Orange County Housing Report: End of Summer Cycle

As the end of summer fast approaches, the Orange County real estate market continues to follow its normal, cyclical path. The active listing inventory continues to drop, demand drops slightly and the expected market time has very little movement. This is typical for this time of year.

Here’s a breakdown of how the numbers look this week:

• Active listing inventory dropped by 169 homes in the past two weeks to 8,362, its lowest level since the beginning of 2006.
• The active inventory last year was at 13,582, 5,220 additional homes.
• The active inventory two years ago was at 17,760, 9,398 additional homes.
• Demand, the number of new pending deals over the prior month, dropped by 103 in the past two weeks to 3,403.
• Last year’s demand was at 2,847, 556 fewer than today.
• Two years ago, demand was at 1,206, 2,197 fewer than today.
• The expected market time is currently at 2.46 months, a slight change from the 2.43 month mark posted two weeks ago.
• The current expected market time is within the definition of a seller’s market, below five months. There is tremendous demand for homes priced below $750,000. Below $500,000, the market is extremely hot. Homes are receiving tremendous activity with multiple offers and an average list to sales price ratio of 100%. Even though we are currently experiencing a seller’s market, property values are not appreciating. This is primarily due to the number of distressed properties on the market that continue to suppress values.
• The expected market time for properties priced between $250,000 and $500,000 is currently at 1.33 months, levels not seen since the incredible days of 2005. Ask any buyer looking for a home priced below $500,000 just how crazy the market has been and you will quickly find that they are writing offer after offer. Last week, one of our agents stated that his buyer was finally in escrow after writing their fifth offer.
• Buyers today do not know how crazy the market is until they lose out on a property or two, learning from the good ol’ school of hard knocks. This is contrary to their perception of the housing market out of the gates due to the constant stream of press on the recession, unemployment and distressed homeowners.
• The current Orange County housing market is controlled by lenders, where just about half of all pending deals are either a short sale or foreclosure.
• The number of distress properties on the market dropped by 43 homes in the past two weeks, now totaling 2,516. The total had stopped its drop two weeks ago. I thought that the number would increase today. The pace in the drop has slowed over the past month, so it will be interesting to see where we go from here.
• 30.1% of the active inventory is distressed. That’s far different compared to last year when 42.3% of the inventory was distressed.
• There are currently only 332 foreclosures on the active market, an increase of 13 over the past two weeks.
• The expected market time for foreclosures is currently at 0.71 months, a deep seller’s market.
• There are 2,184 short sales on the active market, a drop of 56 over the past two weeks.
  The expected market time for short sales is currently at 1.80 months.

What can buyers expect going into the Autumn Market? Interest rates dropped and remain extremely low. Demand is still extremely hot for homes priced below $750,000. There has been a lot of news regarding the end of the $8,000 first time tax credit, which currently ends with sales on November 30th. However, we can expect an extension to that program coming soon. We can also expect a second extension to the increased conventional loan limit, for Orange County it is $729,750. The government does not want to see a decrease in the current real estate market momentum, and these two programs have helped immensely. So, even though we are entering a cyclically slower time of year, do not expect that much of a change in the current market. There are still droves of buyers still looking for homes. The word out on the street is that agents have pockets filled with buyers and not enough new inventory coming on the market. Any increase in fresh inventory would be welcomed by buyers and their agents alike. However, there just won’t be a lot of new inventory to hit the market until after the New Year. The upper price ranges are experiencing less demand. Lack of financing and the recession are not helping. But, the distressed inventory within the upper ranges is definitely fueling some demand.