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ORANGE COUNTY Housing Report | February 2018 – Part 1
On your Mark, Get Set, GO! The Orange County Housing Market is heating up fast. With low housing supply and fierce demand, the housing market is accelerating quickly. New Year’s resolutions are quickly giving way to the hustle and bustle of day to day life. From the haze of holiday distractions, buyers are eager and ready to purchase.
When the supply of homes is low and demand to purchase is high, the expected market time falls. That is what we are experiencing right now. During the holiday market, the supply of homes was low and so was demand. Now that the holidays are in the rear-view mirror, the supply of homes has remained at chronically low levels, while demand is rapidly rising. As a result, the expected market time, the amount of time it would take from placing a home on the market to opening escrow, is falling like a rock.
Active inventory increased only 67 homes in past couple of weeks. The active listing inventory added 67 homes in the past two-weeks, a 2% increase, and now sits at 3,774. The biggest issue for Orange County housing this year has been a real lack of inventory. Thus far in 2018, there have been 6% fewer homes placed on the market. This issue has prevented additional closed sales and has been undermining the true potential for housing. If there were more homes for sale, there would be more pending and closed sales.
Demand increased by 22% in the past couple of weeks. Buyers are extremely eager to purchase, yet are faced with a very anemic inventory. Buyers are gobbling up inventory nearly as fast as homes are placed onto the market. As a result, in the past two weeks, demand, the number of new escrows over the prior month, increased by 317 pending sales, or 22%, and now totals 1,764. That is the largest gain since the start of February of last year. The housing market is only revving the engine at this point. Expect demand to continue to accelerate from here until it peaks sometime in May.
The housing market is forging its way to the absolute best time to sell – From about mid-February through mid-May. That is when the expected market time drops to its lowest levels of the year. Homes will fly off the market at the fastest annual rate. From mid-May through June, a deluge of sellers enter the fray, exceeding the number of pending sales, and the expected market time rises. Going back to “supply and demand,” demand remains steady and strong while the supply of homes on the market increases. As a result, the expected market time rises. It is still a great time to sell, just not as hot as earlier in the year. From July through the remainder of 2018, the expected market time will remain elevated.
It is still all about price – It is extremely important to note that placing a home on the market during the hottest time of the year does not guarantee success. When sellers price their homes too aggressively, they sit on the market and do not entertain offers to purchase. A stunning 25% of all homes that have been placed into escrow so far this year had to reduce their asking price at least once. When the market is hot, carefully pricing a home close to its Fair Market Value is the absolute best way to approach the market. This can be accomplished by diligently analyzing recent comparable pending and closed sales and not giving too much weight to active listings. A realistic price will attract multiple offers to purchase and, oftentimes, will allow a seller to fetch a sales price at or higher than the active listing price.
The market is not tilting in favor of buyers and will not anytime soon. Buyers should approach the market with a ton of patience and the mindset that they will eventually persevere. It may take writing offers on 10 different homes, but in the end will be worth it. Interest rates are still at historically low rates, but this gift will not last forever. Waiting is not the answer.
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The Swan Team | OC Real Estate
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