Orange County Housing Report For Spring 2011

Orange County Housing Report: Spring is Here!

March 18, 2011

Good Afternoon!

Spring forward has a new meaning this year, Orange County housing demand is springing into action.

Housing Demand: Demand is at its highest level since August of last year.
That’s correct. Demand is taking off DESPITE the lack of government intervention in the form of a tax credit. Last year at this time the market was very robust. But, right after the first time home buyer tax credit ended at the end of April, demand took a giant nosedive. It was right smack in the middle of the spring market, typically the best time of the year in terms of demand. This year is very different. The market is functioning without a credit to artificially stimulate the market. Current demand may be trailing last year’s numbers, but I guarantee that there will not be a nosedive in demand in the middle of this year’s spring market. I have often said that in housing there are no guarantees, but I am willing to make an exception this time. The real estate market is finally following a normal cyclical pattern, something it has not done in years. Here’s a quick recap of a “normal” cycle to refresh our memory. Spring is the best time of the year to sell, the current market. It runs from now through mid-June. Pending sales during the spring translate to higher closings in the summer. The summer is when families prefer to move, when the kids are out of school and can nicely transition into a new school. The summer is the second best time of year to sell, but not quite as robust as the spring. Many summer pending sales do not close until the autumn, right after the kids are in school. The autumn is the third best time of year to sell, as demand contracts a bit more. The slowest time of the year to sell is the holiday market, from Halloween until the first couple of weeks of the New Year. A normal market is refreshing. It is much easier to make decisions when we know what is around the corner.

Demand, the number of new pending sales over the past month, increased by 225 in just two weeks and now totals 2,982. At the beginning of the year, demand was at 1,856 pending sales. Since then, it has increased by 61%. Last year at this time there were 288 additional pending sales, propped up by the $8,000 first time homebuyer tax credit.

The Active Listing Inventory: Homeowners are finally getting it, placing their homes on the market if and only if they have to.
Another refreshing aspect to the current market is the fact that the active listing inventory is not growing uncontrollably like it did last year. Like last year, it has grown unabated since the start of the New Year, but not at the same rate. The active listing inventory only added 67 additional homes over the past two weeks and now totals 10,828, less than a 1% increase. Last year at this time, the inventory grew at a 4% clip in the same two week period, adding an additional 330 homes. There were 8,876 homes on the active inventory back then; but, it had increased by 20% from the beginning of the year, compared to only 8% thus far this year. Last year the inventory grew unabated through mid-September because homeowners were placing their homes on the market at unrealistic levels. Many approached the market as to what they “needed to get” out of their home, instead of what the market would truly bear. The overall market was doing much better in the lower ranges. Multiple counter offers, offers close to or at their asking prices, frustrated buyers, and quick sales were all very common. However, that did not mean that buyers were willing to pay much of a premium for a home. Buyers today are “spreadsheet buyers,” buyers that want to carefully analyze as much data as possible before arriving at an offer price. With so many distressed homes on the market, mixed with uncertainty about the future, values are just not ready to appreciate. That does not mean that buyers are going to land a home at a 20% discount. In February, the sales price to list price ratio was 3%, meaning that the average home sold at only a 3% discount. For buyers, low ball offers are a ridiculous waste of time. Similarly, unrealistic, overzealous pricing by sellers is a ridiculous waste of time. The current trend of realistic, discretionary homeowners is another healthy sign in today’s Orange County housing market.


The Distressed Market: 49% of all closed sales in February were either a short sale or foreclosure.
The distressed market plays a major role in today’s market. 35% of the active listing inventory is either a short sale or a foreclosure. 50% of all homes priced below $500,000 are distressed, the hottest price range with an expected market time of a little over three months. Only 6% of all homes above $1 million are distressed, the coolest price range with an expected market time of a little over eight months. In the month of February, 20% of all closed sales were a foreclosure, 29% were short sales, and 51% were homeowners with equity in their homes, also known as “equity sellers” in the real estate trenches. In the past two weeks, the distressed inventory increased by 52 homes and now totals 3,797. There are 699 foreclosures on the market, increasing by 13 homes in the past two weeks. The expected market time for foreclosures is an incredibly HOT 1.64 months. There are currently 3,098 short sales on the active market, an increase of 39 homes in the past two weeks. The expected market time is 2.65 months, a seller’s market.

Have a wonderful weekend.

Sincerely,
Steven Thomas
Broker
Cell 949.874.8221
Copyright 2011 - Steven Thomas, Broker - All Rights Reserved. This report may not be reproduced in whole or part without express written permission by author.