Monday, December 18, 2017 / by Shaun Radcliffe
Orange County Housing Report: Still a Hot Seller's Market
December 17, 2017
It is the middle of December and the market is sizzling hot for all homes priced below $1 million.
Hot Housing Market: Year in and year out December is notoriously the slowest month of the year in terms of demand and new sellers placing their homes on the market; yet housing is still hot.
Nobody can escape it. The holidays are here. Office gatherings, friend gatherings, and family gatherings fill everybody’s calendars. The mall parking lots are full, mailboxes are filled with season’s greetings, and the temperature is finally beginning to drop. Seemingly, one and all are dialed into the season; so, how can housing still be red hot?
Even though Orange County housing is leaning heavily in the seller’s favor, the Holiday Market has arrived and December is notoriously the slowest month of the year in terms of new pending sale activity. There are fewer and fewer homes on the market every single day. The active inventory has dropped 31% since September. As a result, demand has dropped considerably as well, 34%. This is the time of year where both the active inventory and demand (recent pending sales) hits yearly lows.
The slow Holiday Market will only begin to thaw after the first few weeks of the New Year and does not really find its legs until after the Super Bowl, around mid-February. Until then, it will be more of the same, very few homes on the market and muted demand.
Yet, there are stories today of homes hitting the market and generating multiple offers within days. Ultimately, a bidding war ensues. It may be the holiday season, but homes that hit the market below $1 million will fly off the market as long as they are priced right and in excellent condition.
The hottest segments of the Orange County housing market are in the lower ranges and in areas that feature more homes in the lower end. For homes priced below $750,000, the expected market time (the amount of time it would take to list a home and then open up escrow) is at a staggering 39 days. For homes priced between $750,000 and $1 million, the expected market time grows to 58 days, still a pretty rock solid seller’s market. The vast majority of local housing activity takes place below $1 million, 81% of all closed sales so far this year in 2017. Above $1 million, the market slows considerably, especially during this time of the year, the higher the price, the slower the market.
Take a look at Rancho Santa Margarita, for example, where there are only 29 homes on the market today and demand (the number of new pending sales over the prior month) is at 44 pending sales. With an ultra-low inventory and scalding hot demand, the expected market time is a mind blowing 20 days. The average sales price is $555,000. An expected market time below 60 days is considered an extremely hot, deep seller’s market. In Orange County, there are 25 cities and areas that fall within this sizzling category. They have one thing in common; they all are in the hotter lower ranges. Last year there were only 15. The Holiday Market this year is stronger than last year’s.
With only a few exceptions, Rossmoor, North Tustin and Irvine, cities and areas with an average sales price higher than $1 million are experiencing much slower markets. For example, Newport Coast has 80 homes on the market and demand is at 14 pending sales. The expected market time is 171 days, nearly 6 months. There are six cities and areas that are currently undergoing an exceptionally slow market. There were three last year.
The bottom line: in spite of the season, the housing market in Orange County is HOT in the lower ranges.
Active Inventory: The active inventory dropped by 15% over the past month.
The active listing inventory shed 300 homes in the past two weeks and now sits at 4,023, poised to drop below the 4,000 home mark for the first time since May 2013. Expect the inventory to continue to descend dramatically over the next couple of weeks and drop to its lowest point of the year as we ring in a New Year. The start to 2018 will be the second lowest start behind 2013.
Last year at this time, there were 4,789 homes on the market, 766 additional homes, or 19% more than today.
Demand: Demand decreased by 19% over the past month.
In the past two weeks, demand, the number of new escrows over the prior month, decreased by 218 pending sales, or 10%, and now totals 1,864, dipping below 2,000 homes for the first time since the end of January of this year. Just like the inventory, demand is dropping like a rock right now. It will continue to drop until we ring in the New Year. On January 1st, demand will be at its lowest level for the year.
Last year at this time, demand was at 1,984 pending sales, 120 more than today. This is due to the extreme lack of inventory, available choices, for buyers in the lower price ranges today.
Luxury End: Both luxury demand and the luxury inventory dropped within the past couple of weeks.
In the past two weeks, demand for homes above $1.25 million decreased from 236 to 217 pending sales, down 8%. Luxury demand has dropped 33% since the start of November. The luxury home inventory decreased from 1,585 homes to 1,490, a 6% drop in the past two-weeks. The inventory has dropped by 13% since the start of November. Expect both the inventory and demand to continue to drop through the end of the year. The expected market time for all homes priced above $1.25 million increased from 201 days to 205.
For homes priced between $1.25 million and $1.5 million, the expected market time decreased from 129 to 118 days. For homes priced between $1.5 million and $2 million, the expected market time increased from 169 to 207 days. For homes priced between $2 million and $4 million, the expected market time decreased from 246 to 227 days. In addition, for homes priced above $4 million, the expected market time increased from 437 to 521 days. At 521 days, a seller would be looking at placing their home into escrow around the end of May 2019.
Orange County Housing Market Summary
- The active listing inventory decreased by 300 homes in the past couple of weeks and now totals 4,023. Expect the inventory to drop considerably for the last couple of weeks of the year. Last year, there were 4,789 homes on the market, 766 more than today.
- There are 30% fewer homes on the market below $500,000 today compared to last year at this time and demand is down by 25%. Fewer and fewer homes and condominiums are now priced below $500,000. This price range is slowly disappearing.
- Demand, the number of pending sales over the prior month, plunged by 218 in the past couple of weeks, down 10%, and now totals 1,864. The average pending price is $853,152.
- The average list price for all of Orange County remained at $1.8 million. This number is high due to the mix of homes in the luxury ranges that sit on the market and do not move as quickly as the lower end.
- For homes priced below $750,000, the market is HOT with an expected market time of just 39 days. This range represents 38% of the active inventory and 63% of demand.
- For homes priced between $750,000 and $1 million, the expected market time is 58 days, a hot seller’s market (less than 60 days). This range represents 17% of the active inventory and 19% of demand.
- For homes priced between $1 million to $1.25 million, the expected market time is 80 days, a slight seller’s market.
- For luxury homes priced between $1.25 million and $1.5 million, the expected market time decreased from 129 days to 118. For homes priced between $1.5 million and $2 million, the expected market time increased from 169 to 207 days. For luxury homes priced between $2 million and $4 million, the expected market time decreased from 246 to 227 days. For luxury homes priced above $4 million, the expected market time increased from 437 to 521 days.
- The luxury end, all homes above $1.25 million, accounts for 37% of the inventory and only 12% of demand.
- The expected market time for all homes in Orange County increased from 62 days to 65, a tepid seller’s market (60 to 90 days). From here, we can expect the market time to rise slightly through the end of the year.
- Distressed homes, both short sales and foreclosures combined, make up only 1.5% of all listings and 1.7% of demand. There are only 20 foreclosures and 40 short sales available to purchase today in all of Orange County, that’s 60 total distressed homes on the active market, dropping by 4 in the past two weeks. Last year there were 126 total distressed sales, 110% more than today.
- There were 2,421 closed residential resales in November, down by 2% from November 2016’s 2,468 closed sales. November marked a 5% drop from October 2017, normal for the Autumn Market. The sales to list price ratio was 97.4% for all of Orange County. Foreclosures accounted for just 0.7% of all closed sales and short sales accounted for 0.8%. That means that 98.5% of all sales were good ol’ fashioned sellers with equity.
Have a great week!
Radcliffe & Associates
Coldwell Banker Residential Brokerage