The active listing inventory grew at the fastest pace this year in the past couple of weeks! Why are so many homes suddenly coming on the market? Could it be the recent headlines of a record median home sales price of $645,000? Or, are homeowners taking advantage of the last couple of weeks of the Spring Market? It is too soon to really know why more homes came on the market in Orange County in the past couple of weeks more than any other time this year.
In just two weeks, the active inventory added an additional 336 homes and now sits at 6,603. The inventory was at 6,000 homes only a month ago. The quick growth is the equivalent of throwing a bucket of water on a raging bonfire. It won’t put out the fire; but, if a few more buckets are used, the fire will go out. Similarly, as more homes come on the market and demand drops during the summer months, the housing market will cool.
It is still a hot housing market, but the growth in inventory is a glaring sign that the window of opportunity to take advantage of the hottest time of the year to sell is closing. Due to the increased competition, the sizzling hot housing market is transitioning to a slight seller’s market.
The inventory has grown significantly in just about every price range. The largest increase was for homes priced between $500,000 and $750,000, adding an additional 234 homes. A month ago there were 1,376 homes on the market, and today there are 1,610, a 17% increase. The second largest increase was for homes priced between $750,000 and $1 million, adding an additional 157 homes in the past month, a 15% increase. For all of Orange County, the inventory has added an additional 603 homes, up 10%.
What does this mean if you’re thinking of selling?
As the housing market transitions into a slight seller’s market, it means that homeowners will not get away with stretching their asking price that much more than the most recent comparable and pending sales. Buyers are less willing to pay any price; instead, they are looking to pay close to a home’s Fair Market Value and are much more inclined to carefully scrutinize the comparable sales data. Demand drops slightly during the summer, and overpriced sellers sit on the market. The inventory increases throughout the summer and the market continues to cool.
Many believe the Summer Market to be an excellent time to sell. Actually, the Spring Market is where the most activity takes place. Many homes placed into escrow during the spring close during the summer months. Most buyers with children would prefer being settled in their new home by the time the kids go back to school; thus, they need to be all closed up by the middle of August. In order for a home to close escrow by then, it will need to be under contract by the middle of July, which is right around the corner.
Last year there were 327 fewer homes on the market, 5% less.
What’s going on in the luxury market?
The above $2 million price range experienced a huge increase in demand in the past couple of weeks. There were 22 additional pending sales, which was a 20% increase. The expected market time is currently better than one year ago, 231 days compared to 247 (still a very long time compared to the lower ranges).
In the past two weeks, for homes priced from $1 million to $2 million, demand dropped by 4% and the inventory grew by 3%. As a result, the expected market time increased from 104 days to 111 days.
The luxury housing market in Orange County may be slow in comparison to the lower ranges, but there are more closed sales above $1.25 million than ever before in Orange County ($1.25 million is the top 10% of the OC housing market). Through May, there have been 1,174 closed sales, beating the prior height set in 2005.
Demand for housing
After reaching a height in buyer demand back at the beginning of May, demand, the number of new pending sales over the prior month, has been falling. In the past two weeks, it has decreased by 122 homes and now totals 3,022, a 4% drop. The last time demand dropped during this time of the year was back in 2010. Typically, demand increases at the end of May, but not this year. It is too early to determine if this is a trend or just an anomaly, only time will tell. Typically, demand remains about the same in May and June and then drops as the market transitions into summer.
Last year at this time demand was at 3,034 pending sales, 12 more than today.
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