It's All About Supply
The supply of homes available to purchase today is at an all-time low level, and it is matched with strong demand that is not much different than prior to the pandemic. As a result, the market has been white hot from day one of 2022. It is an unprecedented start to the year that is without comparison.
As the inventory dropped, housing has grown hotter and hotter. We started the first of the year with only 1,100 properties (houses, condos, townhomes) available to purchase in Orange County, an unmatched, ultra-low home supply that shattered the prior record low achieved in January 2021, at 2,633 homes. Last year’s start crushed the 2013 record start of 3,161 homes. The active inventory had been dropping prior to COVID, but the pandemic further disrupted housing and intensified the inventory crisis. The crisis had evolved into a catastrophe by the end of 2021 as the fewest number of homes come on the market in December and the second fewest in November. That set up the unprecedented start to this year.
When the inventory is this low, just about everything that is placed on the market is thrown into escrow after being exposed to the marketplace for less than a week. As a result, the Expected Market Time (the time between hammering in the FOR-SALE sign to opening escrow) started this year at 25 days, shattering last year’s record 42-day start. At 42 days, Orange County housing is a Hot Seller’s Market (less than 60 days).
At 25 days, it is an Insane Seller’s Market (less than 30 days) where buyers trip over each other to see every home that enters the fray, sellers call the shots, multiple offers and bidding wars are the norm, and home values are skyrocketing. (For perspective, we have to reach 90 days on market for it to be a balanced market and 120 days on market for the tide to turn to a buyer’s market.)
As the market time reaches lower and lower levels, falling further below the 30 day “insanity” mark, there are more showings, more multiple offers, and higher sales prices. With nearly nothing on the market, home values are soaring, and today’s higher mortgage rates are not deterring buyers from purchasing. As you can see below, the most demand is in the $1.25million to $1.5million range in Orange County with the expected market time at just 2 weeks!
When it comes to demand, we typically quantify that by the number of current pending sales. But with such low inventory, we can't accurately gauge just how much actual buyer demand there is because so many buyers are just waiting for more homes to come on the market.
The moral of the story: if you have been thinking of selling, there is no better time than RIGHT NOW!
Foreclosures and Short-Sales
In 2020 and 2021, fear-mongering analysts argued that there would be an influx of foreclosures and short sales as a result of the pandemic and forbearance. But as you can see in the chart below, to the great dismay of buyers, they just haven’t materialized.
What Does this Mean for You?
Whether you are a buyer, seller, or renter, understand that like everything else these days, rent and the purchase price of a property is going to continue to go up. And while I don’t have a crystal ball (but I sure wish I did, Crypto currency), price increases are likely to continue through 2022 and into 2023.
One of the major reasons there is such low inventory is because homeowners don’t know where to go with so few homes on the market. Naturally, the hope of any seller is that they will find their next house, put in an offer that is contingent upon selling their current house, then put their home on the market and have them both close escrow around the same time. In this market, contingent offers aren’t really considered - not when sellers have multiple non-contingent and all-cash offers. The key is to develop a plan and strategy. The Swan Team can help you with that.
BUYERS: Waiting for the market to get easier is not the answer.
Home values are on the rise and mortgage rates have been on the rise as well. Values are slated to climb between 8 to 10% in Orange County, and mortgage rates could reach or even exceed 3.5%.With rising values and higher rates, payments increase, and home affordability will slowly erode. Waiting is not an option. You will need to make sure you have realistic expectations and understand that patience is key. Not to mention, working with a realtor or team who knows how to get offers accepted is paramount. {Hint, hint: The Swan Team!}
SELLERS: Take advantage of the hot market by pricing a home as close to the last comparable or pending sale.
Carefully pricing will allow you to tap into the throngs of buyers waiting for every home that hits the market. A realistic price will allow you to attract a ton of offers. The bidding war that follows will allow you to obtain a very high sales price, typically selling for a lot higher than the asking price. But you can’t be arrogant and overprice your property. That will lead to fewer showings and fewer (if any) offers.
When it comes to listing your home, it isn’t just as easy as putting a sign up in front of the house. There is planning and work that needs to be done to ensure you get the most return on your investment, the highest sales price possible AND the most convenient terms for you (ie. when you move out, potential rent back, repairs, etc.).
That is where The Swan Team comes in. We are here to make the process the most profitable, convenient, and stress-free it possibly can be. If you or a loved one are thinking about selling, please contact us. We are here to help answer any questions and are happy to share our strategies and plan for your success.
Contact us today by simply clicking on the phone icon at the top of the screen. Or you can always dial us at 949-444-1601 or email us at info@theswanteamoc.com.