10 Aug Orange County Housing: We are Bumping Along a Ceiling
With the best time of the year to sell coming to an end, Orange County appreciation is also slowing.
The data is showing that we have reached a “Ceiling in Home Values” in Orange County. In essence, home values have reached an equilibrium. Prices are not moving up anymore because the underlying forces which will eventually cause a rise in home prices (better economy, higher household income, better access to mortgage capital) have not changed for the better since the current price level was achieved.
As a result, Home Sellers can no longer arbitrarily set the list price of their home above the most recent comparable sales. The number of homes fetching multiple offers is shrinking drastically and homes are sitting on the market. The expected market time is on the rise. The active inventory has been growing all year and just surpassed the 8,000 home mark, just a few hundred short of a long term county average. The active listing inventory added an additional 231 homes in the past two weeks and now totals 8,057. That’s the first time the inventory has been above 8,000 homes since January 2012, 2½ years ago.
Active Inventory: The active inventory increased by 3% in the past two weeks and pushed past the 8,000 home mark.
We have reached a balanced market… where the definition of a successful home sale is defined as: “A relatively short marketing time, a closed sale at a price equal to the last sale, and a smooth escrow with no delays and minimal bickering on the repair list.”
Of course, 2012 and 2013 were completely different. In those years, values were skyrocketing. When that occurred, sellers were able to price their homes above recent sales. They dealt with multiple offers and often sold for more than their list prices. Buyers accepted properties in “as-is” condition and they closed on time because they were fearful of losing the property.
Demand: Demand increased by 2% in the past two weeks. Demand, the number of new pending sales over the past month, increased by 48 now totals 2,549. After an initial small dip in demand in July, it will slightly rise in August. Last year at this time demand was at 2,707, 158 additional pending sales compared to today.
What changed? Unfortunately, news outlets across the country mainly report on year over year statistics; whereas, month to month statistics tell the real story. Orange County’s headlines highlighted a 10% increase in the median sales price year over year in June. Drill down a little bit deeper, when you remove new home sales, residential detached houses are up 6.6% and condominiums are only up 4.2%. That’s the difference in a year. Most important, month to month appreciation is flat.