Orange County Housing Report


May 27, 2014


Hello there,


In this Orange County Housing Report were starting to see an increase in inventory. With the inventory continuing to grow, buyers are finally getting a little extra breathing room.

Breathing Room: The tug of war between buyers and sellers have resulted in a dramatic increase in the inventory and extra breathing room for buyers.

Prior to the start of 2014, all of the ingredients were there for a slow, methodical rise in the inventory. Buyers no longer were willing to pay a ridiculous amount more than the most recent comparable sale; instead, they honed in on the Fair Market Value in approaching the purchase price of a home. Sellers, on the other hand, want the absolute best price possible. They have been busy hearing how much the median has risen year over year. Every month when those numbers are produced, not enough emphasis is placed on where values have been heading month to month. Have values increased since last year? Absolutely, unequivocally, yes. Have values increased since one month ago? In most neighborhoods, areas, and cities, absolutely not. Yet, after hearing how much homes have appreciated annually through the media’s reporting of the monthly median sales price, homeowners mistakenly become overexcited and fail to properly analyze the local market conditions.


Overpricing out of the starting gate is an intentional strategy that has captured the hearts of most sellers. Today’s buyers want to pay the Fair Market Value of a home. There lies the disconnect. Overpriced homes are priced much higher than their Fair Market Value. Buyers see overpriced homes as an “Unfair Market Value,” and simply are unwilling to go there. The problem is that home values have appreciated a tremendous amount in a very short period of time, occurring between the start of 2012 through August 2013. Since then, unstoppable appreciation has been replaced with sellers completely ignoring market fundamentals. Overpricing means sellers are going to sit on the market without any offers, and, after a while, very few showings. The collection of overpriced listings has resulted in the inventory continuously growing without pause so far this year.


The phenomenon of sellers overpricing and buyers desiring to pay the Fair Market Value of a home is true for all of Southern California. Buyers and sellers have dug in their feet and the tug of war is on! As a result, the inventory has grown across the board in every county. From the lows established in March of last year, Southern California has grown by 78%. Orange County happens to be the biggest offender, growing by 121% since March of last year, that’s way more than double. So far, in order to be successful, it has been sellers who have had to succumb to the realities of the market and reduce their asking prices. Buyers, for the most part, have been unwilling to flinch in the tug of war.


For those sellers who price their homes close to their Fair Market Value, they have been able to achieve quick success and often with multiple offers. Multiple offer situations work in the hands of sellers, since they are able to ask for more and can pit offers against each other. This can only occur by carefully approaching the initial asking price of a home.


For the most part, the juice in the market in terms of appreciation is done. Since the inventory is on the rise and buyers do not want to overpay, appreciation has come to a grinding halt. Also, it is extremely important to note that the housing market would not have been able to sustain much more appreciation or we would be in the exact same boat as 2006 through 2008, stuck with values too high and very few buyers able to afford to purchase. Currently, interest rates are still low, making affordability better. The sharp rise in appreciation has already eaten into home affordability. Interest rates are absolutely going to go up. I give it a 100% chance. When that happens, homes will become less affordable. For buyers, cashing in now on incredible rates, currently the lowest of 2014, is a very smart move. In a couple of years down the road, they will look back and realize that purchasing while rates were low was a brilliant move.


With buyers desiring to not overpay, the inventory has swelled, giving buyers more choices and a lot more breathing room. Sellers and REALTORS® have asked where we go from here, concerned that the real estate market may change course and start to depreciate. We are not even close to that occurring, not anytime soon. The current expected market time is 2.61 months, that’s 78 days. Yes, that is far different than 1.28 months just one year ago, 38 days, but it is still a seller’s market. Anything less five months is a seller’s market. The problem is that everybody got used being able to randomly overprice a home and then getting it. They were also used to selling in just a few short weeks. They were used to sifting through 20 offers and picking the very best one. That’s not today’s market reality. It is a seller’s market, just not one where a seller can get away with overpricing their home. They can call the shots if and only if they price their home accurately.


For now, buyers can expect more breathing room as the inventory continues to increase and sellers take a while to figure out that overpricing is no longer a winning strategy.

Don’t hesitate to contact us with any and all real estate questions. We can be found on the web at or on Facebook at

Todd Moeller

Seven Gables Real Estate

[email protected]