By Scot Campbell – Source: Steve Thomas – ReportsOnHousing.com – December 9, 2012
Not enough homes are placed on the market to adequately satisfy the throngs of buyers waiting to buy… especially in the low end of the market.
In the Orange County detached home market, there is a severe shortage of homes in the low end of the market ($250,000 to $500,000), but the inventory grows as price increases to the mid level ($500,000 to $750,000), move-up ($750,000 to $1,000,000), and high end ($1,000,000 to $1,250,000), and luxury segments of the market.
The inventory levels change rapidly, look at market times, for the detached home market segments:
Low End 0.73 Months
Mid Level 1.14 Month
Move-Up 1.97 Months
High End 2.32 Months
Of course, most homes are in the entry and mid-level in Orange County… as a result the reporting by ReportsOnHousing.org focuses primarily on the activity in those two market segments:
It is extremely difficult to articulate just how low the current active inventory is today. There are just 3,482 homes on the market in Orange County. The inventory dropped below 3,500 homes after shedding an additional 52 homes in the past two weeks. That’s only a 1% drop and the lowest drop since the beginning of August.
This really could be the end of the unabated 18 month plunge in the active listing inventory. There will eventually be an end to the drop and a new low will be established. It almost seems impossible for the plummet to continue at this point. It was surprising when it dropped below 4,912 homes in August, the prior record low level reached in early 2005. Yet, it managed to drop by an additional 1,430 homes.
Last year at this time there were 8,905 homes on the market. That’s 5,423 more than today.
REALTORS® are reporting staggering open house attendance (in the low end of the market: condos under $350,000 and houses under $650,000). They are getting as many as 75 buyers attending an open house in December. Remember, this is the Holiday Market, when buyers are typically diverting their attention away from their pursuit of their next home while they focus on Yule tide traditions. Not this year. Buyers are soaking up just about everything that is being placed on the market.
Even though we are in the midst of the holidays, multiple offers are still the norm (in the low end of the market), and so are offers above the list price. Homes are truly appreciating based upon what buyers are willing to pay. Many buyers put off purchasing a home earlier in the year anticipating now being a great time to buy. That may be the case with a normal inventory, but the current inventory is far from normal. Those buyers are waiting in line along with the multitude of buyers who have been unsuccessful in their pursuit thus far.
Homes simply arenot coming on the market this year compared to every other year in the past decade. There are 16% more homes placed on the market in 2011 versus 2012. In real terms, that’s 460 additional homes coming onto the Orange County housing market every single month. Just prior to the housing turn, in 2005 there were 53% more homes placed on the market than today. That’s 1,581 additional homes every single month. This chart illustrates just how anemic the inventory has been this year.
I track demand based upon the number of new pending sales over the past month. With the overwhelming number of buyers actively looking today but unable to purchase due to an unprecedented lack of inventory, true demand is much higher than what I am able to track through the Multiple Listing Service. Quite simply, if a normal flow of homes were placed on the market, there would be a lot more pending sales each and every month this year.
The active listing inventory is muted this year because many homeowners are still underwater. They may have good credit and a stable job, but they do not have the cash necessary to close because they are currently too far underwater. Also, many homeowners are now sitting on the fence while they recoup their equity. Everybody is familiar with the term “buy low, sell high.” It appears as if the bottom of the market was reached last February and now buyers are flooding the market attempting to “buy low.” Homeowners know it is a low, so they want to wait. They don’t want to “sell low.”
Demand: The lack of inventory is cutting into demand.
As discussed above, true demand is much higher than demand based upon the number of new pending sales over the prior month. In the past two weeks, demand dropped by 470 pending sales, a 16% drop, and now totals 2,543. Based upon the word on the street, buyers are scrambling around at anything and everything that is placed on the market right now, but there just is not enough coming on the market. And, that will remain the case throughout the holiday market, which does not end until the second half of January, right after everybody gives up on their New Year’s resolutions. Buyers are in a rush to buy, but homeowners are not in a rush to sell. Instead, they are going to enjoy the holidays with the knowledge that as their homes are slowly appreciating. Last year at this time there were 46 additional pending sales, a 2% difference. But, there were 8,905 active listings for buyers to choose from.
For buyers looking for a “deal” and looking closely at the distressed inventory, the pickings are slim. There are only 434 total short sales and foreclosures on the market today. Distressed homes make up only 12% of the active inventory and 34% of demand. Last year at this time there were 3,357 distressed homes on the market, 38% of the active listing inventory and 57% of demand, much different than today. In the past two weeks, the foreclosure inventory decreased by 12 homes, totaling 110, and has an expected market time of 18 days. The short sale inventory decreased by only 4 homes in the past two weeks and now totals 324. The expected market time is only 14 days and continues to be one of the hottest segments of the housing market. Both 110 active foreclosures and 324 active short sales are new lows for the year and levels not seen since the beginning of all of the distressed activity back in 2007.
The holiday season is NOT deterring home buyers.
Today’s low inventory along with rock bottom mortgage rates makes now a great time to quickly sell a Huntington Beach home for top dollar.
For questions about buying and selling real estate in Orange County, contact Scot Campbell.
He is the President of The Scot Campbell TEAM at Coldwell Banker-Campbell Realtors in Huntington Beach, CA.
He has been a licensed broker for over 21 years and has brokered over 1000 homes and just about every type of transaction imaginable.
Read his profile and client reviews at www.ScotCampbell.com
He can be reached at 714-960-0700 at the office, 714-336-0394 on his mobile number or via email at Scot.Campbell@ColdwellBanker.com