April 8, 2018
The lower end of the housing market is not only disappearing, it is impacting pending and closed sales.
Vanishing Lower Ranges: A mind-blowing 15% fewer homes have come on the market below $750,000 so far this year compared to 2017.
The market has been blistering hot for years now. For homes priced below $750,000, it has been a hot seller’s market (an expected market time less than 60-days) since October 2015. Home prices have appreciated dramatically for six solid years. As a result, there are only a handful of detached homes priced below $500,000 today, 55 to be precise, or 1% of the active listing inventory. Back in January 2012, there were 1,806, 22% of the active inventory. Detached homes below $500,000 have essentially disappeared. Similarly, there are only 69 condominiums, 1.5% of the active inventory, priced below $250,000 today. At the beginning of 2012, there were 1,413, 17% of the inventory. Condominiums below $250,000 is a thing of the past.
The story of the disappearing lower end has been evolving. With housing continuing to appreciate, there are now fewer detached homes available below $750,000. It is 13% of all available homes to purchase today compared to 38% in 2012. Relatedly, there are fewer condominiums priced below $500,000, only 13% of today’s inventory compared to 33% in 2012.
The numbers illustrate just how staggering the shortage of lower range homes has become in 2018. So far this year, 20% fewer properties have been placed on the market priced below $500,000 compared to 2017. As a result, there have been 29% fewer closed sales in this price range. The difference is significant. This is precisely why there are so many buyers sitting around waiting for homes to come on the market; there simply are not enough homes in the lower ranges.
Something is distinctly different this year; total sales are down this year compared to last year. Last year, closed sales above $750,000 made up the difference of fewer closed sales in the lower ranges. Not this year. The upper ranges are not making up the difference. There are 5% fewer homes (all price ranges) that came on the market compared to the same time last year; and, there are 6% fewer closed sales. The lack of opportunities below $750,000 is affecting the total number of closed sales in Orange County.
The erosion of more affordable housing has been going on for years. The below $750,000 range was 84% of all closed sales back in 2012. It dropped to 62% last year. Through March of 2018, it has dropped to 59% of all closings. This trend will only continue as long as the market remains hot. With a depressed inventory and unrelenting demand, this sizzling market is poised to continue for quite some time.
For buyers anticipating more homes in the affordable price ranges coming on the market soon, it is just not going to happen. The number of opportunities is diminishing over time. Buyers who wait will be confronted with fewer available options to purchase.
Active Inventory: The active inventory only added 99 homes in the past two weeks.
The active listing inventory continued its climb in the past two weeks, just at a slower pace, adding 99 homes, up 2%, and now totals 4,708. The active inventory had been increasing at a very fast pace, but not in the past two weeks. Expect the inventory to continue to climb as the market moves deeper into the Spring and Summer Markets, peaking sometime between July and August.
Demand: Demand increased by an unimpressive 3% in the past two weeks.
Last year, demand, the number of new pending sales over the prior month, increased by 11% at this time of the year. This year, demand increased by only 3%, adding 64 pending sales over the past couple of weeks, and now totals 2,602. The last time demand was above the 2,600 pending sale level was back in August 2017. The Spring Market is here, just not at the same pace as the past few years. If this trend continues, it could impact total sales for the year.
Luxury End: The luxury inventory increased while demand remained the same.