Although many sellers approach the housing market as if it is as hot as 2023 or early spring of this year, they quickly realize that it is not instant.
A surprising 54% of the active inventory has been on the market for at least a month.
For anyone going fishing for the first time, especially kids, there is a great deal of enthusiasm and wild expectations of reeling in a bucket full of fish. Upon arriving at the fishing hole and baiting the hook, it is time to fish. The line is cast out into the open water with a cheerful eagerness. The bobber floats in the water and only moves with the water current and does not bob, revealing that there is no fish on the line. The excitement drifts away as 20, 40, and 60 minutes pass, but still no fish. It seems as though time stops.
Sometimes, the fishing is excellent, and the bucket is filled with fish. There are other days when, after fishing for hours, only one is reeled onto the dock. And there are days when nothing is caught, not even a nibble, after trying every type of bait. A large part of fishing is seeing what others successfully use for bait and packing plenty of patience.
Many of today’s sellers are like first-time anglers. They come on the market with great enthusiasm and high expectations of multiple offers within the first week. They have heard about how great the fishing has been in the past. In March of this year, housing was sizzling hot, and most sellers were selling their homes at their list price and often fetched even more. Yet, upon hammering in the FOR-SALE sign and opening their doors to buyer showings, the days turn into weeks, and, frequently, the weeks turn into months. The housing market has evolved. The hot Seller’s Market has transitioned to a more Balanced Market where price is the number one driver to secure a successful outcome.
An unbelievable 54% of all homes on the active listing inventory have been exposed to the market for at least 30 days. Nearly a third, 29%, of the inventory, has been on the market for over two months and is still waiting for the right buyer to bring in an acceptable offer to purchase. That is a long time to sit and wait. Keeping a home in showing condition for more than two months is a lot of work and can be stressful. Of course, everyone expects sellers in the luxury ranges to play the waiting game; however, many sellers in the most affordable ranges are sitting on the market and waiting for a buyer to bring a workable offer. Below $750,000, a surprising 51% have been waiting for at least 30 days, and for 26%, it has been at least two months.
For homes priced between $750,000 and $1 million, 23% have been exposed to the market for 60 days or more. From $1 million to $2 million, it ranges from 16% to 21%. Above $2 million, the share of sellers who have been waiting for at least two months to find success grows from 35% to 56%.
It is taking longer to sell in Orange County than in early spring and last year. The Expected Market Time (the number of days it takes to sell all Orange County listings at the current buying pace) is at 66 days today. At the end of March, it was 37 days, the hottest reading in 2024 and an exceptionally fast pace. That is a substantial, noticeable difference in the marketplace. Last year, at this time, it was 46 days, much faster than today.
Why has the Orange County housing market downshifted so much since early spring? Demand (recent pending sales activity) has not changed much year over year. In fact, today’s demand is currently 1% higher than last year. The big change has been that more homes are coming on the market than last year. While still muted compared to pre-pandemic years, 34% fewer homes have been placed on the market through July compared to the 3-year average before COVID (2017 to 2019), there have been 17% additional homes this year compared to 2023, an extra 2,437 FOR-SALE signs. Those extra signs have accumulated, and the active inventory has grown from 2,010 in March to 3,490 today, up 74% or 1,480 homes. Last year, there were 1,056 fewer signs in mid-August, 30% less.
The housing market is drastically different than earlier this year and last year. Sellers must take their time and carefully arrive at the asking price, meticulously considering a home’s condition, location, upgrades, and amenities. Many sellers simply cannot get out of their own way and are unwilling to listen to real estate experts and correctly price their homes according to the Fair Market Value. They are still waiting with no offers.
The active inventory increased by 2% in the past couple of weeks.
The active listing inventory increased by 64 homes in the past two weeks, up 2%, and now sits at 3,490, its highest level since November 2022. The inventory could reach a peak within the next couple of weeks. A typical Orange County housing peak occurs from July to August. The inventory is no longer growing as rapidly as it did from April to mid-July. As housing approaches its annual peak, the inventory rises only slightly from week to week. Upon reaching its peak, the inventory will fall throughout the Autumn Market and drop sharply during the Holiday Market, from mid-November through New Year’s Eve.
Last year, the inventory was 2,434 homes, 30% lower, or 1,056 fewer. The 3-year average before COVID (2017 through 2019) was 6,723, an additional 3,233 homes, or 93% more, nearly double the current level. This difference illustrates that the inventory crisis is still impacting Orange County housing.
Homeowners continue to “hunker down” in their homes, unwilling to move due to their current underlying, locked-in, low fixed-rate mortgage. It became a crisis once rates skyrocketed higher in 2022. For July, 2,711 new sellers entered the market in Orange County, 996 fewer than the 3-year average before COVID (2017 to 2019), 27% less. Last July, there were 2,270 new sellers, 16% fewer than this year. More sellers are opting to sell compared to the previous year.
Demand increased by 4% in the past couple of weeks.
Demand, a snapshot of the number of new pending sales over the prior month, increased from 1,530 to 1,594 in the past couple of weeks, up 64 pending sales, or 4%. It was the largest rise since the end of April and the highest reading since the start of July. This increase in demand is not typical for mid-August. Before the pandemic, demand dropped by an average of 2% in the same two weeks. The spike in demand is due to a substantial drop in rates. Six weeks ago, rates were above 7%. Since the start of August, they have been bouncing around 6.5%. That is a full percent lower than in April, when they were at 7.5%. For an $800,000 loan, the monthly payment is $5,057 per month at 6.5% compared to $5,594 at 7.5%, a savings of $537 per month or $6,444 annually. Last year, at this time, rates were nearly 7.48%, considerably higher than today. The improving affordability is starting to impact demand. As rates drop further, expect demand to continue to strengthen and buyer competition to grow, especially as the inventory drops in the coming months after it arrives at its peak.
As the Federal Reserve has indicated, watching all economic releases for signs of slowing is essential. These releases can potentially move mortgage rates higher or lower, depending on how they stack up compared to market expectations. This week, the Manufacturing Purchasing Managers' Index (PMI) will be released on Wednesday, illustrating the strength of manufacturing goods. On Thursday, the Initial Jobless Claims will be released, indicating the future direction of unemployment. Both have a high potential to move mortgage rates.
Last year, demand was 1,576, 1% less than today, or 18 fewer pending sales. The 3-year average before COVID (2017 to 2019) was 2,574 pending sales, 62% more than today, or an additional 980.
With demand rising faster than supply, the Expected Market Time (the number of days it takes to sell all Orange County listings at the current buying pace) decreased from 67 to 66 days in the past couple of weeks. Last year, it was 46 days, faster than today. The 3-year average before COVID was 79 days, a bit slower than today.
The luxury market has improved slightly in the past couple of weeks.
In the past couple of weeks, the luxury inventory of homes priced above $2 million increased from 1,206 to 1,234 homes, up 28 or 2%, the highest level since October 2019. Luxury demand increased by 14 pending sales, up 6%, and now sits at 246, its highest level since the start of June. With demand rising faster than supply, the Expected Market Time for luxury homes priced above $2 million decreased from 156 to 150 days. Even with the slight improvement in the luxury market, it still feels exceptionally sluggish. The higher the price, the longer it takes to secure success. This recent improvement could be linked to the recent improvement within financial markets. Yet, those markets remain uncertain, and any future volatility will impact the velocity of luxury.
Year over year, the active luxury inventory is up by 440 homes or 55%, and luxury demand is up by 50 pending sales or 26%. Last year’s Expected Market Time was 122 days, faster than today.
In the past two weeks, the expected market time for homes priced between $2 million and $4 million decreased from 114 to 108 days. For homes priced between $4 million and $6 million, the Expected Market Time increased from 170 to 194 days. For homes priced above $6 million, the Expected Market Time decreased from 656 to 527 days. At 527 days, a seller would be looking at placing their home into escrow around January 2026.
· The active listing inventory in the past couple of weeks increased by 64 homes, up 2%, and now sits at 3,490, its highest level since November 2022. In July, 27% fewer homes came on the market compared to the 3-year average before COVID (2017 to 2019), 996 less. Yet, 441 more sellers came on the market this July compared to July 2023. Last year, there were 2,434 homes on the market, 1,056 fewer homes, or 30% less. The 3-year average before COVID (2017 to 2019) was 6,723, or 93% extra, nearly double.
· Demand, the number of pending sales over the prior month, increased by 64 pending sales in the past two weeks, up 4%, and now totals 1,594, its largest rise since April. Last year, there were 1,576 pending sales, 1% less. The 3-year average before COVID (2017 to 2019) was 2,574, or 62% more.
· With demand climbing faster than supply, the Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, decreased from 67 to 66 days in the past couple of weeks. It was 46 days last year, faster than today. The 3-year average before COVID (2017 to 2019) was 79 days, a bit slower than today.
· In the past two weeks, the Expected Market Time for homes priced below $750,000 increased from 45 to 49 days. This range represents 16% of the active inventory and 22% of demand.
· The Expected Market Time for homes priced between $750,000 and $1 million decreased from 42 to 40 days. This range represents 14% of the active inventory and 23% of demand.
· The Expected Market Time for homes priced between $1 million and $1.25 million decreased from 49 to 42 days. This range represents 10% of the active inventory and 15% of demand.
· The Expected Market Time for homes priced between $1.25 million and $1.5 million decreased from 57 to 55 days. This range represents 10% of the active inventory and 12% of demand.
· The Expected Market Time for homes priced between $1.5 million and $2 million remained unchanged at 76 days. This range represents 15% of the active inventory and 13% of demand.
· In the past two weeks, the expected market time for homes priced between $2 million and $4 million decreased from 114 to 108 days. For homes priced between $4 million and $6 million, the Expected Market Time increased from 170 to 194 days. For homes priced above $6 million, the Expected Market Time decreased from 656 to 527 days.
· The luxury end, all homes above $2 million, account for 35% of the inventory and 15% of demand.
· Distressed homes, both short sales and foreclosures combined, comprised only 0.2% of all listings and 0.3% of demand. Only five foreclosures and three short sales are available today in Orange County, with eight total distressed homes on the active market, down one from two weeks ago. Last year, seven distressed homes were on the market, similar to today.
· There were 2,034 closed residential resales in July, up 14% compared to July 2023’s 1,784 and up 12% from June 2024. The sales-to-list price ratio was 99.2% for Orange County. Short sales accounted for 0.1% of all closed sales, and there were no foreclosure sales. That means that 99.9% of all sales were good ol’ fashioned sellers with equity.
