We are going to talk about what we in the real estate industry call the 6-year drought. Below is the latest from the Orange County Housing Report. For the most up-to-date market data, please Sign Up Now to receive real-time housing reports. We deliver the full/downloadable market reports and charts to your inbox every month.
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ORANGE COUNTY Housing Report | March 2018 – Part 1
There have been far fewer homeowners selling their homes annually ever since the start of the Great Recession. Lack of Sellers: In the face of massive home appreciation and excellent conditions that have favored sellers for years now, fewer homeowners are opting to sell.
How Did we End up in a Seller’s Market?
In 2009, the midst of the Great Recession, a trend emerged. Fewer sellers were coming on the market. It made sense back then; homeowners watched their home equity evaporate overnight, so why would homeowners trip over themselves to sell in the middle of a tumultuous, deep buyer’s market? As a result, from 2009 through 2011, 22% fewer homes came on the market each year compared to 2000 through 2008.
In 2012, the housing market turned, tipping in favor of sellers for the first time since 2006. Even though it was a seller’s market, the trend of fewer homeowners opting to place their homes on the market not only continued, it deepened. For the past six years, from 2012 through 2017, the number of homeowners coming on the market annually dropped from 22% fewer to an average of 31% fewer. To put it all in proper perspective, there were 1,500 more homes coming on the market every single month from 2000 through 2008. That is an additional 18,000 homes per year.
A New Norm for Orange County Housing
Today’s buyers would love to see more inventory. It is frustrating to be a buyer. With a lack of inventory and backed up demand, properly priced homes generate a parade of showings, open houses with buyers bumping into each other, and multiple offers (and in some cases, almost too many to count).
The lack of inventory is no longer a trend. After 9 years, it is a norm, a way of life in real estate. A lack of inventory is not just a standard in Orange County; it is the new standard across Southern California, the entire state of California, and across the United States. People are no longer selling and moving like they did before.
What Does this Mean for Orange County Housing?
Based upon 2017 closed sales, the turnover rate for Orange County is once every 20 years. That is an improvement over 2016’s once every 21 years, 2015’s once every 23 years, and 2014’s once every 24 years. Although it may be slightly improving, once every 20 years is a long time to hold onto a home before opting to sell.
During the Great Recession and the recovery, millions of investors have converted family homes into rentals. With rising home values coupled with rising rents, holding onto these homes has proved to be a wise long-term investment. There is no incentive for them to sell anytime soon.
Buyers in today’s market need to understand that the lack of supply is not a trend; it is the new norm. To be successful, buyers must realistically approach the market with a solid game plan, a game plan that includes patience, a very sharp pencil, and the ability to proceed quickly.
Now, let’s talk numbers…
Orange County Housing Report:
Active Inventory: Active inventory continues to climb at 5%, despite increased demand.
Current Demand: Demand increased by 7% in the past two weeks.
Luxury End: Both luxury demand and inventory increased by 5% in the past two weeks.
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The Swan Team | OC Real Estate
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