Area Real Estate News & Market Trends

You’ll find our blog to be a wealth of information, covering everything from local market statistics and home values to community happenings. That’s because we care about the community and want to help you find your place in it. Please reach out if you have any questions at all. We’d love to talk with you!

March 4, 2021

Property Values Rising with No Top In Sight

Values Rising

The market velocity is extremely fast, and it is a Hot Seller’s Market where values are rising swiftly and multiple offers is the norm.

At the beginning of the COVID-19 pandemic, everybody rushed to their local supermarket to purchase toilet paper. Similar to toilet paper at the beginning of the pandemic, there are not enough homes on the market to keep up with today’s intense buyer demand. There is a run-on housing. Homes are flying off the market faster than they are coming on, and the inventory has been dropping further as the year has progressed. Housing’s momentum lines up strongly in favor of sellers. In looking closely at the housing economic model of supply, demand, mortgage rates, affordability, buyer demographics, and market velocity, the data illustrates that the current trajectory of the housing market is not going to change anytime soon.

At the start of 2020, prior to any lockdown measures and the beginning of the pandemic in the United States, mortgage rates had dropped from 3.75% to 3.5%, an excellent level that had only been reached a few times since 2013. Throw in an increase in buyer demand due to the strongest demographic patch of prime first-time home buyers, 32-year-olds, in 26 years (which will continue for the next 4 years), it was no surprise that the market was hot in February 2020. The inventory was at its lowest level since 2013, a crazy year for housing, demand was at its hottest point since 2017, and the velocity of the market was the strongest since 2013. Then the pandemic hit, demand stalled and so did the inventory. Yet, as rates dropped to record levels, 16 record lows last year, demand heated up and the inventory continued to drop. The lower rates dropped, the hotter the market became. In fact, the market dropped to its hottest point by year’s end with an Expected Market Time (the time between hammering in the FOR-SALE sign to opening escrow) of 37 days.

With mortgage rates remaining below 3%, a level never reached prior to last year, today’s housing market is one of the strongest on record, and it has everything to do with supply and demand. The current number of available homes to purchase is less than the current demand readings. The active inventory today is at 2,438 homes, and demand (last 30- days of new escrow activity) is at 2,863 pending sales. There are 425 fewer homes available to purchase compared to current demand. Homes are flying into escrow as quickly as they are coming on. The Expected Market Time is at 26 days, less than one month, the lowest level since tracking began in 2004.

For proper perspective, last year there were 4,030 homes available, and demand was at 2,479 pending sales. There were 1,551 more homes available to purchase than demand. The Expected Market Time was at 49 days, for mid-February, only 2013 was stronger. In 2013, the prior hottest year in decades, the inventory was at 3,272 and demand was at 2,887. There were 385 more homes available to purchase compared to demand. The Expected Market Time was at 34 days, the prior record level.

With an Expected Market Time of 26 days, homes priced close to their Fair Market Values procure a swarm of activity, multiple offers, 10, 20, or even 30 offers, and ultimately sell for a bit more than the asking price, and in some cases a lot more. It depends upon the home. Buyers worry about paying too much, often the record for a development. Everyone’s head immediately retreats to the last time there was a comparable buyer frenzy in housing, the years leading up to the Great Recession. However, there were over six times the number of homes available to purchase in 2006, a year before the start of the Great Recession, 16,000 homes. Homes were far less affordable with mortgage rates at 6.5%. Lender qualifications were loose with a disproportionate number of subprime, zero-down, and pick-a-payment loans, tons of cash- out refinances, and fraudulent lending practices. The transgressions of the real estate industry ultimately led to the deep recession where values plummeted. In contrast, today’s housing has an extremely strong foundation with years of tight lender qualifications, large down payments, plenty of nested equity, and limited cash-out refinances.

Buyers should not worry about paying too much in today’s environment. Mortgage rates are below 3%, demand is unbelievably powerful, the supply of homes is at record low levels, and values are lined rising swiftly. The underlying ingredients that make up today’s housing market are not going to change anytime soon. Instead, buyers should look at their family budgets and determine how much they can comfortably afford, and then aggressively pursue a home. Waiting is not really an option as home values are on the rise and mortgage rates are slowly rising right now as well.

A Tip for Buyers: In competing against a multitude of offers, sharpen your pencil, make the offer as agreeable as possible, and pack your patience. Sometimes an offer above the listed price is necessary to be the winning bidder. Stretching an offer by an additional $10,000 may be enough to get past the finish line. At today’s 2.81% mortgage rate, the additional $10,000 means that the monthly payment goes up by $41.14 and the down payment slightly rises as well. Remember, only one buyer wins the bidding war. For everybody else, it is back to the drawing board.

Active Listings
The current active inventory shed another 2% in the past couple of weeks.

The active listing inventory shed 55 homes in the past two weeks, down 2%, and now sits at 2,438, the lowest inventory level since tracking began in 2004. The low mortgage rate environment is going to continue to thrust this market forward. Homes are not coming on fast enough to satisfy current demand levels, which is why the number of available homes is dropping right now. Homes are coming off the market and into escrow faster than they are coming on. This will continue until the start of the Spring Market next month. More homeowners ultimately wait for the spring than any other time to place their homes on the market. With today’s ultra-hot housing pace, spring cannot come fast enough.

Active Listings in Orange County

There are fewer homeowners coming on the market compared to the 5-year average. During January, there were 169 fewer new FOR-SALE signs in Orange County, 6% less. This new trend is the same across Southern California. It is not COVID-19 that is currently suppressing homeowners from selling their homes; instead, it is the lack of available replacement homes that have many spooked about selling. Many are fearful there will be “nothing to buy,” limiting the number of homeowners willing to participate in a market with such an anemic level of available homes to purchase. Yet, there are great strategies to counter this argument. Sellers can agree to an offer to purchase contingent on finding a replacement property within a specified period of time. They can also rent back for a couple of months. With the market lining up so favorably for sellers, it is a lot easier for a seller to find a buyer willing to agree to these terms.

Last year in mid-February, there were 4,030 homes on the market, 1,592 additional homes, or 65% more. There were plenty more choices for buyers compared to today.

Demand
Demand continued to soar by 11% in the past couple of weeks.

Demand, a snapshot of the number of new pending sales over the prior month, climbed from 2,590 to 2,863 in the past couple of weeks, adding 273 pending sales, up 11%. This is the strongest mid-February demand reading since 2013 when it reached 2,887, virtually identical to today. Mortgage rates below 3% are instigating today’s unprecedented demand levels. Since demand is a snapshot of recent pending sales activity, if there were more homes coming on the market right now, demand would be much higher than where it is today. The lack of available homes to purchase is limiting today’s escrow activity. Demand will continue to rise as more homes become available over the next couple of months and more homes come on the market during the spring. It will most likely peak sometime in May.

Last year, demand was at 2,479, that is 384 fewer pending sales compared to today, or 13% less.

Posted in Market Updates
Jan. 29, 2021

January Real Estate Report - Are We at a Boiling Point?

 

With record low mortgage rates, there is almost too much demand. (Not to mention: Buyers are consumed with how their current home doesn't have the space or features they want in a pandemic reality.) It is like a pot of spaghetti that is boiling over. A quick fix would be to turn down the temperature. That is not that easy in housing. The only way to turn down the heat is for rates to rise. Buyers may be rooting for an easier market with less competition, fewer competing offers, and a gentler rise in values, but that would come at the expense of higher rates and higher monthly payments.

 

 
It is the very thing that buyers are eager to take advantage of that is causing all their frustrations, record low mortgage rates below 3%. It seems that everyone wants to cash in on these incredible savings at the same time. At lower rates, homes become a lot more affordable, even for Southern California’s high dollar value housing stock. It improves a buyer’s purchasing power as well, allowing a family on a budget to afford a lot more home.
Because of these low rates, demand is off the charts and everything that comes on the market is gobbled up almost immediately. Today’s demand (a snapshot of the prior 30-days of pending sales activity) is at 2,055 pending sales compared to 1,702 last year, 21% higher.
 

 

 
The current active inventory (the number of available homes to purchase) is at 2,627 compared to 4,023 last year. There were 53% more homes available to purchase only one year ago. With rock solid demand and an exceptionally low supply, the market is unbelievably hot and lines up heavily in the seller’s favor. The Expected Market Time (the number of months to sell all Orange County listings at the current buying pace) is at 38 days. Last year it was at 71 days, and in November 2018 it was at 122 days.

 

 
While today’s housing market may be boiling over on the backs of record low mortgage rates, buyers should keep the pedal to the metal and not give up. Home values are on the rise and mortgage rates are slated to increase to the mid-3’s by year’s end. Waiting is quite simply not the answer. The same goes for sellers. Waiting until the second half of the year when inventory increases (meaning your property has more competition) and interest rates increase (meaning buyers have less purchasing power) could result in your home taking longer to sell and not selling for as much as you would like. If you are considering selling your home or someone you know is thinking of selling their home but want to wait until the pandemic is over...DON'T WAIT! Striking while the iron is hot is key to your success; just as working with the right real estate team is paramount to selling it quickly and for top dollar. That is where The Swan Team comes in!
Contact us now at 949-444-1601 and get the best team in the business working for you!
Posted in Market Updates
Jan. 15, 2021

What You Need to Know About Prop 19

 


With the new year comes new laws and rules that take effect. This year, the most talked about new rules regarding real estate revolve around the approved Prop 19.
 
Take a quick read to see if you or your family members might be affected by the legal and tax implications.
 
EXPANDED SPECIAL RULES FOR ELIGIBLE HOMEOWNERS Effective April 1, 2021: Homeowners 55 years of age and older, severely disabled, or whose property was extensively destroyed by wildfire or other natural disasters may be eligible to transfer the taxable value of their primary residence to a replacement primary residence:
  • „ Anywhere in California
  • „ Of any value, but with upward adjustments if replacement is of greater value
  • „ Purchased or newly constructed within two years of sale
  • „ Up to three times (previously one time), but without limitation for properties destroyed by fire
TAXATION OF INHERITED PROPERTY TRANSFERS Effective February 16, 2021: Prop 19 narrows the rules allowing properties to pass from parent to child and grandparent to grandchild without an increase in the property tax bill. The taxable value can be transferred:
  • „ To only those properties used as a primary home or farm by the child or grandchild
  • „ If homeowners’ exemption is filed within one year of transfer
  • „ If the value of the property is less than $1M over the original tax basis. If the property value, at the time of transfer, is more than $1M over the original tax basis, some upward adjustment in assessed value would occur.
For more information on Prop 19, visit Prop19Attorney.com or boe.ca.gov/prop19.
Posted in Market Updates
July 31, 2017

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Posted in Market Updates