November 19, 2017
With an unrelenting lack of supply of homes FOR SALE, it will not be a buyer’s market anytime soon.
Not a Buyer’s Market: Since 2012, the active inventory for Orange County has been extremely limited.
It is time to load the plate with turkey, ham, sweet potatoes, string beans, mashed potatoes, Brussels sprouts, stuffing, and cranberry sauce. Thanksgiving is all about plenty of choices and not enough room on the dinner plate to fit it all. As Americans, we eat more on this day than any other day of the year.
There may be plenty of choices for the Thanksgiving meal, but the Thanksgiving housing market is seriously lacking choices with a razor thin supply of homes for sale. With only 4,714 homes available to purchase in Orange County, buyers in the lower ranges, homes priced below $750,000, are literally waiting on the sidelines for the next home to come on the market. It is a seller’s market for all homes below $1.25 million (88% of all closed sales in 2017 have been below $1.25 million).
The active listing inventory in Orange County has been leaning in the sellers favor since February 2012. That was not only the beginning of the recovery, it was the beginning of a six year run in housing. And, housing is poised to continue its run for a seventh year due to a chronically low inventory.
In order for housing to move away from a seller’s market and transition to a balanced market, one that does not favor a buyer or seller, the active inventory must grow beyond 8,000 homes. When it remains above the 8,000 home threshold, housing will eventually transition into a buyer’s market. However, that is not going to occur anytime soon.
It occurred for about five months back in 2004, not long enough to move from a balanced market to a buyer’s market. It happened again for a couple of months during the Autumn Market of 2005, one of the first cracks in the housing market that lead up to the Great Recession. The active inventory surpassed 8,000 homes again in January 2006 and remained elevated through September 2009, nearly four consecutive years. Even though the Great Recession started in March 2007, the active inventory signaled throughout 2006 that the market was poised for a change.
The active inventory climbed above the 8,000 mark again in February 2010 and remained elevated through January 2012, an additional two years. From there, it dropped like a rock and housing transitioned seemingly overnight from a buyer’s to a seller’s market. It has been a seller’s market ever since and has only surpassed the 8,000 home threshold for four weeks during the summer of 2014, not long enough for anybody to notice.
The bottom line is this: the 8,000 home mark is a level that establishes which way the market is heading. With an only 4,714 homes on the market today, and dropping, the inventory is nowhere close to that mark. In fact, 2018 is going to start with fewer than 4,000 homes, less than the start to this year. And, this year was defined by its lack of homes for sale, especially below $750,000.
Everybody is wondering, “When will Orange County housing become a buyer’s market?” The answer is, quite simply, “not anytime soon.”
Active Inventory: The active inventory dropped by 3% over the past couple of weeks.
The active listing inventory shed 164 homes in the past two weeks and now sits at 4,714, a 3% drop. Since peaking in mid-July, the inventory has discarded 1,269 homes, a healthy 20% drop. With Thanksgiving this week, housing will transition into the Holiday Market and the inventory will drop like a rock from this week through the end of the year. The New Year will start with fewer than 4,000 homes, the second lowest inventory behind 2013.
Demand: Demand decreased by 4% in the past couple of weeks.
Demand, the number of homes placed into escrow within the prior month, decreased by 95 pending sales, or 4%, in the past two-weeks, and now totals 2,314. With Orange County housing transitioning into the Holiday Market this week, demand will decline and pick up momentum in December. By the start of the New Year, demand will be at its lowest point of the year.
Luxury End: Luxury demand fell sharply in the last couple of weeks.
In the past two weeks, demand for homes above $1.25 million decreased from 325 to 299 pending sales, down 8%. Luxury is already transitioning into the Holiday Market. The luxury home inventory decreased from 1,712 homes to 1,672, a 2% drop in the past two-weeks. Expect both the inventory and demand to drop through the end of the year. The expected market time for all homes priced above $1.25 million increased from 158 days to 168