June 3, 2019
Sometimes it is a great idea to step away from the noise swirling around housing and focus on the trends.
Top 5 Housing Trends: With five months of the year in the rearview mirror, there are crystal clear trends in 2019.
Everybody seems to have an opinion about the direction of the housing market. “Up!” “Down!” “The housing run has peaked!” “I’m going to wait for values to come crashing down.” In the end, there is way too much noise that is not rooted in facts, ignoring the data. It is time to step aside from the commotion and look at the trends that have surfaced in 2019.
Here’s a breakdown of the “Top 5” current Orange County housing trends:
- There are a lot more homes on the market. In fact, this is the highest active inventory level since 2011. There are 7,479 homes that are currently FOR SALE. That is 27% more than last year, an additional 1,605 homes. At the start of the year, the difference was 2,204, so this trend is beginning to diminish. The big rumor is that there are a lot more homeowners opting to sell and flooding the market. The reality is that there are nearly the same number of sellers coming on the market year after year.
- Demand is muted compared to 2012 through the 2017. This trend emerged last year. In 2018, through May, demand (the number of new pending sales in the prior 30-days) was down by 13% compared to 2012 through 2017, the housing recovery. In 2019, it is down 20% compared to those same years. The muted demand has made it more challenging to sell. Homes are not appreciating like they used to. With values reaching record levels, the rise in incomes coupled with inflation has not been able to keep up with home prices. Also, many believe that the current seven-year housing run is reaching a peak and running out of steam. These factors are softening demand.
- Muted demand has put a damper on closed sales. The number of closed sales is down 9% compared to last year and off by 12% compared to 2017. When there are fewer pending sales, that translates to fewer successful closed sales. For the rest of the year, expect reports of year over year closed sales to be almost identical.
- Home appreciation is now flat, so careful pricing is crucial. With a higher active inventory, coupled with muted demand, the Expected Market Time has increased substantially. Currently, it is at 85 days, a slight Seller’s Market. Unlike 2012 through 2018, housing did not enjoy a HOT Seller’s Market. It only evolved to a slight Seller’s Market, one where sellers get to call more of the shots, but homes are not appreciating much at all. Expect this trend to continue through the remainder of the year.
- Interest rates have dropped dramatically over the past 6 months, improving affordability substantially, but not fueling much of a bump in demand. After nearly reaching 5% back in November, mortgage rates have dropped to 4%. They have not been this low since January 2018, right before they began to spike. This has increased affordability greatly.
Active Inventory: The current active inventory is at its highest point since September 2014.
Demand: In the past four weeks, demand was nearly unchanged.
Luxury End: The luxury market improved in the past couple of weeks.