Is the Orange County Market Starting to Thaw?

After an extremely cool December, housing is starting to warm up a bit.

Housing Thaw: With rising demand, the housing market is starting to move its way towards a Balanced Market.

It is a Southern California chilly morning. You climb into your car for the daily commute to the office and blast the heater, but it blows cold air because the engine is not hot yet. Your fingers are numb, and you cannot wait for the temperature to start to rise. After a couple of minutes, the blowing air begins to warm. That is precisely how the housing market starts every year. Housing’s engine is cold on the first of January and takes a few weeks to heat up. This year is no exception, the market is finally starting to warm up a bit.

The housing market in 2019 started off a lot colder than everybody had been accustomed to. It was the coldest start since 2011 with an Expected Market Time of 152 days, Buyer’s Market territory (the Expected Market Time is the amount of time it would take to place a home on the market today and enter escrow down the road). But, in the past couple of weeks, the market began its annual thaw.

The active inventory rose by 4% and demand jumped by 23%, as a result, the Expected Market Time dropped from 152 days to 128. At 128 days, it is still a slight Buyer’s Market, just not as frigid as a couple of weeks ago. Last year, during the same time period, the inventory increased by 2% and demand increased by 22%, which resulted in the Expected Market Time dropping from 77 days to 64, a Seller’s Market.

This year’s market is completely different than the past seven years. From 2012 through 2018, housing moved to a Seller’s Market by the end of January. In most cases, it quickly moved to a HOT Seller’s Market with Expected Market Times below 60-days. That will not be the case for 2019. Instead, the market is moving towards a Balanced Market, one that does not favor buyers or sellers.

The best time to sell a home, with the lowest Expected Market Time readings for the year, occurs from the Super Bowl through mid-May. This year will be no exception; it just won’t be as robust as the past seven years. Many homeowners and sellers are holding their collective breath with high expectations for the Spring Market. Remember, right now it is still a slight Buyer’s Market. It will drop down to a Balanced Market, NOT a Seller’s Market. It will remain balanced until mid-May. That is when demand will remain relatively the same while more homes come on the market. As a result, the Expected Market Time will rise from mid-May through the Summer Market.

Does this mean prices are dropping?

The answer to this question, is yes and no. It depends on your market area and price point.  The high-end luxury market has been showing signs of year over year decreases is sales prices.  In the lower price points what we are seeing is price drops in the amount the sellers are asking for their property.  These are not necessarily lower than this time last year. It just means sellers need to adjust their expectations to what the buyers are willing to pay today, and that is not 10% over last year, it’s more like 3-5% over last year.  We can expect to see these lower appreciation percentages through 2019.  In order to sell a house quickly, it’s important to market it at a price that is based on the current sold comparables.

Why will Orange County housing not be hotter in the spring?

The answer is a simple Econ 101 principle, supply and demand. The supply of homes, the active listing inventory, is up 62% over last year. Demand, the last 30-days of pending sales, is down 19% from last year. With more sellers competing against each other, coupled with muted demand, the market feels a bit more sluggish than what everybody has been accustom to.

This is a county overview. Each city (and even neighborhoods) can be different. Here are a few examples:

If you’d like an in depth look at what is happening in your area, just ask, I’d be happy to send some info your way.

For those of you thinking of selling in the future, get your free copy of my e-book, “How to Prepare Your House For Sale”  or get the Ultimate Sellers Guide immediately via email.