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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 | November 2018
Orange County Housing Report:
Active Inventory: Active inventory dropped by 1% in the past 2 weeks.
Current Demand: Current demand dropped by 6% in the past 2 weeks.
Luxury End: Luxury housing market improved slightly.
Sellers Must Price Accordingly
Sellers must price according to their location, condition, upgrades, updates, decor, and overall appeal. Prior to this year, there was not a lot of thought that went into pricing a home. Since 2012, sellers stretched their asking prices and home values soared. Sellers were in control.
With higher prices and a dramatic rise in interest rates this year, housing has slowed considerably. Interest rates have risen from 3.9% in November 2017 to nearly 5% today. Combine that with annual appreciation around 5% and monthly mortgage payments have increased by 19%. As a result, demand is down 23% compared to last year and the active listing inventory is 48% higher.
Due to the sharp increase in supply and a striking drop in demand, the Expected Market Time for Orange County has increased to levels not seen since 2011. The Expected Market Time has grown from 54 days in April to 117 days today, a Balanced Market (between 90 to 120 days). It is knocking on the door of a Buyer’s Market (over 120-days) for the first time since January 2011. The 117-day height was last reached in July 2011, over seven years ago. Last year at this time, it was at 61 days, a Seller’s Market (less than 90-days).
The Value of a Home
Sellers no longer get away with stretching the asking price. In fact, they must be extremely careful in pricing or they will not find success. It is not as easy as pricing it right at the most recent comparable sale either. Rarely are two homes completely identical. There is a lot more that goes into the value of a home.
Buyers – buyers are much different today than buyers of past markets.
Today, buyers want a home that is turnkey, ready to go. They want it to look like a model home. Buyers used to overlook some deferred maintenance and lack of upgrades and updates. They focused on the “bones” of a home, the floor plan, and location. They were not afraid of a home that required a little bit of “elbow grease.” What happened? Quite simply, it was Chip and Joanna Gaines.
Expectations – shows like HGTV's show, Fixer Upper, changed the game.
This is where the expectations and desire for the perfect, turnkey home originated from. This show, along with the overabundance of real estate related reality shows, changed buyers’ expectations and approach to real estate. Buyers now know the approximate cost, time, and hassle in improvements, updates, and remodels that go into a home.
Values – when it falls short, buyers subtract from value.
Today’s buyer wants a home to look like a model. If a home needs carpet, the walls are scuffed and dirty, the kitchen is outdated, the yard needs work, the patio is cracked, the light fixtures are old, the bathrooms are dated, and there is plenty of deferred maintenance, buyers will subtract heavily from value. Many buyers will just skip these homes altogether and wait for a home to come along that is already done and ready for immediate occupancy.
To find success: sellers must price their homes carefully - considering the comparable sales and factoring in a home’s condition and overall appeal. The closer a home looks to a model, the faster it will sell. Pricing a home at the last comparable sale, yet it needs a lot of work, will simply not sell in today’s market.
As a result: sellers have a choice. They can either invest in their home and update it prior to placing it on the market; or, they can adjust the price to reflect the work that needs to be done. Buyers will also subtract for the hassle to do it themselves. With the market knocking on the door of a buyer’s market, price is everything.
Best seller advice: you should rely on the professional analysis and advice of a seasoned REALTOR®. That's where we at The Swan Team come in!
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