August 12, 2019 / By Steven Thomas
Buyer demand may not be as hot as prior years, but the Housing market is not collapsing either.
No Housing Collapse: The underlying housing fundamentals have stabilized significantly compared to last year’s slide.
Little kids often have a tough time climbing under the covers and swiftly dozing off to sleep. Instead, they look under their bed to make sure there is nothing there. They look in their closet and then close the door tight. They make certain that the nightlight is brightly shining. There are even times when they will ask dad or mom to be absolutely certain that there are no monsters in their room. Finally, they anxiously fall asleep.
For buyers or sellers wondering if there are any monsters lurking around the corner, they can be rest assured that the sky is not falling, there are no surprises on the housing front anytime soon. Reports from the housing trenches are that many buyers expect the market to drop like a rock and that is when they will finally be able to purchase. That simply is not on the horizon. Sitting back and waiting on the sidelines will prove to be a waste of time.
From May through August of last year, the active inventory climbed by 17%, demand dropped by 10%, and the Expected Market Time (the amount of time it would take from hammering in the FOR SALE sign to opening escrow) rocketed upward. The Expected Market Time continued to soar by climbing an additional 56% from August through the end of the year, compared to a 7% average from 2012 through 2017.
This year, from May to the start of August, the active inventory has remained unchanged, demand has only dropped by 2%, and the Expected Market Time increased by only 1%. Housing is not grinding to a halt. The sky is not falling. Typically for this time of the year, the Summer Market, the active inventory rises, demand drops slightly, and the Expected Market time slowly increases. This year, there has not been much change at all.
Orange County housing has improved dramatically since all the cracks of last year. But that does NOT mean that the market is back on track and will rapidly appreciate like it did before. Take a closer look at demand. It is up 9% compared
to last year. But, do NOT get too excited in comparing the market this year to last year. The numbers are going to look great for the rest of the year compared to 2018. However, housing grinded to a halt from July to the end of 2018. A better comparison is to look at the market when it was hot, improving, and appreciating.
Contrasting this year to 2017 paints a much better picture as to where local real estate is heading. Demand in Orange County is off by 10% compared to 2017. It is still muted, just not sliding off a cliff like it was last year. The inventory is up by 27% compared to two years ago. The Expected Market Time is at 86 days compared to 61 days in 2017.
It is time for everybody’s expectations to be adjusted. The market is not as hot as before. Housing is not sliding into the abyss. Property values are not skyrocketing right now, but they are not falling either. Local real estate is not changing that much; what you see is what you get.
The bottom line: while housing is not as robust today as prior years, it is not spiraling out of control and will not result in a housing downturn anytime soon. The sky is not falling.
Active Inventory: The current active inventory shed 113 homes in the past two-weeks.
Demand: In the past two-weeks, demand increased by 4%.
Luxury End: The luxury market improved in the past couple of weeks.