03 Oct Orange County Housing Report: Patience is the Name of the Game
Orange County Home Sellers are learning that we are back in a traditional balanced real estate market, and selling a home requires patience…
Homes no longer sell in a week; instead, the expected market time for all of Orange County is now 3.3 months or 98 days.
With an expected market time of 3.3 months, homes no longer “fly off” the market. Gone are the days when 20 offers are generated within days of installing the FOR SALE sign in the front yard. Sale prices are no longer above the asking prices; instead, most homes are initially overpriced and see few if any offers in the initial weeks on the market… Sellers fairly quickly realize that today’s housing market is much different than the last couple of years.
Unfortunately some sellers poorly prepared their home for the market, over-priced their homes, and hired a broker who did very little marketing… these home sellers lost their one opportunity to make a good “first impression” to the home buyers.
Home sellers thinking about coming on the market can learn from the mistakes made by the homeowners who are just “sitting on the market”:
The savvy sellers are employing large nationally branded Full Service Real Estate Firms to effectively market the property, preparing their home for the market, and pricing strategically.
Sellers need to be patient: Just because a home shows well and is priced right, does not mean that the sellers will find success right away. Instead, pricing according to their Fair Market Value is a crucial initial step in order to succeed. After properly pricing, sellers need to patiently wait for the right buyer to come along. This may happen towards the beginning of marketing process for some, but will be a lot longer for others. With an expected market time of nearly 100 days for all of Orange County, patience is the name of the game.
Expecting a quick offer is very possibly going to bring frustration… the “right buyer” for a home may not be looking the first few weeks a home is on the market. Having expectations in line with the market reality is fundamental in order to succeed in today’s market which has transitioned to a balanced market.
But, all-in-all this is a good time to sell… gone is the home seller’s anxiety of wondering if they are selling for “too little, too soon”.
The market has “bounced up” to an equilibrium level which matches the current level of employment, income, available financing, and mortgage rates. It is a good feeling for sellers to know they “rode out the cycle” and can now sell at a very good price compared to a few years ago… even if selling will take a little longer this year than last year.
Memo to buyers: It is NOT a buyer’s market. It is simply taking longer in order for homes to sell. At 3.3 months, it is still a “seller’s market” compared to what we saw in the years 2007 to 2010. Appreciation is no longer rampant, but do not expect to buy below the last market sale. Today’s market allows sellers to control the terms of a contract… find a great house and make a fair market offer with flexible terms!
Here are the latest Orange County Real Estate Market Indices:
Active Inventory: The active listing inventory continued its slow decent, shedding 1% in the past two weeks, or 68 homes.
Since reaching the 2014 peak about a month ago, the active listing inventory has shed a total of 266 homes. Initially, the drop was more severe, but in the past two weeks, the inventory only shed 68 homes and now sits at 7,818. After continuously climbing without pause all year, the inventory peaked at the end of August, a normal cyclical peak. Ironically, it has been years since the housing market has experienced a normal, August peak, and is a welcome relief to an inventory built on the backs of unrealistic, overpriced sellers. Sellers are quickly coming to the realization that the best time of the year to sell is behind us, deterring many homeowners from even placing their homes on the market. Many overpriced listings are opting to not reduce their asking prices; instead, they are simply throwing in the towel. More homes were pulled off the market in August than any other month of the year, 1,350 total.
Last year at this time there were 6,123 homes on the market, 1,695 fewer than today.
Demand: Demand decreased by 5% in the past two weeks.
Demand, the number of new pending sales over the past month, decreased by 113 and now totals 2,386, a 5% drop. Over the past 10 years, the average drop at the end of August was 3%, so a 5% drop is a bit more severe. Last year at this time demand was at 2,465, 79 additional pending sales compared to today. From here we can expect demand to continue to drop a bit more as we move deeper into the Autumn Market. With kids back in school, many buyers will wait until next spring to continue their quest for their new home.
Distressed Breakdown: The distressed inventory increased by 12% in the past two weeks.
The distressed inventory, foreclosures and short sales combined, increased by 34 homes, 12%, and now totals 311, its highest level of the year. But, let’s keep that in proper perspective; after starting the year with 271 homes, the distressed inventory has only grown by an extra 40 homes. The long term trend is for it to remain at a very low level
In August, 3% of all sales were short sales and a little over 1.5% were foreclosures. 94.5% were homeowners with equity in their homes, good old fashioned sellers. The overall distressed market is diminishing over time. Last year, 10% of sales in August were distressed, and two years ago it was 32%.
In the past two weeks, the number of active foreclosures increased by 3 homes and now totals 78. Only 1% of the active inventory is a foreclosure. The expected market time for foreclosures is 63 days. The short sale inventory increased by 31 homes in the past two weeks and now totals 233. The expected market time is 61 days and remains one of the hottest segments of the Orange County market. Short sales represent 3% of the total active inventory.