Orange County Housing report

Active Listing Inventory: The unabated growth has slowed but still hasn’t reached a peak
The Orange County inventory continued to grow over the past couple of weeks, adding an additional 236 homes and now totals 11,650. This is the highest level since December 2008. With school starting, many homeowners realize that the best time of year to sell has passed them by. As more and more sellers come to grips with the market realities, expect many of them to throw in the towel and pull their homes off the market. There are a lot of equity sellers on the market, nearly 7,900 or 68% of the active market. Many of these sellers will opt to sit out the Autumn and Holiday markets. Last year at this time there were only 8,531 homes on the market, 3,119 fewer than today.
Expected Market Time: The tale of two markets continues and the higher ranges are SLOW.
For homes priced below $1 million, the expected market time is 3.34 months. This range represents 80% of the active inventory and 93% of demand. For homes priced above $1 million, the expected market time is 10.48 months, the higher the range, the slower the expected market time. This range represents 20% of the active inventory, but only 7% of demand. The slowest range, homes priced above $4 million, has an expected market time of 26 months. The hottest market in Orange County is Talega with an expected market time of only 2.22 months. The slowest market in Orange County is Corona del Mar with an expected market time of 11.5 months and an average list price of $3.5 million. Last year at this time the expected market time was 2.43 months.

Housing Demand: Not much of a change in housing demand.
Demand, the number of new pending sales over the past month, increased by only 30 homes in the past two weeks, a 1% increase, and now totals 3,002. That is the first time that demand surpasses the 3,000 mark since the beginning of July. That is still 25% below the end of April peak that totaled 3,979. Last year at this time demand was at 3,506 pending sales, 504 more than today. From here, we can expect demand to slowly drop as we enter the next season of the Orange County housing market, the Autumn market, from the start of school through the pleas of “trick or treat.” From there, housing demand will cool further as we enter the Holiday market, from Halloween through the first couple of weeks of the New Year. There are a lot of distractions during the holidays and real estate typically is placed on the back burner.

Foreclosures and Short Sales: The distressed inventory continues to grow at a very rapid pace.
There really isn’t a “normal cycle” for predicting the level of the distressed inventory throughout the year. When homeowners owe more than their homes are worth and they can no longer afford their monthly payments, they place their homes on the market as short sales regardless of the time of year. Likewise, banks place foreclosures on the market after they have completed the foreclosure process and prepared the homes for sale. This process takes months to complete, so foreclosures are placed on the market regardless of the time of year. We are all acutely aware that there is a “shadow inventory” of homes that are not making their monthly payments and are either attempting to modify their loans, or are trying to sell their homes as short sales, or are staying put and doing nothing. According to various reports the “shadow inventory” totals between five and seven million homes. This shadow inventory has to be worked through, but is not going to occur as a tsunami of distressed properties to hit the market all at once. Instead, we are going to witness slow increases and drops over the next few years. This slow absorption will not pull down values like it did at the beginning of this downturn and it will keep a lid on any substantial appreciation. Once employment improves, the pathway to an eventual healthy and stable recovery will occur. The distressed inventory increased by 182 homes in the past two weeks, the largest increase since December of 2008, and now totals 3,757 homes. Foreclosures increased by only 6 homes in the past two weeks and now total 659. The expected market time for foreclosures is 1.82 months. There are an additional 176 short sales in the past two weeks and now total 3,098. The expected market time for short sales is 2.99 months.