January 13, 2019
The start to 2019 is unlike the last 6-years, paving the way for a much different year.
The 2019 Start: There are a lot more homes, demand is down, and the Expected Market Time is at its highest level since January 2011.
The holiday decorations have been taken down, placed in their appropriate boxes, and carefully tucked away in the attic. Everybody is slowly coming out of the fog after enjoying the festive season full of so many distractions. It is already two weeks into the New Year. This is when the housing market awakens and starts to thaw. Yet, something is different this year.
Orange County housing is starting off on a completely different foot and it is all due to the shift in the market in 2018. The shift was a move away from the theme of “not enough homes on the market” to “not enough demand.” For years, the story was that housing was suffering from a supply problem, but that morphed into a demand problem last year. It is good old fashioned supply and demand from Econ 101. These shifts caused the market to change.
Since 2012, housing has had very little supply and plenty of demand, which favors sellers. But, in 2018, as the supply increased, and demand dropped, the market shifted from a Seller’s Market to a Balanced Market to a slight Buyer’s Market. That is precisely where housing is starting 2019, a slight Buyer’s Market. Sellers are no longer calling the shots. A slight Buyer’s Market does NOT mean that prices are falling like a rock. Lowball offers are a waste of time and indicate that a buyer is not in touch with reality. Instead, it is a market where buyers no longer have to trip over each other to purchase. They can take their time and call more of the shots in the purchase contract. They are in control.
There were 64% more homes on the market to start 2019 compared to last year and it was the highest inventory start since 2012.
Demand, the last 30-days of pending activity, started the year with 1,190 pendings sales, 21% fewer than last year.
The housing run in Orange County is over. There is a completely different flavor to the market. For years sellers have been in control. For the past few years the Expected Market Time started the year below 90-days, a Seller’s Market; AND, that was in January. This year housing started the year at 142 days and increased to 152 by January 10th. It is a Buyer’s market at the start of the year for the first time in nine years.
The Orange County housing market will thaw and improve from here, moving towards a Balanced Market. The best time of the year is around the corner, from February, right after the Super Bowl, through April. There will be no Hot Seller’s Market this year. It will be balanced at best. In May ,the Expected Market Time rises and the market slowly cools.
Words of caution for sellers: if you are holding out for the Spring Market in anticipation of a quick sale and a price higher than the last comparable sale, that simply will not happen. Instead, sellers will be looking at a much more sluggish market with muted demand and buyers taking their time to purchase. Properly pricing is absolutely crucial in order to find success.
Words of caution for buyers: home values are not dropping much at all right now, so lowball offers is just a waste of everybody’s time including your own. The market is going to improve a bit over the coming weeks and move more towards a Balanced Market during the spring. After isolating a home they like, buyers need to offer the Fair Market Value for a home. A home in great condition that is priced right will not last long even in a slight Buyer’s Market. The old saying “you snooze, you lose” applies.
Active Inventory: In the past couple of weeks, the active inventory increased slightly.
Demand: In the past couple of weeks, demand dropped quite a bit, as it always does to start a year.
Luxury End: The luxury housing market continued to slow considerably.