Bone Dry: A Supply Problem

For years, there have not been enough homes on the market, and the start to 2020 is especially pronounced.

Life is a time crunch. Inevitably, important errands are left to the last minute. It’s happened to everybody at one time or another. With Valentine’s Day on the horizon, it will happen again. Many will head to the grocery store on February 13th and make a bee line to the greeting card aisle, only to find twenty other procrastinators hurriedly looking for the best card. Squeezing between the crowd reveals a half empty shelf with the best cards undoubtedly already taken. The whole ordeal is frustrating. 

Similarly, buyers this year are just as frustrated. The Orange County housing shelves are half empty. It is tough being a buyer looking for a home in today’s market. The year started with 3,692 homes, the third lowest start in decades behind 2013 and 2018. There were 5,565 homes to start 2019, 51% more than January 1, 2020. There were a lot more choices a year ago, but not today. 

The trend of the supply problem dates to the beginning of the Great Recession, 2008. Ever since then, fewer and fewer homeowners have placed FOR SALE signs in their front yard. This trend is hardly a blip on the radar screen; instead, it has continued for twelve consecutive years. Last year may have seemed like a better year with more homes to choose from, but that was caused by diminished demand due to higher interest rates. Homes that typically would have sold in prior years lingered on the market until interest rates dropped to historical lows, dropping from 4.5% at the start of 2018 to below 3 by the end of May. 

The number of homes placed on the market in 2019 was down by 4% compared to 2018, a difference of 139 fewer homes 

every single month. Yet, the 139 fewer home difference is nothing compared to the first decade of the 2000’s. In 2004, there were 2,099 more homes placed on the market every single month. That’s an additional 25,000 homes for the year, plenty for buyers to choose from. 

Additionally, in December 2019, there were 12% fewer homes listed for sale, 1,339 new FOR SALE signs compared to 1,534 in December 2018. In fact, it was the lowest number of homes placed on the market since the start of accurate record keeping back in 1999. Fewer homes for the year and a further drop to end 2019 set up the low inventory start to 2020. 

Price is determined by supply and demand. For kicks and grins, imagine that demand remained the same. When the same number of buyers are interested in purchasing a home, yet the supply of homes drops considerably, it essentially becomes a bidding war where the highest bidder wins. As a result, prices rise. Essentially, that is what has happened during this housing run that dates to 2012. In 2012, demand spiked; however, there were not enough homes on the market to satiate the voracious appetite for buyers to buy. Home values have been on the rise ever since, slowing considerably last year because of muted demand. With the return of historically low mortgage rates and an extremely anemic supply of homes, the bidding wars are back and so is the return of appreciation.

 Buyers who feel as if they are running out of luck can attest to the need for more choices. It’s “slim pickens,” especially in the lower ranges. And, this is occurring during the Holiday/Winter Market. The market will really heat up in just a couple of weeks, right after the Super Bowl. 

 ADVICE FOR BUYERSbe realistic from the start. Do not delay in pulling the trigger to write an offer to purchase a home that piques your interest. Buyers do not have to overpay for a home. They may have to pay slightly more than the most recent comparable sale. Offer the FAIR MARKET VALUE for a home. Most of all, pack your patience. 

 ADVICE FOR SELLERSbe realistic in pricing. Too many over-exuberant sellers initially overprice their homes. Homes do not rapidly appreciate. Orange County homes are projected to increase 5% over the next 12-months. That is 365 days, not 30 days. So, price accordingly. A wise strategy is to price a home at its FAIR MARKET VALUE. The better the price, the more activity a home generates. Multiple offers drive the sales price up.


The active listing inventory shed 645 homes in the past month and now sits at 3,901, a 14% drop. The inventory has not been this low since January 2018. From January 1st to today, the active listing inventory has actually risen from 3,692 to 3,901 homes, an increase of 209 homes, or 6%. From here, expect the inventory to continue to rise until peaking sometime over the summer. This is the time of the year where more and more homeowners opt to place their homes on the market now that the holidays are in the past. Some had taken their homes off the market to skip the slowest time of the year and are ready to give it another shot. The number of new FOR SALE signs will grow as the year progresses, peaking during the Spring Market.

 Last year at this time, there were 5,911 homes on the market, 2,010 more than today, a 52% difference. The inventory is MUCH different than last year when buyers had a lot more choices.


Orange County Market Summary

  • ·       The active listing inventory dropped by 148 homes in the past two-weeks, down 4%, and now totals 3,901, the lowest level since January 2018. Last year, there were 5,911 homes on the market, 2,010 more than today, or an extra 52%. 
  • Demand, the number of pending sales over the prior month, decreased by 156 pending sales in the past two-weeks, down 10%, and now totals 1,434. Last year, there were 1,165 pending sales, 19% fewer than today. 
  • The Expected Market Time for all of Orange County increased from 76 days to 82, a slight Seller’s Market (between 60 to 90 days). It was at 152 days last year, substantially slower than today. 
  • For homes priced below $750,000, the market is a hot Seller’s Market (less than 60 days) with an expected market time of 57 days. This range represents 35% of the active inventory and 51% of demand.
  • For homes priced between $750,000 and $1 million, the expected market time is 58 days, also a hot Seller’s Market. This range represents 17% of the active inventory and 24% of demand.
  • For homes priced between $1 million to $1.25 million, the expected market time is 84 days, a slight Seller’s Market.
  • For luxury homes priced between $1.25 million and $1.5 million, in the past two weeks, the Expected Market Time remained the same at 124 days. For homes priced between $1.5 million and $2 million, the Expected Market Time increased from 115 to 149 days. For luxury homes priced between $2 million and $4 million, the Expected Market Time decreased from 238 to 199 days. For luxury homes priced above $4 million, the Expected Market Time decreased from 686 to 605 days. 
  • The luxury end, all homes above $1.25 million, accounts for 38% of the inventory and only 16% of demand.
  • Distressed homes, both short sales and foreclosures combined, made up only 1.2% of all listings and 1.6% of demand. There are only 18 foreclosures and 27 short sales available to purchase today in all of Orange County, 45 total distressed homes on the active market, down 4 from two-weeks ago. Last year there were 67 total distressed homes on the market, slightly more than today.
  • There were 2,469 closed residential resales in December, 40% more than December 2018’s 1768 closed sales. December marked a 10% increase compared to November 2019. The sales to list price ratio was 97.4% for all of Orange County. Foreclosures accounted for just 0.6% of all closed sales, and short sales accounted for 0.5%. That means that 98.9% of all sales were good ol’ fashioned sellers with equity.