OC Reports on Housing by Steven Thomas
A Blazing November
November 16, 2020
With an extremely limited supply, this is the hottest
November since 2012.
Hot November Housing
With an Expected Market Time of 41 days, in the midst of November, the Orange County housing market is hotter than the Spring Markets of 2014 through 2019.
If a home is priced according to its Fair Market Value and is in great condition, it will procure multiple offers, a bidding war will ensue, and it will often sell for more than the asking price. Home values are on the rise.
It is sizzling hot in the middle of November and the start of the Holiday Market, now through the first few weeks of January.
The Expected Market Time (the time between pounding in the FOR-SALE sign to opening escrow) is currently at 41 days, a Hot Seller’s Market.
The start of 2021 will be like 2013; it will be a Hot Seller’s Market upon ringing in the New Year. It will be ushered in with a record low number of available homes to purchase, beating the lows established in 2013. The depleted supply will be met with a rush of demand stimulated by a record low interest rate environment. A low supply and hot demand bode well for sellers. That is the story right now, and it will be the story in 2021.
A WARNING to Buyers: The market is hot now and will remain hot through the spring of 2021. Do not expect the market to slow just because of all the diversions of the holidays. Right now is still an unbelievable opportunity for buyers to cash in on the record low mortgage rate environment. There is plenty of buyer competition and it is not going anywhere.
A WARNING to Sellers: Carefully pricing a home based upon its condition, upgrades, and location is still fundamental to find success. Overpricing a home will not only result in a waste of market time, but it will also
prevent a seller from taking advantage of the bidding war that ensues when priced according to its Fair Market Value. As a result, overpriced sellers often net less at the closing table.
The current active inventory decreased by 3% in the past two weeks.
Even with the drop in the active inventory, there are MORE homes coming on the market right now compared to last year. COVID-19 suppressed homeowners from entering the fray earlier in the year, but that ended in Orange County in July. Now there are more homes coming on the market year over year. In October, there were 16% more homes that came on the market compared to 2019, an additional 464 FOR-SALE signs. The fact that housing is pumping on all cylinders and mortgage rates are at record levels, more homeowners are being lured into selling their homes.
Last year at this time, there were 5,534 homes on the market, 1,691 additional homes, or 44% more. There were a lot more choices for buyers last year.
Demand plunged by 7% in the past two weeks.
Demand, the number of new pending sales over the prior month, decreased from 3,019 to 2,799 in the past couple of weeks, shedding 220 pending sales, down 7%. This is a seasonal phenomenon caused by the distractions of the holidays and a diminishing number of homes available to purchase. It is still the strongest level for November since 2012. For the remainder of the year, demand will consistently drop until ringing in a New Year. Yet, it is important to note, that current demand is elevated and at its highest level in eight years.
Orange County Housing Summary
· The active listing inventory decreased by 101 homes in the past two-weeks, down 3%, and now totals 3,843, its lowest level since January 2018. COVID-19 is not suppressing the inventory. In October, there were 16% more homes that came on the market compared to last year. Last year, there were 5,531 homes on the market, 1,691 additional homes, or 44% more.
· Demand, the number of pending sales over the prior month, decreased by 220 pending sales in the past two-weeks, down 7%, and now totals 2,799. COVID-19 has no effect on demand. Record low rates are fueling today’s exceptional demand. Last year, there were 2,328 pending sales, 17% fewer than today.
· The Expected Market Time for all of Orange County increased from 39 days to 41, a Hot Seller’s Market (less than 60 days). It was at 71 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 30 days. This range represents 34% of the active inventory and 47% of demand.
· For homes priced between $750,000 and $1 million, the expected market time is 25 days, a hot Seller’s Market. This range represents 16% of the active inventory and 27% of demand.
· For homes priced between $1 million to $1.25 million, the expected market time is 40 days, a hot 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 50 to 56 days. For homes priced between $1.5 million and $2 million, the Expected Market Time increased from 62 to 72 days. For luxury homes priced between $2 million and $4 million, the Expected Market Time increased from 116 to 118 days. For luxury homes priced above $4 million, the Expected Market Timeincreased from 255 to 308 days.
· The luxury end, all homes above $1.25 million, accounts for 39% of the inventory and only 17% of demand.
· Distressed homes, both short sales and foreclosures combined, made up only 0.3% of all listings and 0.3% of demand. There are only 5 foreclosures and 7 short sales available to purchase today in all of Orange County, 12 total distressed homes on the active market, down 1 from two-weeks ago. Last year there were 54 total distressed homes on the market, more than today.
- There were 3,359 closed residential resales in October, 31% more than October 2019’s 2,564 closed sales. October marked a 0.6% increase compared to September 2020. The sales to list price ratio was 98.4% for all of Orange County. Foreclosures accounted for just 0.1% of all closed sales, and short sales accounted for 0.2%. That means that 99.7% of all sales were good ol’ fashioned sellers with equity.
Have a great week.
Quantitative Economics and Decision Sciences