Source: Steven Thomas – ReportsOnHousing.com 8/14/2012
It is time for another update on the overall Orange County real estate market from Steven Thomas, here is what he has to say:
There just are not enough words to describe this year’s amazing drop in inventory: unpredictable, incredible, surprising, remarkable, etcetera.
Where are the For Sale Signs? The inventory has continuously dropped since June 2011.
2012 has been all about NO INVENTORY. It is difficult to point a finger at precisely what has caused this about face in the Orange County housing market. Instead, there are many contributing factors to the lack of inventory.
First off, let’s take a look at demand. Demand has been up an average of 20% thus far in 2012 compared to last year. Demand surged to levels not seen since July of 2005, prior to the downturn. Higher demand has definitely taken a big bite out of the active listing inventory, but demand is only one factor. In 2010 the inventory grew unabated for the first nine months despite a strong start to the year. It is not just demand. 13% fewer homes have come on the market this year compared to last year, and 20% fewer compared to two years ago. As a matter of fact, through July, the number of homes placed on the market is the lowest since prior to 2000. In 2006, there were 70% more homes placed on the market compared to 2012. With a mix of fewer homes placed on the market and robust demand, inventories have sunk to unprecedented levels.
Let’s shift our focus to the rationale behind so few homeowners placing their homes on the market compared to prior years. First and foremost, there are many homeowners that are simply underwater and unable to sell their homes. During the downturn, values dropped about 35% from their heights. In some communities, the drop was even more substantial. It is estimated that between 20% to 25% of all homeowners with a mortgage in Orange County owe more than their homes are worth. Just because a home is underwater does not mean that it is distressed. Many of these homeowners have great jobs and outstanding credit; yet, they do not have the cash necessary to make up the difference in order to sell. They are, quite simply, stuck in their homes until values appreciate to a level where they would be able to sale. With so many homeowners underwater and unable to sell, the inventory has been reduced substantially. And there is another contributing factor to throw into the mix. The age old axiom, “buy low and sell high” has seeped into the psyche of many homeowners. For those homeowners looking to downsize, with values poised to appreciate, conventional wisdom believes that hanging onto a home makes good economic sense. Yet, this is not always true today. Many homes and condominiums in the lower ranges have “overshot” the bottom, meaning that their drop in value was extensive compared to the average due to too many distressed sales in the area. For example, some condominium complexes dropped by more than 50%. Today, those condos are an incredible bargain and they generate multiple offers and values way over their asking prices. It is imperative for buyers and sellers to do their homework becausereal estateis local and can even change from street to street.
It is safe to say that the Orange County housing market will continue to experience a lack of inventory for quite some time. Appreciation is underway, just not at the levels of the mid-2000’s. It will take some time for modest appreciation to free underwater homeowners to sell their homes.
The Active Listing Inventory: The listing inventory dropped yet again.
The active listing inventory has dropped for 14 months straight. Every time I think we have hit bottom the inventory continues its unabated drop. In the past two weeks, the inventory has shed an additional 76 homes and now totals 5,238. That’s the smallest drop since May. The lowest the inventory in the past decade was reached in March 2005, when the active listing inventory bottomed at 4,912 homes. That’s only 326 fewer than today. Last year at this time there were 5,865 additional homes on the market, more than double.
Demand: As is normal for this time of year, demand increased in the past couple of weeks.
Demand has been following a normal real estatecycle: Spring is the best time of the year for demand, followed by the Summer market. It will downshift in the fall and then take a hiatus during the holidays. The market is pulled up and down based upon the calendar too. Everybody takes a break for graduations, the Fourth of July and personal vacations. Look for the same for the start of school, Halloween, Thanksgiving and just about the entire month of December. In the past couple of weeks, demand, the number of new pending sales over the prior month, increased by 90 pending sales, a 3% rise, and now totals 3,540. Last year at this time demand was at 3,044, 14% fewer than today. The expected market time for all of Orange County is at 1.48 months, or 44 days.
The Distressed Market: The distressed inventory dropped by another 8% in the past two weeks.
In Orange County, the active distressed inventory, both short sales and foreclosures combined, continued its stunning drop, shedding an additional 66 homes, or 8%, and now totals 764, numbers not seen since June 2007. This segment of the housing market continues to be the hottest, representing only 15% of the active inventory but 37% of demand. At the beginning of 2012, there were 3,137 short sales and foreclosures on the market. The distressed inventory has dropped by more than 75%. In the past two weeks, the foreclosure inventory decreased by 17 homes, totaling 151, and has an expected market time of 20 days. The short sale inventory decreased by 49 homes in the past two weeks and now totals 613. The expected market time is 17 days and continues to be the hottest segment of the housing market, hotter than foreclosures. On average, short sales take a much longer time to close and there is no such thing as a predefined close of escrow date. The close date is up in the air until formal lender approval is eventually received. But, with so few homes on the market, buyers are willing to wait.
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
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