What's does an inventory spike mean?
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We're talking about what we in the real estate industry call a change in the market. 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 | May 2018
A sudden spike in the inventory is a sign for sellers to approach the market carefully. In the past two weeks, the active inventory had its largest increase since July 2013. Let’s take a look at how this affects the market in our Orange County Housing Report.
What does this mean?
The script for the Orange County housing market has been the same for quite some time now.
The year starts with very few homes on the market.
The inventory rises slowly, peaking sometime during the summer.
The long-term average for the active listing inventory is 8,000 homes; yet, it cannot even hit that level for a day, falling astonishingly short year after year.
The headlines have been the same: “Not Enough Homes on the Market” and “Buyers are Tripping Over Themselves to Purchase.”
Suddenly, something has changed. More homes are coming on the market, a lot more homes. The active listing inventory spiked in the past two weeks, adding 436 properties, a 9% increase. Granted, the overall inventory, 5,016 homes, is still very low compared to the long-term average, but there is a palpable change in the air.
What Does this Mean for Orange County Housing?
The gigantic increase in the inventory coupled with only a slight rise in demand resulted in the expected market time, the number of days it would take for a home that came on the market today to be placed into escrow, to increase from 54 days to 58 days.
It is still a hot seller’s market, below 60 days; however, it is knocking on the door of a slight seller’s market, 60 to 90 days. A slight seller’s market would mean that appreciation would slow; there would be fewer multiple offers; and, sellers would still be able to call most of the shots.
This sudden surge in the expected market time is the largest increase for this time of year since 2007. This change typically means that buyers are more price sensitive and that sellers are not going to get away with stretching their asking prices by that much more than the most recent comparable sale. The word from Orange County’s real estate trenches is that many homes are overpriced and simply will not sell until they adjust their asking prices much closer to their Fair Market Values.
How does one arrive at a home's Fair Market Value?
A seller must take into consideration their home’s condition, location, and upgrades compared to the most recent comparable pending and closed sales.
Today’s buyers are quite sophisticated and educated on deferred maintenance and the cost and time it takes to update and upgrade a home thanks to the plethora of cable television shows devoted to flipping, renovating, and purchasing homes. Most buyers are looking for homes that do not need a makeover; they do not want to deal with the hassle in revamping a home. These homes will ultimately just sit on the market until the price reflects the outstanding work that needs to be done.
Last year at this time the active inventory was at 5,263 homes, 119 more than today, a 2% difference.
Now, let’s talk numbers…
Orange County Housing Report:
Active Inventory: The active inventory increased by 9% in the past 2 weeks.
Current Demand: Demand only increased by 1% in the past 2 weeks.
Luxury End: Luxury demand (5%) and inventory (6%) increased by in the past 2 weeks.
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The Swan Team | OC Real Estate
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