Over The Peak
“The Happiest Place on Earth” is right in our back yard. Remember the unbelievable anticipation and unbridled excitement when you were a kid heading to Disneyland with the family? You could barely close your eyes the night before. Now imagine heading to this magic kingdom and arriving at noon. No big deal, on Mondays in May it is open until 11 PM. There is still plenty of time, right? You just missed the first few hours. Those may be THE best hours with the shortest lines, but 11 hours at Disneyland will be amazing and memorable, nonetheless. Selling a home after the peak in demand is similar. THE most optimal time to sell a home maybe in the rearview mirror, but there is still plenty of runway left in the housing market to accomplish the goal in making a move.
For sellers who are holding their collective breath anticipating the Spring Market to continue to accelerate from here, they will be disappointed. Demand, the last month of pending sales, peaked two weeks ago and dropped 3% since. It currently sits at 2,653 pending sales. From here, it will remain relatively the same until it methodically drops slowly but surely from June through the end of the year.
If demand is going to remain at roughly the same high level, what is the big deal? The active inventory will grow from here until peaking sometime in August. On average, in the past six years, the active inventory has grown by 1,350 homes, a 26% rise. With demand plateauing and then dropping, coupled with a rising inventory, the Expected Market Time (from coming on the market to opening escrow) will rise. The market will slow from here. The longer a homeowner waits to come on the market, the longer it will take to sell their home. The current Expected Market Time for all of Orange County is 81 days, rising from 76 days just two weeks ago. That is a slight Seller’s Market, where homes are not appreciating much at all, but sellers get to call more of the shots. It will continue to climb and surpass the 90-day mark sometime during the summer, reaching a Balanced Market, one that does not favor sellers or buyers (between 90 and 120 days).
Success can still be found for homeowners who come on the market in June or July, but there will be more sellers competing against each other for a slightly smaller pool of buyers. For sellers, accurately pricing a home by leaning into their REALTOR® is crucial in order to find success.
Erroneously and aggressively overpricing a home right out of the gates is a waste of time and misses the opportunity to take advantage of the very best time to sell, the first couple of weeks a home enters the fray. That’s when apps, websites, and buyers highlight the fact that a NEW LISTING has hit the market. When a home reduces the price down the road, buyers are not as enthusiastic with the PRICE REDUCED banner as they were when they were scrolling through the all 40 photos when the home initially hit the market. Take advantage of the first couple of weeks of market enthusiasm and get that price right.
Don’t be a statistic: 16% of all homes in Southern California reduced their asking price just last week.
In the past two weeks, the active listing inventory increased by 252 homes, up 4%, and now totals 7,185, surpassing the 7,000-home mark for the first time since November. That’s a six-month high and it will only increase from here. The sharp rise in the inventory was the largest so far this year. The inventory has climbed, on average, by 26% in the past six years from now through mid-August. Even if the inventory just climbed 20%, that would place it at 8,600 homes, the highest peak since 2011. That would be a lot more seller competition.
Last year at this time there were 5,434 homes on the market. That means that there are 32% more homes available today. This is the highest level of homes on the market for this time of the year since 2011.
OC Housing Market Summary
- The active listing inventory increased by 252 homes in the past two weeks, up 4%, and now totals 7,185. It was the largest increase so far this year. Last year, there were 5,434 homes on the market, 1,751 fewer than today. There are 32% more homes than last year.
- Demand, the number of pending sales over the prior month, decreased by 71 pending sales in the past two-weeks, down 3%, and now totals 2,653. Last year, there were 2,675 pending sales, 1% more than today.
- The Expected Market Time for all of Orange County increased from 76 days two weeks ago to 81 days today, a slight Seller’s Market (between 60 to 90 days) and the highest level for this time of the year since 2011. It was at 61 days last year.
- For homes priced below $750,000, the market is a Seller’s Market (less than 60 days) with an expected market time of 58 days. This range represents 39% of the active inventory and 55% of demand.
- For homes priced between $750,000 and $1 million, the expected market time is 70 days, a slight Seller’s Market. This range represents 19% of the active inventory and 22% of demand.
- For homes priced between $1 million to $1.25 million, the expected market time is 86 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 increased from 108 to 128 days. For homes priced between $1.5 million and $2 million, the expected market time increased from 133 to 134 days. For luxury homes priced between $2 million and $4 million, the expected market time increased from 186 to 228 days. For luxury homes priced above $4 million, the expected market time increased from 425 to 463 days.
- The luxury end, all homes above $1.25 million, accounts for 33% of the inventory and only 15% of demand.
- Distressed homes, both short sales and foreclosures combined, made up only 0.9% of all listings and 1.3% of demand. There are only 27 foreclosures and 41 short sales available to purchase today in all of Orange County, 68 total distressed homes on the active market, up 9 in the last two-weeks. Last year there were 44 total distressed homes on the market, fewer than today.
- There were 2,558 closed residential resales in April, 2% fewer than April 2018’s 2,614 closed sales. April marked a 13% increase from March 2019. The sales to list price ratio was 97.9% for all of Orange County. Foreclosures accounted for just 0.3% of all closed sales, andshort sales accounted for 0.4%. That means that 99.3% of all sales were good ol’ fashioned sellers with equity.
*Information taken from Steven Thomas Orange County Housing Market Report May, 2019.