategy of pouncing on a property during the holiday lull. Given the number of buyers who have been unsuccessful after writing multiple offers, expect many of them to attempt the same strategy. As a result, they will encounter continued competition to purchase.
Another “spooky” concern are the number of homeowners that are entering the housing market way too overconfident. Not too long ago, buyers were in control of the market. Flash forward to today, just a half of a year into a healing housing market, and sellers are getting ahead of themselves and offering ridiculous asking prices. Given supply and demand, buyers are willing to pay a little bit more than the last closed sale within hot ranges and hot areas, but, if you are a seller, hold your horses. For most homes, a few thousand dollars more than the last comparable sale is agreeable to buyers in the midst of a lot of competition, but they will walk away, or will ignore altogether, a home that is listed at 10% above the last comparable sale.
The median sales price in Orange County was up nearly 6% in a year. That means it took 365 days to go up 6%, not a couple of months. The problem with some sellers is that they price their homes 6% or more than the home that just closed last week or last month. Homes do not appreciate that much in such a short period of time. It takes much longer than that.
For those sellers willing to keep their home ready to show day in and day out for a year, the market just might appreciate to their overzealous price in time, a very, very long time. With so few homes on the market, even overpriced homes will be shown a lot; they simply will not sell. Instead, they will waste everybody’s time, including their own, as tons of willing and able buyers tour their home without writing an offer. Any offers generated will be “lowball” in the minds of sellers, but in the minds of buyers, they are strategizing on ways to get the seller off of their high horse and back down to reality.
Active Inventory: The record low inventory is approaching 4,000 homes.
Active Inventory: The record low inventory is approaching 4,000 homes.
In all of Orange County, the active inventory is knocking on an incomprehensible level never seen before. It is knocking loudly on the door of 4,000 homes. Within the past two weeks alone, it shed an additional 156 homes, 4%, and now totals 4,043. The third most populous county in California, home to over 3 million people, has only a few thousand homes on the market. The housing diet started in June of last year, dropping continuously and shedding 64% of the inventory in that time.
Last year at this time there were 9,875 homes on the market, well over double the current inventory. The active inventory stood at 8,114 homes at the beginning of the year, more than double today’s historical low.
Demand: Demand continued to drop along with the anemic inventory.
Understandably, blaming a drop in demand on the low inventory sounds counterintuitive, but it is completely valid in this case. Ask every REALTOR® with pockets filled with willing and able buyers, unable to purchase thus far because there is nothing to show their buyers. When something does pop onto the market, good luck on finding parking to see the home! In the past month, 11% fewer homes were placed on the market compared to last year at this time. This year interest rates are much better and buyers are finally convinced that it is a good time to buy. Even with fewer homes being placed on the market, demand is till 10% stronger than last year. Currently, demand, the number of new pending sales over the prior month, dropped by 3% in the past two weeks, or 110 pending sales, and now totals 3,145. Demand is slowly dropping in conjunction with fewer homes listed for sale.
The Distressed Market: The distressed market has not stopped dropping since one year ago.
Last year at this time there were 9,875 homes on the market, well over double the current inventory. The active inventory stood at 8,114 homes at the beginning of the year, more than double today’s historical low.
Demand: Demand continued to drop along with the anemic inventory.
Understandably, blaming a drop in demand on the low inventory sounds counterintuitive, but it is completely valid in this case. Ask every REALTOR® with pockets filled with willing and able buyers, unable to purchase thus far because there is nothing to show their buyers. When something does pop onto the market, good luck on finding parking to see the home! In the past month, 11% fewer homes were placed on the market compared to last year at this time. This year interest rates are much better and buyers are finally convinced that it is a good time to buy. Even with fewer homes being placed on the market, demand is till 10% stronger than last year. Currently, demand, the number of new pending sales over the prior month, dropped by 3% in the past two weeks, or 110 pending sales, and now totals 3,145. Demand is slowly dropping in conjunction with fewer homes listed for sale.
The Distressed Market: The distressed market has not stopped dropping since one year ago.
The distressed market has dropped, unabated since the end of October last year, when it totaled 3, 563. It has plummeted by an astonishing 87%. The distressed inventory has not been this low since May 2007. It currently represents just 13% of the total active inventory and 35% of demand. Last year it represented 36% of the inventory and 54% of demand. This is a definitive sign that the Orange County housing market is recovering. In the past two weeks, the foreclosure inventory decreased by 10 homes, totaling 128, and has an expected market time of 21 days. The short sale inventory decreased by 21 homes in the past two weeks and now totals 404. The expected market time is only 13 days and continues to be the hottest segment of the housing market.
Written by,
Steven Thomas
Quantitative Economics and Decision Sciences
