Orange County Housing Report: Entry Level Housing Sizzles
There just are not enough condominiums and houses in the
lower ranges to keep up with the red hot demand.
Entry Level Housing: Starter homes are flying off the market with
an expected market time around one month.
An important segment of the housing market is the starter
home, buyers looking to purchase a home for the first time. In Orange County,
the detached starter home starts around a half a million dollars. There are
only 174 available today below $500,000. For many college graduates and young
families who cannot afford a detached home, they turn to townhomes and
condominiums. With interest rates below 4% and the Federal Reserve talking
about eventually raising rates, buyers are tripping over themselves to purchase
and the market is sizzling.
For detached homes below $750,000, the market is scorching
hot with an expected market time (the time it would take for the average home
to enter escrow) of only 29 days. For sellers who price their homes close to
the most recent comparable pending and closed sales, and are in good condition,
they generate immediate interest with multiple offers within days of hitting
the market. If a home is on the market for a few weeks within this range and no
offers to show for it, there is something wrong with the home and it is
typically price.
The market is still really hot from $750,000 to $1 million
with an expected market time of less than two months. Above $1 million and the
market starts slowing considerably.
Many entry level buyers turn to townhomes and condominiums
for affordability reasons. There are only 212 available in all of Orange County
below $250,000, and they are typically small one to two bedrooms and less than
1,000 square feet. The expected market time is 44 days. For condominiums
between $250,000 and $500,000 the expected market time is 35 days. Once again,
when sellers price their homes carefully and are in great condition, they too
are generating multiple offers within moments of coming on the market.
With an expected market time of less than 60 days for
attached homes between $500,000 and $750,000, the market is still very hot. It
starts to slow above $750,000 and comes to a crawl above $1 million.
The bottom line: it is the Spring Market and Orange County housing is heavily stacked in favor
of the seller. Demand is so hot for starter homes that many buyers will not be
able to purchase. There are currently far more buyers than sellers. It’s a
supply and demand issue. It won’t start to slow until the Summer and Autumn
Markets. Buyers need to be on their “A” game in order to be successful and
secure a home within these ranges today.
Luxury End: Through April, there have been more luxury home sales above
$1.25 million than ever before.
The word from the Orange County real estate trenches is
that the luxury market is really slow; yet, demand for homes above $1 million
is up compared to 2015. How can that be? It is quite simply a supply issue.
For homes priced between $1 million and $1.5 million,
demand is up an incredible 21% compared to last year. The number of active
listings is also way up, 19% higher. Although activity is up, the increase is
almost totally offset by the number of competing listings. The expected market
time is 95 days compared to 97 days last year.
For luxury homes priced above $1.5 million, demand is up
6% compared to last year. In real numbers, it is only 14 additional pending
sales. The inventory is a different story; it is up 24%, an additional 285
homes on the market competing against each other. There are more sellers
competing for a very similar number of buyers; thus, the market feels a lot
slower.
There are many definitions for luxury housing, but if we
take a closer look at one definition, the top 10% of all closed sales, Orange
County’s luxury end would be $1.25 million and up. Through April, there have
been more closed sales above that threshold than ever before. Keep in mind,
that’s four months of cumulative sales. There are currently 1,932 homes on the
market above $1.25 million.
Demand: In the past two-weeks demand increased only slightly, but to a
new record height for the year.
Demand, the number of new pending sales over the prior
month, increased by only 13 homes in the past two-weeks, now totaling 3,196,
the highest level since October 2012 and the height thus far in 2016. It
appears as if demand is peaking right now.
From here we can expect demand to remain at these levels through mid-June
when we transition to the Summer Market. With the distractions of summer, the
beach, family trips, the pool, hiking, picnicking, and every other outdoor
recreation you can think of, Orange County housing demand experiences a
cyclical slowdown.
Last year at this
time demand was at 3,138 pending sales, 58 fewer than today. The expected
market time was 56 days, identical to today.
Active Inventory: The inventory increased by 2% in the past
two weeks.
The active inventory increased by 138 homes in the past
two weeks and reached 6,000 homes for the first time since the start of
November of last year. With scorching hot demand, the inventory is having a
difficult time growing; many homes are coming off of the active inventory every
day as they successfully enter escrow. The numbers will not really climb until
the Summer Market when demand starts to slow. The inventory looks a lot like
2015. It reached a peak of only 7,178 homes at the end of August, well off the
10-year average peak of 10,375 homes. There just are not enough homes coming on
the market compared to a decade ago.
Last year there were 175 fewer homes on the market, 3%
less.
Summary:
