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For home buyers and sellers, it's essential to understand the current real estate market dynamics. Before the pandemic, the housing market had nearly three times as many homes available for sale compared to today, and this shortage is not expected to change in the near future. This scarcity can be attributed to factors like stricter lending standards and the prevalence of fixed-rate mortgages, which have created a healthier homeowner stock with fewer forced sales. Consequently, finding a suitable home has become more challenging, and potential buyers may need to exercise patience as inventory levels remain low.
The root of this supply dilemma can be traced back to the Dodd-Frank Act, which was enacted in 2010 in response to the Great Financial Crisis. This law curtailed risky lending practices and introduced common-sense consumer protections. While it has improved the stability of the housing market, it has also contributed to the limited supply of homes for sale. Therefore, both buyers and sellers should be prepared for a market characterized by low inventory and a strong homeowner base, which suggests that the inventory crisis is likely to persist for some time.
What we're seeing:
→ Active inventory continuing downward
→ Autumn market has arrived
→ Demand plateaued
→ Price reductions are trending
→ New listings are more accurately priced
→ 16% of all escrows are canceling nationwide
What we can expect:
→ Inventory tapering through January
→ Homes listing at more accurate pricing
→ Longer days on market
→ Price reductions through 1st quarter 2024
Orange County Housing Market Summary:
- The active listing inventory in the past couple of weeks decreased by 32 homes, down 1%, and now sits at 2,353, its lowest reading since the start of July. The inventory peaked at the start of August. It is the second lowest mid-September reading since tracking began in 2004, with only 64 more homes than 2021, the lowest level by far. In August, 39% fewer homes came on the market compared to the 3-year average before COVID (2017 to 2019), 1,367 less. Last year, there were 3,638 homes on the market, 1,285 more homes, or 55% higher. The 3-year average before COVID (2017 to 2019) was 6,520, or 177% more, nearly triple.
- Demand, the number of pending sales over the prior month, increased by nine pending sales in the past two weeks, up 1%, and now totals 1,474, the lowest mid-September reading since 2007. Last year, there were 1,756 pending sales, 19% more than today. The 3-year average before COVID (2017 to 2019) was 2,363, or 60% more.
- With the inventory falling and demand rising slightly, the Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, decreased from 49 to 48 days in the past couple of weeks. It was 62 days last year, slower than today.
- For homes priced below $750,000, the Expected Market Time decreased from 31 to 30 days. This range represents 20% of the active inventory and 27% of demand.
- For homes priced between $750,000 and $1 million, the Expected Market Time increased from 32 to 33 days. This range represents 15% of the active inventory and 23% of demand.
- For homes priced between $1 million and $1.25 million, the Expected Market Time decreased from 37 to 35 days. This range represents 10% of the active inventory and 14% of demand.
- For homes priced between $1.25 million and $1.5 million, the Expected Market Time increased from 38 to 40 days. This range represents 9% of the active inventory and 11% of demand.
- For homes priced between $1.5 million and $2 million, the Expected Market Time decreased from 58 to 55 days. This range represents 14% of the active inventory and 12% of demand.
- For homes priced between $2 million and $4 million, the Expected Market Time in the past two weeks increased from 96 to 98 days. For homes priced between $4 million and $6 million, the Expected Market Time decreased from 257 to 181 days. For homes priced above $6 million, the Expected Market Time decreased from 310 to 247 days.
- The luxury end, all homes above $2 million, account for 34% of the inventory and 13% of demand.
- Distressed homes, both short sales and foreclosures combined, comprised only 0.2% of all listings and 0.4% of demand. Only two foreclosures and two short sales are available today in Orange County, with four total distressed homes on the active market, unchanged from two weeks ago. Last year, eight distressed homes were on the market, similar to today.
- There were 1,979 closed residential resales in August, 9% less than August 2022’s 2,168 closed sales. August marked an 11% rise compared to July 2023. The sales-to-list price ratio was 99.2% for all of Orange County. Foreclosures accounted for 0.2% of all closed sales, and short sales accounted for 0.2%. That means that 99.6% of all sales were good ol’ fashioned sellers with equity.
