Orange County Housing
Report: Oktober-Housingfest!
Even though the Orange County housing market has transitioned
to a normal Autumn Market, October is a great month for housing.
October Housing: despite the downshift in both the inventory
and demand, cyclically, October is a decent month for real estate.
Naturally, the housing market slows quite a bit after the
kids go back to school and the leaves turn different colors and cover the
ground below. Just as Mother Nature transitions from season to season, so does
the housing market. It’s just not the most ideal time of the year to make a
move. That is precisely why a lot of real estate takes place in the spring.
When a buyer and seller agree to terms in the spring, many close during the
summer, a great time of year to move the family around. The kids are on summer
break; it’s perfect! So, the peak of pending sales is in the spring and the
peak of closed sales is in the summer.
Often sellers and buyers mistaken summer as the best time
of the year for real estate. While it is the best time to close a sale, most
are opened up as pending sales during the spring. Pending sales take anywhere
from 30 to 60 days to close. For a seller placing their home on the market in
August, the best time of the selling season is pretty much in the rearview
mirror at that point. There’s just not enough time for the pending sale period
after a buyer and seller consummate a transaction. A home placed into escrow in
August is going to close anywhere from September to October, not the best time
for a family to move and start new schools, after the school year has already
begun.
Even though the Autumn Market is considerably slower than
the both the Spring Market, 23% slower, and the Summer Markets, 15% slower,
October is cyclically the best month of the season to both buy and sell.
Remember, families don’t move as often outside of the late spring and summer
months; however, there is a small window of opportunity, and it is right NOW.
That’s simply because some families are willing to move during the holiday
break, while the kids are out of school. More closed sales occur during the
month of December compared to November, averaging 12% more over the past five
years.
Sellers that are on the market today have a few more weeks
to take advantage of the additional activity and aim for a December closing.
That window shuts about mid-November when we enter the Holiday Market. Closed
sales fall off a cliff in January compared to December, averaging a 26% plunge
over the past five years. In order for sellers to successfully take advantage
of the current “Oktoberfest” for
housing, they need to be carefully priced, as close to the Fair Market Value as possible. In a market loaded with overpriced
homes on the market today, many sellers will simply not be successful. By the
time that they realistically reduce the asking price to where it needs to be,
we will have transitioned into the slowest season of the year, the holidays.
Similarly, now is also a great time for buyers to
purchase. There are considerably fewer buyers in the marketplace right now;
thus, there is considerably less competition in purchasing a home. Currently,
the expected market time is tipping away from a seller’s market and more
towards balance. A balanced market does not favor buyers or sellers and values
remain flat. Many buyers mistaken the Autumn and Holiday markets as a buyer’s
market because activity slows. That’s just not the case because while it is
true that there are fewer buyers, it is also true that there are fewer sellers.
As a matter of fact, over the past five years, on average the active listing
inventory has dropped by 17% from October to the end of the year. Last year it
dropped by 23%. So, while there are fewer buyers competing to purchase, there
are also fewer and fewer choices as the year draws to a close.
For the remainder of the year, Orange County’s market will
remain a balanced market. That doesn’t mean that a buyer is going to get a
crazy deal by purchasing now through the end of the year. It does mean that
they will be able to purchase a home at the Fair Market Value and there will be fewer offers generated on any
given home. The number of multiple offer situations drops as well, so buyers
are considerably less frustrated than earlier in the year during when it was a
hot seller’s market.
The time is NOW for both buyers and sellers to cash in on
“Oktoberfest” for housing. There’s
only about 5 weeks left.
Active Inventory: the
inventory continued its descent, declining by 3% in the past two weeks.
The Autumn Market inventory drop is in full swing,
shedding 230 homes in the past two weeks and now totals 6,729. Fewer homes are
coming on the market and more and more sellers are throwing in the towel the
further we get from the Summer Market. The inventory will continue its downward
trend through the end of 2015.
Last year at this time the inventory totaled 7,400 homes, 671
more than today, with an expected market time of 3.31 months, or 99 days.
That’s two weeks longer than today.
Demand: Demand decreased by 6% in the
past couple of weeks and 10% in the past month.
Demand, the number of new pending sales over the prior
month, decreased by 159 homes in the past two weeks and now totals 2,378 homes.
Demand was last at this level back in January of this year. During this time of
the year there are both fewer buyers and sellers participating in the market.
Demand drops in sync with the active inventory.
Last year at this time there were 145 fewer pending sales,
6% less, totaling 2,233.
Distressed Breakdown: The distressed inventory decreased by 16% in
the past couple of weeks.
The distressed inventory, foreclosures and short sales
combined, decreased by 35 homes in the past two weeks, a 16% drop, and now
totals 185, its lowest level since May and the biggest drop of the year.
Distressed homes are now an insignificant part of the overall Orange County
housing market scene. In September, foreclosures represented 1% of all closed
sales and short sales represented 2%; thus, normal sellers with equity in their
homes represented 97% of all closed activity.
In the past two weeks, the foreclosure inventory decreased
by 15 homes and now totals 50, its lowest level since the start of the Great
Recession. Only .7% (that’s seven-tenths of one percent) of the total active
inventory is a foreclosure. The expected market time for foreclosures is 33
days, a red HOT segment of the market. The short sale inventory decreased by 20
homes in the past two weeks and now totals 135, its lowest level since May. The
expected market time is 43 days. Short sales represent just 2% of the total
active inventory.
