ORANGE COUNTY housing report | October 2018
Cracks in the 6-year housing run emerged in the spring, and now more cracks are appearing.
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 | October 2018
Orange County Housing Report:
Active Inventory: Active inventory increased by 2% in the past 2 weeks.
Current Demand: Current demand did not change substantially over the past 2 weeks.
Luxury End: Luxury demand did not change substantially over the past 2 weeks.
More Cracks Appearing
New cracks in the housing market are demonstrating that the cooling trend is here to stay. There’s a strange phenomenon that takes place when you're full speed ahead with quick turnover. Why does it feel so slow? Quite simply, you got used to the high speed of a hot market, zooming along nonstop for a long period of time.
Similarly, the housing market has been zooming along at a high speed for years; that is, until last spring. That’s when cracks in the Orange County housing market began to emerge. In the last couple of months, more cracks have appeared. The market is still moving, just not at the speed that everybody has become accustomed to. The latest trends that have surfaced continue to highlight a cooling marketplace, moving at a much slower speed.
Crack – The current active inventory has not reached a peak.
Typically, the active listing inventory peaks in the Summer Market, sometime between July and August. This year, it does not look like it will reach a peak until October, around the mid-point of the Autumn Market. The delay is occurring because there are more homes coming on the market right now. In the past month, an extra 459 homes (or 15% more homes) were placed on the market compared to the same time last year.
Crack – A delayed peak is a strong indicator of a much slower spring for the following year.
The peak has also been delayed because demand is down considerably, its lowest levels since 2007. When demand is down, fewer homes are pulled from the active listing inventory as compared to pending sales. After reaching a peak, the active inventory drops for the remainder of the year. With the top to the 2018 inventory expected to hit sometime around October, the market will not have as much time to adequately drop by year’s end. There will be more homes to start the 2019 housing market, meaning more seller competition.
Crack – The Expected Market Time spiked from July through September.
Typically, the Expected Market Time - the amount of time it would take to place a home on the market today and open up escrow down the road - flattens during the Summer and Autumn Markets. It remains flat because the velocity of homes coming on the market slows during the summer (with all of the distractions) and autumn (with the kids going back to school). Similarly, demand drops during the summer and autumn for the same reasons. The decrease in homes coming on the market and the decrease in demand offset each other so the Expected Market Time does not change much.
However, this year, a large drop in demand combined with a consistently growing active listing inventory, which has not peaked and instead paved the way for an increase in the Expected Market Time. Expected Market Time has increased from 80 days in July to 100 days today. At 100 days, the housing market is knee deep in a Balanced Market, a market that does not favor a buyer or seller, and is pushing its way towards a Buyer’s Market for the first time in years.
The cracks in housing that started during the Spring Market cooled the HOT seller’s market that everyone had become accustom to. As Orange County housing cooled further during the Summer Market, more cracks started to emerge. These trends have only developed this year. The cracks are cautionary flags in approaching the local housing market. If these trends continue, the market could cool further and move its way towards a Buyer’s Market down the road. It won’t happen this year, but it could be the initial signs of an eventual shift.
Best advice for a buyer: Buyers need to remember that it is NOT a Buyer’s Market. Sellers are still able to fetch the Fair Market Value of a home, meaning a price very close to the most recent comparable pending and closed sales. Values are NOT dropping.
Best advice for a seller: For now, the evolving market is a bit more challenging for sellers than what what you may have been used to. Unrealistically priced listings will not succeed. It necessitates a much more cautious, deliberate approach to the housing market.
Instead, you should rely on the professional analysis and advice of a seasoned REALTOR®. That's where we at The Swan Team come in!
If you need help preparing to buy or sell in 2018 – Contact Us Now!
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The Swan Team | OC Real Estate
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