Friday, October 4, 2024 / by Bob Cowan
THE ORANGE COUNTY HOUSING REPORT
A JUMP IN DEMAND
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ACTIVE LISTING
THE ACTIVE INVENTORY MAY HAVE REACHED A PEAK TWO WEEKS AGO.
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The active listing inventory decreased by 29 homes in the past two weeks, down 1%, and now sits at 3,666, its first drop since March. This drop may be the beginning of a steady fall in the inventory for the remainder of the year, indicating that a peak was reached a couple of weeks ago in mid-September. Nonetheless, the peak is late, typically occurring between July and August. Last year's peak occurred in November, even later. The earlier the peak, the further the inventory falls for the remainder of the year. Orange County housing peaked because of the sharp rise in demand, which ultimately chipped away at the inventory. During the Autumn Market, fewer homes are placed on the market compared to the spring and summer months. The number of sellers coming on the market declines further each month, with the fewest in December followed by the second-fewest in November. The slow, steadfast fall during the autumn changes to a rapid decline during the holidays, from Thanksgiving to the New Year. The inventory drops to its lowest level by year's end. Last year, the inventory was 2,340 homes, 36% lower, or 1,326 fewer. The 3-year average before COVID (2017 through 2019) was 6,400, an additional 2,734 homes, or 75% more. This difference has been diminishing.
Homeowners continue to "hunker down" in their homes, unwilling to move due to their current underlying, locked-in, low fixed-rate mortgage. It became a crisis once rates skyrocketed higher in 2022. For August, 2,454 new sellers entered the market in Orange County, 1,083 fewer than the 3-year average before COVID (2017 to 2019), 31% less. Last August, there were 2,154 new sellers, 12% fewer than this year. More sellers are opting to sell compared to the previous year.
DEMAND
DEMAND JUMPED BY 10% IN THE PAST COUPLE OF WEEKS.
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Demand, a snapshot of the number of new pending sales over the prior month, jumped from 1,413 to 1,554 in the past couple of weeks, up 141 pending sales, or 10%, its largest increase since February and its highest level since July. A substantial rise at this time of the year is unprecedented and is a direct result of a significant increase in affordability. Even though mortgage rates already had the Federal Reserve half-of-a-percent cut in the short- term rate baked into long-term mortgage rates before their announcement a couple of weeks ago, many buyers waited for the news before writing an offer to purchase. With the Federal Reserve initiating its rate-cut cycle, many buyers have decided to cash in on the improving mortgage rate environment. As long as mortgage rates hover around today's current levels or drop even lower, expect demand to continue to improve and outpace last year's demand levels.As the Federal Reserve has indicated, watching all economic releases for signs of slowing is essential. These releases can potentially move mortgage rates higher or lower, depending on how they stack up compared to market expectations. This week is jobs week, which includes the number of job openings, wages, the number of jobs created or lost, and unemployment. This week will be the most consequential week for rates and will set the tone for the remainder of October.Last year, demand was 1,414, down 140 pending sales or 9%. The 3-year average before COVID (2017 to 2019) was 2,262 pending sales, 46% more than today, or an additional 708.With supply falling and demand surging higher, the Expected Market Time (the number of days it takes to sell all Orange County listings at the current buying pace) decreased from 78 to 71 days in the past couple of weeks. Last year, it was 50 days, faster than today. The 3-year average before COVID was 86 days, slower than today.
LUXURY END
THE LUXURY MARKET IMPROVED SLIGHTLY IN THE PAST COUPLE OF WEEKS.
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In the past couple of weeks, the luxury inventory of homes priced above $2 million (the top 10% of the Orange County housing market) increased from 1,198 to 1,207 homes, up nine or 1%. Luxury demand increased by eight pending sales, up 3%, and now sits at 247. With demand rising faster than supply, the Expected Market Time for luxury homes priced above $2 million decreased from 150 to 147 days, its strongest reading since the start of July. Nonetheless, at 147 days, the luxury market is considerably slower than the lower ranges. For homes priced below $2 million, the Expected Market Time is 56 days.Year over year, the active luxury inventory is up by 418 homes or 53%, and luxury demand is up by 56 pending sales or 29%. Last year's Expected Market Time was 124 days, a bit faster than today.In the past two weeks, the expected market time for homes priced between $2 million and $4 million decreased from 111 to 108 days. For homes priced between $4 million and $6 million, the Expected Market Time decreased from 257 to 199 days. For homes priced above $6 million, the Expected Market Time increased from 295 to 391 days. At 391 days, a seller would be looking at placing their home into escrow around October 2025.
In the past couple of weeks, the luxury inventory of homes priced above $2 million (the top 10% of the Orange County housing market) decreased from 1,225 to 1,198 homes, down 27 or 2%. Luxury demand increased by three pending sales, up 1%, and now sits at 239. With supply falling and demand rising, the Expected Market Time for luxury homes priced above $2 million decreased from 156 to 150 days, identical to four weeks ago. Nonetheless, at 150 days, the luxury market is far from instant, especially in the even higher luxury price ranges. Year over year, the active luxury inventory is up by 400 homes or 50%, and luxury demand is up by 56 pending sales or 31%. Last year's Expected Market Time was 131 days, a bit faster than today.
In the past two weeks, the expected market time for homes priced between $2 million and $4 million increased from 110 to 111 days. For homes priced between $4 million and $6 million, the Expected Market Time decreased from 351 to 257 days. For homes priced above $6 million, the Expected Market Time decreased from 329 to 295 days. At 295 days, a seller would be looking at placing their home into escrow around July 2025.
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bob cowan, california, orange county, october 2024
