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Good Morning -
Minus the artificial stimulus of the housing market by the first time buyer credits of yesteryear, it appears that Orange County has begun a normal annual housing cycle. The distractions of the holiday and year end activities and New Year ramp up are behind us, and as we enter the beginning of the spring market, demand and inventory are increasing, while the expected market time is decreasing for most price ranges.
Over the last two weeks our active inventory has increased by 164 homes to a total of 10,389 homes for sale. Demand has increased by 564 pending sales to a total of 2,718 pending sales. Our expected market time decreased from 4.75 months of inventory two weeks ago to 3.82 months of inventory today. The inventory of distressed properties, as a segment of the overall inventory, has decreased by 13 homes to a total of 4,104. The number of foreclosed homes for sale, within the active distressed inventory increased by 2 homes, and now stands at 726 for all price ranges in all of Orange County.
For more in depth analysis of the Orange County housing market please see the Orange County Housing Report below.
Enjoy a wonderful rest of your week!
Sincerely,
Tony Dove, REALTOR®
Direct: (714) 283-1116
Office: (714) 282-4300
Toll Free: (800) 615-2707
Email: Tony@TonyDove.com
Website: www.TonyDoveOnline.com
Blog: www.LocalRealtyDigest.com
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Data obtained from sources that are believed to be reliable but can not be guaranteed. For more information, please contact Tony Dove by phone or email. |
February 3, 2011
Housing Demand is Back!
A Normal Housing Cycle: Demand is not quite where it was in the mid-2000s, but it finally appears to be following a normal annual cyclical pattern.
Demand is not being artificially manipulated like it was last spring or the winter of 2009 with first time home buyer tax credits. Absent housing rebates, the real estate market is finally functioning on its own, making it is easier to gauge where the market is heading. So, what does a "normal" housing cycle mean to Orange County?
Demand typically surges at the end of January, levels off in February and then swells to its highest point of the year from March through May, the spring market. Inventory typically increases during this time of year, but because increasing demand will generally outpace increasing inventory levels, the market time usually decreases to its lowest point of the year. Most sellers know that we are entering the best time of the year to sell, and will place their homes on the market. However, the best time of the year to sell does equate to paying a premium for a home. Buyers today are "spreadsheet buyers," meaning they are going to concentrate on the most recent comparable and pending sales to carefully arrive at price. They do not want to overpay for a home and will patiently wait until they find a home they like, being sold by a realistic, informed seller, before they enter into negotiations. A seller should only place their home on the market if they are ready to do what it takes to sell their home, in the here and now.
From June through August, the second best time of the year to sell a home, demand will fall slightly, and inventory levels will continue to increase. With a summer time decrease in demand, the expected market time will rise slightly.
When the new school season begins to get underway, purchasing a home becomes less convenient to many families, the deceleration in demand becomes more pronounced, and inventory begins to decrease. The expected market time during the autumn market remains about the same as in the summer.
As the goblins and ghosts go running from door to door chanting "TRICK OR TREAT," the Orange County housing market begins its transition to the slowest time of the year, the holiday market. The distractions of the holidays, year end activities, and New Year ramp-up return, demand decelerates until it reaches its lowest point of the years housing cycle, New Year's Eve. The inventory of new homes being placed on the market slows considerably, but not enough to offset the decrease in demand causing a rise in market time to its highest point of the year.
In Orange County, we have not witnessed a normal housing market cycle in years. There is something refreshing about normal.
Housing Demand: In the last two weeks, housing demand surged.Demand, the number of new pending sales over the prior month, increased by 26% in the past two weeks, adding an additional 564 pending sales, and now totals 2,718 pending sales. Thus far this year, demand is a mirror image of 2009, prior to any artificial government stimulus. Last year, there were 530 additional pending sales; but remember that demand was being manipulated up by the $8,000 first time home buyer tax credit.
The Active Inventory: The inventory is increasing at the same pace as last year.
Two years ago, sellers approached the market with extreme caution. Last year, everybody threw caution to the wind and replaced it with unwarranted optimism. Sellers heard media tales of year over year increases in the median sales price and multiple offers being made on many listed homes. The problem with the median sales price is that it is not an accurate gauge of appreciations or depreciation. It can only provide an overall "feel" for where house values are headed, but it is not precise. Stack up all sales in a month and take the exact middle value and you get the median sales price. If all of a sudden there is an increase in the number of upper priced homes sold, the median sales price is skewed upward. If there is an increase in lower priced homes sold, the median sales price will be skewed downward. Unwarranted optimism is my number one concern for the housing market in 2011.
In the past two weeks the active inventory added an additional 164 homes and now totals 10,389 homes. Last year at this time there were 2,532 fewer homes on the market.
Expected Market Time and Price Ranges: The expected market time increases as the price range increases.
For Orange County as a whole, the expected market time has dropped in the past month from 5.10 months to 3.82 months today, a slight seller's market. For homes priced below $750,000, 76% of the active listing inventory, the expected market time is a robust 3.37 months. Even though it is technically a seller's market, do not expect appreciation. There are just too many distressed homes in the marketplace, keeping a lid on appreciation. For homes priced between $750,000 and $1.5 million, the expected market time is 4.91 months, technically a market in equilibrium. From $1.5 million to $2.5 million, the expected market time is actually at its lowest level in several years, 9.43 months. For homes above $4 million, there are 277 homes on the market and only 2 pending sales within the last month. This range has an expected market time of just over 138 months. This may be an anomaly, but never-the less, a strong indicator that the highest priced homes on the market should be prepared for a slow 2011.
The Distressed Market: There's still not much change in the distressed market.In the past two weeks the active distressed inventory, both foreclosure and short sales, dropped by 13 homes. Not much has changed since last September, growing by only 65 homes, now totaling 4,104. There are 726 foreclosures on the market, adding just two homes in the past two weeks. The expected market time for foreclosures is 1.64 months, a HOT seller's market. There are currently 3,378 short sales on the active market with an expected market time of 2.85 months, also a seller's market. Expect the distressed inventory to slightly increase as the year progresses. Do not expect a wave of new distressed activity.
Source: Steven Thomas, President, Broker
