Orange County Housing Report: The 10-Year Drought

February 24, 2019

Ever since the Great Recession, far fewer homeowners have been selling their homes annually, a trend that is not going away.

Lack of Sellers: Fewer homeowners are opting to sell in spite of homes appreciating to record levels.

Millions flock to the Hawaiian Islands to escape the grind of everyday life and bask in the tropical sun and warm waters. After relaxing for hours on the sand and swimming in the aqua blue surf, so many vacationers forget to reapply sunscreen. Upon returning to the hotel room, the inevitable has occurred. Looking in the mirror they confirm they have a lobster red sunburn from head to toe. Nearly everybody has experienced the pain of a deep sunburn. It is hard to sleep, hard to take showers, and hard to go back out in the sunshine again. The pain is a reminder to never forget to reapply sunscreen again.

Similarly, homeowners across the nation watched the housing market take a pounding during the Great Recession as their equity vanished in a blink. Many lost their homes to short sales or foreclosures. Everybody either personally got stung by the correction or knew of somebody who did. As a result, a new trend emerged to avoid a lobster red burn in the future: homeowners stay in their homes a lot longer. There are far fewer homeowners who opt to sell every year. Even with record home values, the trend continues.

From 2000 to 2008, there were an average of 1,347 more homes that came on the market every single month compared to the past 10 years. That is an extra 16,158 sellers every year, 39% more. That has been the storyline for a decade, not enough homes are offered for sale. It is not just an Orange County phenomenon. Nor is it isolated to California. A lack of sellers has been a national issue that has plagued the real estate market and made it very difficult for buyers to isolate a home.

The lack of supply and years of red-hot demand, juiced by historically low interest rates, has resulted in homes appreciating to record levels in Orange County, erasing the losses and sting of the Great Recession. This 10-year old trend is now the norm. Homeowners are simply not moving as often as they used to.

Based upon 2018 closed sales, the turnover rate for the Orange County housing stock is once every 21 years, matching the rate of 2016.

In 2018, the markets with the best turnover rates were in South Orange County and along the coast. From the south, Ladera Ranch and Rancho Mission Viejo top the list once again with a turnover rate of once every 11 years. Talega, Laguna Woods, Coto de Caza, San Juan Capistrano and Dove Canyon, all from the south, are all turning over faster than the rest of the county. Newport Coast and Corona del Mar, two of the most expensive zip codes in the county, also made the top eight list. Many of the top eight are newer areas, which tend to turn over more rapidly.

The lowest turnover rates can be found in more established, older cities in North Orange County: Garden Grove, Buena Park, Santa Ana, Fountain Valley, Cypress, La Palma, and Westminster round out the bottom seven with the lowest turnover rates. The lowest rate in Orange County can be found in Westminster where homeowners are moving at a pace of once every 28 years.

There are numerous reasons that homeowners in Orange County and across the nation are opting to stay put. After feeling the burn from the Great Recession, many are turning their homes into “Forever Homes.” A majority of homeowners have refinanced to historically low interest rates, some as low as the mid-threes, making moving a lot more challenging as rates rise.

Buyers must understand that the low turnover rate in the housing stock is here to stay. In some area, homes are coming on the market at a snail’s pace. Here is a great tip for buyers: realistically approach the market with market data, patience, persistence, and a solid game plan, utilizing the expertise of a professional REALTOR®.

Active Inventory: In the past couple of weeks, the active inventory increased by 3%.

Demand: In the past couple of weeks, demand increased by 17%.

Luxury End:  Luxury demand increased by 14%.