Demand has broken away from the normal Autumn cycle and is up for the start of the season. Typically, demand, the number of new pending sales within the prior 30 days, starts a slow decline at the beginning of the Autumn market, but not this time. Demand marched to the beat of its own drum and did not follow the normal real estate cycles for the first half of this year, growing unabated. Then, in June, demand started to track the normal cycle, falling in July slightly and then increasing throughout August. If demand was to follow a normal Autumn cycle, it would have dropped slightly. However, demand increased by 127 homes in the prior two weeks and now totals 2,974 pending sales. Not only is demand far surpassing the prior two years, but it is swiftly approaching 2005 numbers. Demand is 152% stronger than last year and 34% stronger than two years ago. Last year at this time there were only 1,180 pending sales, 1,794 fewer than today. Two years ago there were 2,208 pending sales, 766 fewer than today. In 2005 there were 3,058 pending sales, 84 additional compared to today, a 1.7% difference. This change in the demand cycle was totally unexpected. It remains to be seen just how long this unconventional pattern will continue; nonetheless, it is a very good sign for the Orange County real estate market as a whole.
The active listing inventory has broken from all cyclical patterns for the entire year. After a slight initial increase in the inventory for the first couple of weeks of the year, it remained at a plateau for the first half of 2008. June and July was marked by a slow descent in the inventory. But, ever since the beginning of August, the inventory has been rapidly dropping, shaving a total of 1,572 homes since July 25th. In the past month alone, the inventory has dropped by 885 homes. Today the active inventory stands at 13,174 homes compared to 14,059 a month ago, a 6.3% drop. Last year at this time the active inventory actually increased by 17 homes within the prior four week period. Two years ago it dropped by 334 and three years ago it actually climbed by 830 homes, the beginning of the real estate slowdown. So far in 2008 the active inventory dropped from 14,944 at the beginning of the year to 13,174 homes today, an 11.8% decrease.
With demand increasing and the active inventory dropping, the expected market time has actually dropped to its lowest point of the year, 4.43 months. The market is in much better shape compared to the beginning of the year when the expected market time was at 14.97 months. Back then demand was at 998 pending sales and the inventory was at 14,944 homes. Last year at this time, the beginning of the financial crunch, the expected market time had blossomed to 15.17 months, 242% longer than today. Two years ago, the expected market time was 7.10 months, 60% greater than today. This market is so different compared to the past couple of years. This can be attributed to the distressed market and financial crunch pressuring pricing to the point where Orange County homes became more affordable and attracted many first time home buyers and, now, investors. As home prices align closer to rents, investors are starting to enter the market again. The stronger market can also be attributed to non-distressed home owners utilizing their discretion and ultimately deciding to not compete and sit this current market out. Slowly but surely more home owners are staying put and are realizing that their homes are not just an asset to be flipped every two to three years. Their address is “home,” a place to raise a family and create memories that will last a lifetime. Homes should be bought and sold with the understanding that, first, a home is a place to raise a family and, second, a great LONG TERM investment. That will very likely be a lasting legacy of this current downturn.
The disparity in Total Pending Sales, a statistic that I started tracking back in September of 2006 to show ALL pending activity and not just the past months activity (demand), from last year to this year continues to grow unabated. A month ago today’s total pending sale count was 105% greater in comparison to 2007. The disparity has grown since to 157% greater than last year. Today it stands at 4,393 total pending sales, the highest point of the year, surpassing the previous high of 4,363 established on June 26th. Last year the total pending count was at 1,710, a difference of 2,683. So, the current market may be filled with its set of challenges, but they pale in comparison to where the market was a year ago.
Distressed properties, foreclosures and short sales, make up a major portion of today’s Orange County real estate market. With the inventory dropping due to homes placed into escrow and many discretionary sellers pulling their homes off of the market, the percentage of distressed homes on the market has grown a little bit over the past month. A month ago distressed homes made up 41.7% of the overall active inventory versus 42.9% today. However, the total number of distressed homes on the market has actually dropped in that same time period by 215 homes, from 5,865 to 5,650. Current demand is exhausting the continuous stream of new distressed homes that are placed on the market and even driving it down a little bit. The expected market time for foreclosed homes is at 1.18 months, a seller’s market. So, if you are a buyer looking for a “deal,” do not expect a foreclosure to sell for much less than the asking price. There is so much demand for foreclosures that most are securing multiple offers, and many are actually sold above the asking price. Short sales are a little bit of a different story with an expected market time of 6.2 months, but don’t let that number fool you. Many short sales that are a part of the active listing inventory have actually secured many offers, they have an agreed upon contract between the buyer and seller, and the accepted contract has been submitted to the lender(s) for “lender approval.” These listings are waiting for the formal “lender approval” before starting the escrow process and pulling the home off the market with a pending status. So, the 6.2 month expected market for short sales is definitely inflated and should be at or below about the three month mark.
Where do we go from here? Back in July I told everybody to expect to hear more regarding resurrecting the Resolution Trust Corporation (RTC) to help stabilize the current housing dilemma. Well, two month later and they are now formulating something very similar to the RTC. The RTC was formed in 1989 to "bail out" the rapidly deteriorating financial market due to the insolvency of savings and loan associations. Today, a similar agency would purchase bad debt of distressed, owner-occupied homes at a discount from the debt holder and restructure the loan for the owner in areas hit hard by foreclosure activity. This in turn would ultimately stabilize the current financial crunch. This will not flip the switch to a better market overnight, but it will get us back on track over the course of time. It will ultimately restart the financial engine that drives our economy and repair the ailing housing market.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/
Tuesday, September 23, 2008
Friday, September 12, 2008
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Monday, September 8, 2008
Market Time Report: Expected Market Time Remains Under 5 months
September 4, 2008
With year over year demand 136% higher than in 2007 and 28% higher than 2006, it is no wonder that the expected market time is at a much healthier level. For the first half of 2008 demand increased unabated. Since mid-June, demand has followed the normal seasonal cycles. Demand first dropped to a summer low at the beginning of July and then increased until reaching the Summer market peak two weeks ago. “Back to school” marks the beginning of the Autumn market and a slow drop in demand. Demand dropped by 144 homes in the prior two weeks and 93 homes in four weeks, now totaling 2,847 pending sales. That is much better than last year at this time. Still in the beginning stages of the financial crunch that started the month before, demand dropped by 269 homes in just two weeks and 598 homes in a month. Demand dropped to historical lows and totaled only 1,206 pending sales, a difference of 1,641 compared to today. Two years ago, demand dropped by 141 homes in the prior two weeks and totaled 2,216 pending sales, 631 fewer than today. So, in regards to demand, we are currently on much better footing compared to the prior two years.
The active listing inventory has broken from all traditional cycles due to discretionary homeowners steering clear of the current market, choosing to not compete with lenders, who control 42% of the market through foreclosures and short sales. Typically, the active listing inventory climbs throughout the Summer, as many homeowners place their homes on the market to take advantage of the Summer selling season, often mistaken as the best time of the year to market a home (it is actually the Spring market). In 2007, the active listing inventory grew from 11,643 homes at the beginning of the year to 17,760 homes this time last year, a 53% increase. In 2006, the active listing inventory grew from 7,635 homes at the beginning of the year to 15,767 homes this time two years ago. In 2008, the active inventory dropped from 14,944 at the beginning of the year to 13,582 homes today, a 9% decrease. And, most of the drop has actually come recently, with a decrease of 3.4% in two weeks and 5.3% in the past four weeks.
So, even though demand has dropped a bit in the past two weeks, the subsequent drop in the active listing inventory has enabled the expected market time to remain virtually the same, increasing only slightly from 4.70 months to 4.77. Four weeks ago the expected market time was at 4.88 months. So, not a lot has changed in respect to market time. Last year at this time, the expected market time had burgeoned in a four week span from 9.76 months to 14.73. Two years ago, the expected market time was 7.12 months. In regards to expected market time, once again we are on much better footing compared to the prior two years.
The disparity in Total Pending Sales, a statistic that I started tracking back in September of 2006 to show ALL pending activity and not just the past months activity (demand), is continuing to grow substantially. The current total pending sales count dropped by 129 homes in the past two weeks, but only dropped by 28 homes in the prior four weeks, now totaling 4,220 pending sales. In 2007 at this time, there were only 1,813 total pending sales last year and a drop of 300 in two weeks and 648 in four weeks. So, compared to last year, total pending sales are up 132%. Two weeks ago, the year over year comparison was at 106% and four weeks ago it was up by 72%. Total Pending Sales is yet another statistic that points to much better footing compared to the past.
As discussed earlier, distressed properties, foreclosures and short sales, make up a major portion of today’s Orange County real estate landscape. The distressed inventory exploded onto the market last year, growing unabated from July of last year through the end of May, 2008. On July 26, 2007, there were 792 distressed homes on the market, 5% of the total active inventory. The distressed inventory continuously grew through May 29, 2008, where it stood at 5,905 homes on the market, 39% of the total active inventory. Today, the distressed inventory stands at 5,744 homes, 42% of the total active inventory. The inventory has been at a plateau since the end of May and actually dropped over the past month. The distressed inventory dropped by 121 homes in two weeks and 206 homes in four weeks. This phenomenon can be attributed to stronger demand and discretionary homeowners opting to not compete. Current demand is exhausting the continuous stream of new distressed homes that are placed on the market. Where is all of this demand coming from? The rapid growth of distressed properties and very little demand from August of last year through February of this year significantly depreciated Orange County housing, especially in the lower ranges. With affordability back in the marketplace combined with low interest rates, a wave of first time home buyers, many priced out of the market for years, dove in. 78% of the active distressed home market is isolated below $500,000 and 93% can be found below $750,000. It is no wonder that there is so much demand below $500,000, representing 64% of all demand. In comparison, the range below $500,000 represents 49% of the total active inventory. Homes priced below $750,000 represent 69% of the active inventory and 86% of demand.
Where do we go from here? Our government is carefully monitoring both the housing and financial markets and is preparing to do whatever it takes to prevent a radical downturn. The United States Treasury is preparing to take over both Fannie Mae and Freddie Mac to stabilize the conventional lending market, currently all loans below $729,750 in Orange County (this will drop to $625,500 in high cost areas). Investors have turned their collective heads away from Fannie and Freddie, but with the United States taking over, the risk of them failing drops out of the equation completely. This ultimately will strongly encourage investors from around the world to once again invest in these secondary mortgage market entities, which will allow interest rates to drop to lower levels. In this scenario, consumers looking to purchase or refinance win. Housing demand wins. The government is not afraid to intervene. They will carefully plot a course to restore the credibility of the both the financial markets and the American Dream, homeownership.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/
With year over year demand 136% higher than in 2007 and 28% higher than 2006, it is no wonder that the expected market time is at a much healthier level. For the first half of 2008 demand increased unabated. Since mid-June, demand has followed the normal seasonal cycles. Demand first dropped to a summer low at the beginning of July and then increased until reaching the Summer market peak two weeks ago. “Back to school” marks the beginning of the Autumn market and a slow drop in demand. Demand dropped by 144 homes in the prior two weeks and 93 homes in four weeks, now totaling 2,847 pending sales. That is much better than last year at this time. Still in the beginning stages of the financial crunch that started the month before, demand dropped by 269 homes in just two weeks and 598 homes in a month. Demand dropped to historical lows and totaled only 1,206 pending sales, a difference of 1,641 compared to today. Two years ago, demand dropped by 141 homes in the prior two weeks and totaled 2,216 pending sales, 631 fewer than today. So, in regards to demand, we are currently on much better footing compared to the prior two years.
The active listing inventory has broken from all traditional cycles due to discretionary homeowners steering clear of the current market, choosing to not compete with lenders, who control 42% of the market through foreclosures and short sales. Typically, the active listing inventory climbs throughout the Summer, as many homeowners place their homes on the market to take advantage of the Summer selling season, often mistaken as the best time of the year to market a home (it is actually the Spring market). In 2007, the active listing inventory grew from 11,643 homes at the beginning of the year to 17,760 homes this time last year, a 53% increase. In 2006, the active listing inventory grew from 7,635 homes at the beginning of the year to 15,767 homes this time two years ago. In 2008, the active inventory dropped from 14,944 at the beginning of the year to 13,582 homes today, a 9% decrease. And, most of the drop has actually come recently, with a decrease of 3.4% in two weeks and 5.3% in the past four weeks.
So, even though demand has dropped a bit in the past two weeks, the subsequent drop in the active listing inventory has enabled the expected market time to remain virtually the same, increasing only slightly from 4.70 months to 4.77. Four weeks ago the expected market time was at 4.88 months. So, not a lot has changed in respect to market time. Last year at this time, the expected market time had burgeoned in a four week span from 9.76 months to 14.73. Two years ago, the expected market time was 7.12 months. In regards to expected market time, once again we are on much better footing compared to the prior two years.
The disparity in Total Pending Sales, a statistic that I started tracking back in September of 2006 to show ALL pending activity and not just the past months activity (demand), is continuing to grow substantially. The current total pending sales count dropped by 129 homes in the past two weeks, but only dropped by 28 homes in the prior four weeks, now totaling 4,220 pending sales. In 2007 at this time, there were only 1,813 total pending sales last year and a drop of 300 in two weeks and 648 in four weeks. So, compared to last year, total pending sales are up 132%. Two weeks ago, the year over year comparison was at 106% and four weeks ago it was up by 72%. Total Pending Sales is yet another statistic that points to much better footing compared to the past.
As discussed earlier, distressed properties, foreclosures and short sales, make up a major portion of today’s Orange County real estate landscape. The distressed inventory exploded onto the market last year, growing unabated from July of last year through the end of May, 2008. On July 26, 2007, there were 792 distressed homes on the market, 5% of the total active inventory. The distressed inventory continuously grew through May 29, 2008, where it stood at 5,905 homes on the market, 39% of the total active inventory. Today, the distressed inventory stands at 5,744 homes, 42% of the total active inventory. The inventory has been at a plateau since the end of May and actually dropped over the past month. The distressed inventory dropped by 121 homes in two weeks and 206 homes in four weeks. This phenomenon can be attributed to stronger demand and discretionary homeowners opting to not compete. Current demand is exhausting the continuous stream of new distressed homes that are placed on the market. Where is all of this demand coming from? The rapid growth of distressed properties and very little demand from August of last year through February of this year significantly depreciated Orange County housing, especially in the lower ranges. With affordability back in the marketplace combined with low interest rates, a wave of first time home buyers, many priced out of the market for years, dove in. 78% of the active distressed home market is isolated below $500,000 and 93% can be found below $750,000. It is no wonder that there is so much demand below $500,000, representing 64% of all demand. In comparison, the range below $500,000 represents 49% of the total active inventory. Homes priced below $750,000 represent 69% of the active inventory and 86% of demand.
Where do we go from here? Our government is carefully monitoring both the housing and financial markets and is preparing to do whatever it takes to prevent a radical downturn. The United States Treasury is preparing to take over both Fannie Mae and Freddie Mac to stabilize the conventional lending market, currently all loans below $729,750 in Orange County (this will drop to $625,500 in high cost areas). Investors have turned their collective heads away from Fannie and Freddie, but with the United States taking over, the risk of them failing drops out of the equation completely. This ultimately will strongly encourage investors from around the world to once again invest in these secondary mortgage market entities, which will allow interest rates to drop to lower levels. In this scenario, consumers looking to purchase or refinance win. Housing demand wins. The government is not afraid to intervene. They will carefully plot a course to restore the credibility of the both the financial markets and the American Dream, homeownership.
If you are considering buying or selling a home in South Orange County, call on the experts! Dianna and Brian McGarvin 949-370-2652 or visit our website at http://www.pierbowl.com/
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