The Orange County housing market is not changing that much. What you see is likely what weÃ¢â‚¬â„¢ll get for the rest of the year.Ã‚Â The Market is on Cruise Control.
Cruise Control:Ã‚Â The inventory is increasing, demand is flat, and foreclosures and short sales are almost nonexistent.
This yearÃ¢â‚¬â„¢s housing market is remarkably different than the prior two extremely hot years. The market is still really strong; itÃ¢â‚¬â„¢s just not out of control crazy like before. 2012 and 2013 were marked by very low inventories and not enough homes to go around, so multiple bids and rampant appreciation were the norm. Home values were rocketing upward, almost too fast. The appreciation that occurred in those two years should have been spread over five years. It just happened overnight, way too fast.
Flash forward to today, and the active inventory has been on the rise the entire year. We have gone from an inventory of 4,733 homes at the start of the year to 7,182 today, a 52% increase. Meanwhile demand has not changed much this spring. In the past month, demand has only increased by 24 homes and totals 2,723, far fewer than last year when it posted 3,144 pending sales.
With a rising inventory and flat demand, the expected market time has been rising and appreciation has slowed to a crawl. As a matter of fact, appreciation is starting to bump up against a ceiling. Because values have increased substantially, they are at a point where they cannot continue to increase without taking a giant bite out of home affordability. Buyers have traded in their exuberant zeal to pay whatever price to obtain a home for a methodical approach to paying theÃ‚Â Fair Market ValueÃ‚Â of a home. ThatÃ¢â‚¬â„¢s because home values were a deal over the past couple of years and now they are priced where they need to be.
Values are bumping along a ceiling, not really changing much at all from one month to the next. The average sales price for May was $721,000 this year versus $692,000 last year, only a 4% difference and that is year over year. Month to month it is almost negligible.
So if you are a seller, waiting for values to rise to your overpriced level, or if you are a homeowner waiting for values to increase before you place your home on the market, you are going to be waiting a very long time. TodayÃ¢â‚¬â„¢s market is going to be tomorrowÃ¢â‚¬â„¢s market for some time into the future. What you see is what you get. The Orange County housing market really does feel like itÃ¢â‚¬â„¢s on cruise control with no major changes recently nor into the future. Sellers need to get real and price their homes according to the most recent comparable sales. If you are on the market for a while with no offers to date, the market is speaking to you loud and clear, Ã¢â‚¬Å“You are overpriced.Ã¢â‚¬Â
For buyers, if you are waiting to purchase because you think that home values are going to drop down the road, think again. That is not going to happen anytime soon. If thatÃ¢â‚¬â„¢s the message that you are reading into this report, you are receiving the wrong message. Memo to all buyers: it is still a sellerÃ¢â‚¬â„¢s market. Sellers are in control. If they price their home at the Fair Market Value, they will procure plenty of activity and will sell quickly. Sellers are not able to randomly price their homes, but they are still in the driverÃ¢â‚¬â„¢s seat. The expected market time would have to rise to 6 months for it to transform into a buyerÃ¢â‚¬â„¢s market. Currently, the expected market time is 2.64 months, or 79 days. Not even close to the 180 days needed to tip the scales to a buyerÃ¢â‚¬â„¢s market.
It is as if the housing market is on cruise control. The inventory is rising and will continue to through the end of the summer. Demand is not changing much and that will continue through the end of summer as well. Distressed properties, both foreclosures and short sales, will take a backseat in the housing market for the long term. The expected market time will continue to slowly rise, but will not slip into buyerÃ¢â‚¬â„¢s market territory anytime soon. This is the Orange County housing market. To expect anything different right now or on the horizon is irrational.
Seven Gables Real Estate