The Orange County housing behaves differently depending upon the price range.
Different Markets: The entry market is HOT while luxury is not.
A nicely upgraded detached home comes on the market in mint condition listed FOR SALE at $650,000. During the initial weekend, the open house is a total success with buyers bumping into each other to see the home. By Monday morning, the listing agent is sorting through five offers to purchase the home. By the week’s end, the seller is able to come to an agreement and accepts a full price offer that closes in 30-days.
A beautiful upgraded luxury homes comes on the market with an entertainer’s yard listed FOR SALE at $1.6 million. Seven different buyers tour the home in the initial week. Quite a few people come through the weekend open house. The first week’s activity is solid, yet there are no offers generated. It is not until nearly hitting the three-month mark on the market when the sellers are entertaining their first offer. There had been some interest prior, but nobody was willing to step up and write an offer to purchase. A few days later, after back and forth negotiations, the seller comes to an agreement and accepts an offer for $30,000 less than what they were asking and closes in 60-days.
These two scenarios are both taking place right here in Orange County and are typical for their specific price ranges. Yes, the market is HOT, but the higher the range, the longer it takes to sell a home. The “FLAVOR” of the market really depends upon the price point of a home.
The market is sizzling hot for homes priced below $750,000. That price range gets the most press and it is what everybody is talking about in discussing Orange County housing. When you hear about multiple offers within days and lines of people touring the open house, chances are it is a home in the lower end of the market. The lion’s share of all closed sales in 2017, two-thirds took place below $750,000. It is a majority of today’s market, yet there are not enough on the market today. It currently accounts for only 37% of the active listing inventory.
The $750,000 to $1 million price range is still hot, but, on average, it takes a couple of more weeks to negotiate a deal compared to the lower ranges. Condominiums in this range need to price carefully. There just are not as many buyers looking to purchase an attached home priced above three-quarters of a million dollars.
Above $1 million, the market decelerates quite a bit. The expected market time is still less than 90-days for homes priced between $1 million to $1.5 million, but they are not flying off the market with buyers tripping over themselves to purchase. Above $1.5 million, it’s a totally different ballgame, ranging from an expected market time of 4 months to nearly a year. There simply are not enough luxury buyers, but there are certainly plenty of competing sellers.
Regardless of the price range, from now through August, there will be a lot more homes coming on the market and the active inventory will continue to grow. As the supply of homes grows and demand stays relatively the same, the expected market time will grow as well. More homes coming on the market means more competition. In order to find success at ALL price points, it is imperative that sellers carefully price their homes according to their Fair Market Values. Many sellers will fall victim to overpricing and will not achieve their objective until they correct their asking price with a reduction more in alignment with their true Fair Market Value.
Active Inventory: The active inventory increased by 5% in the past couple of weeks and is growing at a fast clip.
After a very slow start, the active inventory is rapidly increasing, adding an additional 547 homes in the past month, a 12% increase, and now sits at 5,263. This is the time of the year when many homes come on the market, but it’s at a much faster pace right now. That may be partially due to the lack of new homeowners coming on the market for the first two-and-a-half months. It’s as if somebody flipped the “ON” switch at the end of March. The inventory has been rapidly increasing ever since.
From here we can expect the active inventory to continue to increase through mid-August where it will peak. With more competition, the market will cool a bit as it transitions into the Summer Market.
Last year at this time, there were 5,862 homes on the market, 11% more.
Demand: Demand is off by 6% compared to last year at this time.
Demand, the number of homes placed into escrow within the prior month, only grew by 24 pending sales in the past couple of weeks, or 1%, and now totals 2,981. It is just about to surpass the 3,000 pending sale mark within the next couple of weeks; yet, that should have occurred by now. Part of the issue is that there are still not enough FOR SALE signs below $500,000 compared to last year.
Last year at this time, there were 202 more pending sales totaling 3,183.
Luxury End: The luxury range is HOT with demand up 19% compared to last year.
Demand may be flat for Orange County as a whole, but it is much stronger for luxury homes compared to 2016. For all homes priced above $1 million, luxury demand is strong with 96 additional pending sales compared to last year at this time, 19% higher. Today’s luxury inventory is nearly the same as last year, with 8 fewer homes on the market. The overall expected market time for all homes priced above $1 million is 117 days compared to 140 days last year.
In the past two weeks, demand for homes above $1 million increased from 573 to 597 pending sales, a 4% rise, and its highest level ever. The luxury home inventory increased from 2,229 homes to 2,338, up 5%.
For homes priced between $1 million to $1.5 million, the expected market time in the past couple of weeks increased from 81 days to 84 days. For homes priced between $1.5 million to $2 million, the expected market time increased from 110 to 116 days. In addition, for homes priced above $2 million, the expected market time decreased from 202 days to 189 days. At 189 days, a seller would be looking at placing their home in escrow around the end of October.