Orange County Housing Report: A Slight Thaw

lindseym January 30, 2019

January 27, 2019

After an extremely cool December, housing is starting to warm up a bit.

Housing Thaw: With rising demand, the housing market is starting to move its way towards a Balanced Market.

It is a Southern California chilly morning. You climb into your car for the daily commute to the office and blast the heater, but it blows cold air because the engine is not hot yet. Your fingers are numb, and you cannot wait for the temperature to start to rise. After a couple of minutes, the blowing air begins to warm. That is precisely how the housing market starts every year. Housing’s engine is cold on the first of January and takes a few weeks to heat up. This year is no exception, the market is finally starting to warm up a bit.

The housing market in 2019 started off a lot colder than everybody had been accustom to. It was the coldest start since 2011 with an Expected Market Time of 152 days, Buyer’s Market territory (the Expected Market Time is the amount of time it would take to place a home on the market today and enter escrow down the road). But, in the past couple of weeks, the market began its annual thaw.

The active inventory rose by 4% and demand jumped by 23%, as a result, the Expected Market Time dropped from 152 days to 128. At 128 days, it is still a slight Buyer’s Market, just not as frigid as a couple of weeks ago.

This year’s market is completely different than the past seven years. From 2012 through 2018, housing moved to a Seller’s Market by the end of January. In most cases, it quickly moved to a HOT Seller’s Market with Expected Market Times below 60-days. That will not be the case for 2019. Instead, the market is moving towards a Balanced Market, one that does not favor buyers or sellers.

The best time to sell a home, with the lowest Expected Market Time readings for the year, occurs from the Super Bowl through mid-May. This year will be no exception; it just will not be as robust as the past seven years. Many homeowners and sellers are holding their collective breath with high expectations for the Spring Market. Remember, right now it is still a slight Buyer’s Market. It will drop down to a Balanced Market, NOT a Seller’s Market. It will remain balanced until mid-May.

Why will Orange County housing not be hotter in the spring? The answer is a simple Econ 101 principle, supply and demand. The supply of homes, the active listing inventory, is up 62% over last year. Demand, the last 30-days of pending sales, is down 19% from last year. With more sellers competing against each other, coupled with muted demand, the market feels a bit more sluggish than what everybody has been accustom to.

The bottom line: expect housing to be different this year, plan and adjust accordingly.

Active Inventory: In the past couple of weeks, the active inventory increased by 4%.

Demand: In the past couple of weeks, demand increased by 23%.

Luxury End:  The luxury housing market showed some life and is beginning to thaw.

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