Why Summer Is Looking to Be the Hot Selling Market for Orange County in 2020

Joel Kan, Economist at The Mortgage Bankers Association (MBA) notes:

“Applications for home purchases continue to recover from April’s sizable drop and have now increased for five consecutive weeks…Government purchase applications, which include FHA, VA, and USDA loans, are now 5 percent higher than a year ago, which is an encouraging turnaround after the weakness seen over the past two months.”

Additionally, according to Google Trends, which scores search terms online, searches for real estate increased from 68 points the week of March 15^th to 92 points last week. As we can see, more potential homebuyers are looking for homes virtually.

Prior to the “stay at home” order in mid-March, Orange County housing was a sizzling hot Seller’s Market with extraordinarily little inventory and unbelievable demand. It was the hottest start to a Spring Market since 2013, a spring to remember for Orange County housing. Low mortgage rates, averaging 3.75%, was stoking the fires of demand. When the virus hit, demand plunged, and the market slowed.

In the past couple of weeks, demand (the last 30-days of pending sales) jumped from 1,172 pending sales to 1,622, a 38% rise. It was last at this level in mid-January. Typically, during this time of the year demand has already peaked and it does not change much at all. Not this year. Demand is in recovery mode and the sharp increase indicates that it is “V-Shaped.”

The active inventory climbed by 5% in the past two weeks, close to the 5-year average of 4.4% during this time of the year. The inventory remains at lows last seen in 2013. Surging demand is outpacing the rise in supply, resulting in the Expected Market Time (the time between hammering in the FOR-SALE sign and opening escrow) tumbling from 118 days to 90 days, a slight Seller’s Market (between 60 and 90 days). That is a market where sellers get to call more of the shots, yet home values are not changing much at all. Last year at this time, the Expected Market Time was at 84 days very close to today.

What’s the Opportunity for Buyers?

Another reason buyers are coming back to the market, even with forced unemployment and stay-at-home orders, is historically low mortgage rates. Sam Khater, Chief Economist at Freddie Mac indicates:

“For the fourth consecutive week, the 30-year fixed-rate mortgage has been below 3.30 percent, giving potential buyers a good reason to continue shopping even amid the pandemic…As states reopen, we’re seeing purchase demand improve remarkably fast, now essentially flat relative to a year ago.”

With mortgage rates at such low levels and states gradually beginning to reopen, there’s more incentive than ever to buy a home this summer.

What’s the Opportunity for Sellers?

Finding a home to buy, however, is still a challenge, as this spring sellers removed many listings from the market. Though more people are now putting their houses up for sale this month as compared to last month, current inventory is still well below last year’s level.

According to last week’s Weekly Economic and Housing Market Update from realtor.com:

“Weekly Housing Inventory showed continued tightening. New Listings declined 28% compared with a year ago, as sellers grappled with uncertainty and hesitated bringing homes to market. Total Listings dropped 20% YoY, a faster rate than in prior weeks, leaving very few homes available for sale. As Time on Market was 15 days slower YoY, asking prices moved up 1.5% YoY.”

Orange County’s active listing inventory increased by 242 homes in the past two-weeks, up 5%, and now sits at 4,867. It has grown by 523 homes in the past month, up 12%. Demand has not quite recovered and is still off by 39%. Even with a reduction in demand, the overall inventory is not increasing as swiftly as it would have had the typical number of homeowners entered the fray. COVID-19 is suppressing the number of homeowners coming on the market. In the past 4-weeks, there were 38% fewer new FOR SALE signs compared to the prior 5-year average. Two weeks ago, it was a 54% difference, so the gap is beginning to narrow. More sellers are thawing to the idea of selling now as well. 

If you’re thinking of selling your house this summer, now may be your best opportunity. With so few homes on the market for buyers to purchase, this season may be the time for your house to stand out from the crowd. Trusted real estate professionals can help you list safely and effectively, keeping your family’s needs top of mind. Buyers are looking, and your house may be at the top of their list.

Bottom Line

If you’re thinking of selling, many buyers may be eager to find a home just like yours. Check out this short video that will help you prepare your house for sale.