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Longer market times and price reductions are very strong indicators that sellers will net less upon closing.
Price is ultimately the most critical first impression of a home. Sellers only get one shot at this first impression. After the initial ten days of coming on the market, most seasoned buyers have seen the home. Some decide to tour the house, yet others, after considering all the details, decide that their “phone tour” is enough and they are not interested in pursuing it any further. The longer a home is on the market, the less fanfare and excitement the property receives. Even if a seller reduces the asking price down the road, it is not met with eager buyer anticipation and enthusiasm. Currently, 27% of today’s active listing inventory has reduced the asking price at least once. The data illustrates that lowering the asking price or stubbornly waiting to get a price is not the best strategy.
The sales price to last list price ratio is very revealing. This refers to the final list price before becoming a pending sale. These are averages, meaning there are exceptions, but the overall trend is eye-opening. In Orange County, 88% of all closed sales in May did not reduce the asking price. The sales price to last list price ratio for these homes was 101.3%, meaning, on average, a home sold a bit higher than the asking price. A house listed at $1 million sold for $1,013,000, $13,000 above the asking price. The median days on the market before becoming a pending sale was only 8, indicating that accurate pricing means considerably less time on the market in addition to selling, on average, for more than the asking price.
The most critical step for sellers to secure as much money as possible upon closing is to spend considerable time arriving at a home’s Fair Market Value based on a home's condition, location, amenities, and location. With mortgage rates stubbornly above 7%, the pressure to initially price a home accurately is the difference between selling quickly and maximizing the net proceeds check after closing versus staying on the market, reducing the asking price, and eventually walking away with less money.
What we're seeing:
→ Active inventory rising
→ Demand slowed after interest rates
→ Always slow at this time of year
→ Correctly priced homes are going fast
→ Some are selling at or over asking price
→ Price reductions between 1 and 7%
→ Need to focus on initial listing price
What we can expect:
→ Faster pace once people are in summer routines
→ Inventory and demand will peak in August
Orange County Housing Market Summary:
- The active listing inventory in the past couple of weeks increased by 150 homes, up 6%, and now sits at 2,470. In April, 32% fewer homes came on the market compared to the 3-year average before COVID (2017 to 2019), 1,272 less. 604 more sellers came on the market this April compared to 2023. Last year, there were 2,139 homes on the market, 331 fewer homes, or 13% less. The 3-year average before COVID (2017 to 2019) was 6,255, or 153% extra, more than double.
- Demand, the number of pending sales over the prior month, increased by 52 pending sales in the past two weeks, up 3%, and now totals 1,759. Last year, there were 1,660 pending sales, 6% fewer. The 3-year average before COVID (2017 to 2019) was 2,765, or 57% more.
- With supply rising faster than demand, the Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, increased from 41 to 42 days in the past couple of weeks. It was 39 days last year, similar to today. The 3-year average before COVID (2017 to 2019) was 68 days, slower than today.
- In the past two weeks, the Expected Market Time for homes priced below $750,000 decreased from 32 to 31 days. This range represents 17% of the active inventory and 23% of demand.
- The Expected Market Time for homes priced between $750,000 and $1 million decreased from 24 to 23 days. This range represents 14% of the active inventory and 20% of demand.
- The Expected Market Time for homes priced between $1 million and $1.25 million increased from 26 to 28 days. This range represents 10% of the active inventory and 14% of demand.
- The Expected Market Time for homes priced between $1.25 million and $1.5 million decreased from 33 to 28 days. This range represents 10% of the active inventory and 14% of demand.
- The Expected Market Time for homes priced between $1.5 million and $2 million increased from 40 to 46 days. This range represents 13% of the active inventory and 12% of demand.
- In the past two weeks, the expected market time for homes priced between $2 million and $4 million increased from 65 to 66 days. For homes priced between $4 million and $6 million, the Expected Market Time decreased from 184 to 167 days. For homes priced above $6 million, the Expected Market Time decreased from 439 to 413 days.
- The luxury end, all homes above $2 million, account for 38% of the inventory and 16% of demand.
- Distressed homes, both short sales and foreclosures combined, comprised only 0.2% of all listings and 0.1% of demand. Only three foreclosures and two shorts sales are available today in Orange County, with five total distressed homes on the active market, up one from two weeks ago. Last year, ten distressed homes were on the market, similar to today.
