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OC Real Estate: Back To Neutral Market in Feb ’19

Back to Balance: With rising demand, the housing market transitioned to a Balanced Market.

Let’s paint a picture. It is the end of the school year and time for thousands to graduate from college and embark on the next chapter in their lives. Arenas and stadiums across the country will bestow degrees to young adults eager to make their mark on the world. Their heads are filled with the highest expectations: instant job offers, the job of their choice, and an attractive salary. Then, reality sets in. They move back in with their parents. Their résumé is distributed to a myriad of companies, but there is no instant offer. Finally, after months of looking, they stumble upon an entry level position that pays very little. It all boils down to unrealistic expectations.

Similarly, sellers in 2019 are experiencing the plight of unrealistic expectations. Many are coming on the market expecting a hot Seller’s Market in the spring like 2012 through 2018: instant offers, instant success, full price offers, and buyers tripping over themselves to purchase their home. That is just not the Spring Market in 2019. Like college graduates, it all boils down to unrealistic expectations.

The Spring Market is officially here. Now that the New England Patriots have clinched yet another Super Bowl victory, the housing market moves to THE very best time of the year to sell a home, from now through the end of April. That is three months of perfect market conditions, rising demand and not as much seller competition. The Expected Market Time (the amount of time it will take to list a home today and place it into escrow down the road) drops to its lowest level of the year and remains there through April.

Buyer demand peaks in May and slowly drops from there. At the same time, the active inventory rises as more homeowners opt to come on the market from May through July. With falling demand and a rising inventory, the Expected Market Time rises. It continues to rise until it peaks, customarily between July and August. Last year, it did not peak until ringing in a New Year because demand dropped considerably while the active inventory continued growing until the end of October.

For the next three months it is the best time to sell a home. In the past couple of weeks, demand jumped by 25%, normal for this time of the year, while the active inventory remained nearly the same. As a result, the Expected Market Time dropped from 128 days, a slight Buyer’s Market, to 102 days, a Balanced Market. It is a market that does not favor buyers or sellers. It was a Balanced Market last year from September through the start of November. It shifted to a slight Buyer’s Market the week of Thanksgiving, but just shifted back to balance within the last two weeks with stronger demand. Since January 1st, demand has increased by 51% and the active inventory has only increased by 10%; thus, the huge drop in the Expected Market Time.

Right now, the Orange County housing market is a Balanced Market, noticeably different than past seven years when it leaned heavily in favor of sellers. That is when sellers called the shots and prices climbed. Many sellers are eagerly coming on the market now anticipating a hot Seller’s Market once again; instead, they are encountering today’s Balanced Market. Homes are sitting on the market longer. There are markedly fewer showings. Success is determined by the sellers who accurately price their homes and pack their patience. The market no longer provided instantaneous success with multiple offers. Only homes that are nicely upgraded, show like a model, and are priced well fly off the market. They are the exception, not the rule.

The market is not going to get much better than where it is today, balanced. It will most likely remain balanced throughout the Spring Market. In May, as the Expected Market Time starts to rise, slowly, but surely, Orange County housing will become more sluggish and tilt more in the buyer’s favor.

Active Inventory: In the past couple of weeks, the active inventory decreased by 22 homes.

In the past two  weeks, the active inventory decreased by 22 homes, almost no change, and now totals 6,100. The lack of a rise is partially due to increased demand, with more homes going into escrow; but, it is also due to the fact that 5% fewer homes have come on the market so far this year. Nonetheless, expect the inventory to rise through the Spring and Summer markets as more sellers enter the fray.

Last year at this time there were 3,981 homes on the market. That means that there are 53% more homes available today. This is the highest level of homes on the market in February since 2012.
Demand: In the past couple of weeks, demand increased by 25%.

Demand, the number of new pending sales over the prior month, continued to soar. In the past couple of weeks, demand increased by 356 pending sales, or 25%, from 1,435 to 1,791. This is typical for this time of the year. For perspective, demand increased by 30% last year, adding an additional 522 pending sales. Demand will continue to rise until peaking sometime in May.

Even with the increase in demand, it is the lowest reading for this time of the year since 2008. It will continue to be muted compared to recent years.

Last year at this time, there were 495 additional pending sales, 28% more than today.

The current Expected Market Time dropped from 128 days to 102 days in the past two weeks, a Balanced Market (between 90 and 120 days). Last year, the Expected Market Time was at 52 days, a HOT Seller’s Market.

Luxury EndLuxury demand jumped by 33%.

In the past two-weeks, demand for homes above $1.25 million increased by 62 pending sales, a 33% increase, and now totals 249. The luxury home inventory decreased by 8 homes and now totals 1,862, almost unchanged. The overall expected market time for homes priced above $1.25 million dropped from 300 days to 224 over the past two-weeks, a significant improvement.

Year over year, luxury demand is down by 56 pending sales, or 25%, and the active luxury listing inventory is up by an additional 229 homes, or 19%. The expected market time last year was at 167 days, noticeably better than today. For homes priced between $1.25 million and $1.5 million, in the past two-weeks, the expected market time decreased from 185 to 144 days. For homes priced between $1.5 million and $2 million, the expected market time decreased from 305 to 209 days. For homes priced between $2 million and $4 million, the expected market time decreased from 314 to 241 days. For homes priced above $4 million, the expected market time decreased from 794 to 582 days. At 582 days, a seller would be looking at placing their home into escrow around the middle of September2020.

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Michael and Anabel Simpson

Michael and Anabel Simpson have over 16 years of experience helping the community buy and sell real estate in Orange County, Los Angeles County, and Riverside County with a special emphasis on Anaheim and the surrounding area. In addition to being licensed Realtors, they are Short Sale and Foreclosure certified. Ask Michael and Anabel Simpson about the different techniques they use to sell homes, including 3D video, social media marketing and more. Contact Michael and Anabel Simpson today.

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