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The summer of 2023 has been characterized by low inventory, homeowners unwilling to sell, low demand, and a low number of closed sales.
California experienced a very unusual May and June this year. Southern California was subject to some of the coldest daytime temperatures in the last 40 years, far below their norm. The housing market has experienced a similar cold front where it seems shrouded in a thick fog that will not clear. The higher mortgage rate environment has impacted many real estate statistics and resulted in a very cool summer. The active inventory, demand, and closed sales pale compared to when housing felt “normal” before Covid.
Low demand has led to the lowest monthly closed sales since tracking began in 2004. Through July, there have been only 11,577 closed sales, down 26% compared to last year and 34% compared to the 3-year pre-Covid average of 17,434 closed sales. In terms of closed units, housing is experiencing a recession. Nearly anyone that works within the real estate industry, from REALTORS® to mortgage lenders to inspectors, has felt the impact of completing fewer sales. Yet, in terms of values, the homeowner is doing quite well. According to Freddie Mac’s Home Price Index, the Los Angeles/Orange County metro dropped 7% from its all-time peak in May 2022 through December 2022. Since bottoming in December, home values have risen 7% through June and appear poised to continue to climb through 2023 due to a scarcity of homes for sale.
More homeowners would opt to sell if rates were below 6%. Demand would rise, and so would the number of closed sales. But it is going to take a while to see the inventory increase. As rates drop and demand rises, newly listed homes would sell quickly, making it challenging for the supply to rise. The good news will be that the recession in units will fade as more buyers and sellers tap into the housing market
Orange County Housing Market Summary:
- The active listing inventory in the past couple of weeks increased by 86 homes, up 4%, and now sits at 2,475, its highest level since January. It is still the lowest level to start August since tracking began in 2004. In July, 39% fewer homes came on the market compared to the 3-year average before COVID (2017 to 2019), 1,450 less. Last year, there were 4,069 homes on the market, 1,594 more homes, or 64% higher. The 3-year average before COVID (2017 to 2019) was 6,753, or 173% more, nearly triple.
- Demand, the number of pending sales over the prior month, decreased by 18 pending sales in the past two weeks, down 1%, and now totals 1,580, the lowest level for a start to August since tracking began in 2004. Last year, there were 1,812 pending sales, 15% more than today. The 3-year average before COVID (2017 to 2019) was 2,630, or 66% more.
- With supply rising and demand falling, the Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, increased from 45 to 47 days in the past couple of weeks. It was 67 days last year, much slower than today.
- For homes priced below $750,000, the Expected Market Time increased from 32 to 34 days. This range represents 18% of the active inventory and 26% of demand.
- For homes priced between $750,000 and $1 million, the Expected Market Time increased from 27 to 31 days. This range represents 15% of the active inventory and 23% of demand.
- For homes priced between $1 million to $1.25 million, the Expected Market Time increased from 25 to 33 days. This range represents 10% of the active inventory and 15% of demand.
- For homes priced between $1.25 million to $1.5 million, the Expected Market Time decreased from 46 to 44 days. This range represents 11% of the active inventory and 12% of demand.
- For homes priced between $1.5 million to $2 million, the Expected Market Time remained unchanged at 53 days. This range represents 13% 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 decreased from 83 to 76 days. For homes priced between $4 million and $6 million, the Expected Market Time decreased from 253 to 152 days. For homes priced above $6 million, the Expected Market Time decreased from 297 to 291 days.
- The luxury end, all homes above $2 million, account for 32% of the inventory and 13% of demand.
- Distressed homes, both short sales and foreclosures combined, comprised only 0.3% of all listings and 0.6% of demand. Only one foreclosure and six short sales are available today in Orange County, with seven total distressed homes on the active market, down two from two weeks ago. Last year there were seven distressed homes on the market, identical to today.
