Housing has transitioned to the slowest time of the year, the Holiday Market, from the mid-November through the first couple of weeks of the New Year. 

The Holiday Slowdown

The Holiday Market is when the inventory and demand plunge from mid-November through New Year’s Eve.

Local radio stations are now playing holiday music, and festive lights are strung along rooflines. Everyone has their Thanksgiving plans dialed in. The holidays have arrived, along with all the seasonal distractions. It is the time of year for family gatherings, turkey and ham, shopping, holiday parties, exchanging presents, and spending time with loved ones. Real estate takes a back seat to all the festivities.

Starting the week before Thanksgiving, the housing market transitions from the Autumn Market to the Holiday Market, the slowest time of the year for housing. It is when the active inventory and demand (a snapshot of the number of new pending sales over the prior month) plunge until ringing in a New Year. The Expected Market Time (the number of days it takes to sell all Orange County listings at the current buying pace) will not change much, similar to the last few years. Regardless of the economic situation, without fail, the cyclical slowdown prevails. It is the season where many sellers and buyers will place their real estate goals and needs on pause to enjoy the holidays.

Last year, the number of available homes uncharacteristically declined from January through mid-April and then slowly grew until reaching a late peak in November. Yet, it was the second-lowest November reading since tracking began in 2004. After peaking at 2,496 homes, the inventory dropped during the Holiday Market to 1,785 during the first week of January, a drop of 28%. The 3-year average inventory drop before the pandemic (2017 to 2019) was 23%.

The inventory drops because not many homeowners are willing to place their homes on the market during the Yuletide season. The fewest sellers enter the fray in December, 64% less than May, the peak month with the greatest number of new sellers. The second fewest come in November, 46% less than May’s peak. Many unsuccessful sellers will also throw in the towel and pull their homes off the market. Last year, 804 homes were pulled off the market in November and December. That was much lower than the 3-year average before the pandemic of 1,978 because the inventory was already so low.  The inventory falls substantially with fewer new available homes and sellers pulling their homes off the market. 

The current active inventory is at 3,358, up 45% or 1,049 additional FOR-SALE signs compared to last year. There are far more unsuccessful sellers this year than last, thus more sellers will throw in the proverbial towel. Today’s inventory is very similar to the 2022 levels. In 2022, 1,360 sellers pulled their homes off the market in November and December. 

Demand drops substantially during the Holiday Market as well. Many buyers place their home search efforts on hold as they avert their attention to enjoying the holiday season. There are fewer choices for buyers who continue to scour the market for the right home due to a lack of fresh inventory and many sellers removing their homes from the market. Demand plummeted by 30% last year, from 1,223 pending sales in November to 864 during the first week of January. The 3-year average drop was 37%. 

Today’s demand is at 1,363 pending sales, 16% higher than last year’s 1,173 pending sales. With few choices and many buyers pausing their search for a home, demand will sink until the New Year. 

The Expected Market Time, the true speed of the market based on supply and demand, will not change much for the rest of the year. When supply and demand drop at a similar pace, the market time remains almost unchanged. That has been the case since 2020, increasing or decreasing by only a few days. Before the pandemic, the Expected Market Time grew substantially. That occurred because demand would drop at a faster pace compared to the slide in the number of available homes to purchase. The 3-year average before the pandemic was an increase of 19 days. This year, the Expected Market Time will not change much, continuing the trend that started during COVID. 

It is official. The Orange County Holiday Market has arrived, the slowest time of the year for housing. ‘Tis the season for all the festive distractions.

Active Listings

The inventory fell by 4% in the past couple of weeks. 

The active listing inventory decreased by 158 homes in the past two weeks, down 4%, and now sits at 3,358, its lowest level since the start of July. It was the most significant drop so far this year. Today’s level is far below the 3-year average before COVID (2017 to 2019) of 5,359, an astonishing 37% lower. The inventory will continue to plunge until ringing in a New Year with the cyclical trends of the fewest number of new sellers in November and December, along with a flood of unsuccessful sellers who throw in the towel and pull their homes off the market. 2025 will start similar to 2023 with around 2,500 FOR-SALE signs. The inventory crisis will continue. 

Last year, the inventory was at 2,309 homes, 31% lower, or 1,049 fewer. The 3-year average before COVID (2017 through 2019) was 5,359, an additional 2,001 homes, or 60% more.

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 October, 2,377 new sellers entered the market in Orange County, 626 fewer than the 3-year average before COVID (2017 to 2019), 21% less. Last October, there were 1,891 new sellers, 20% fewer than this year. More sellers are opting to sell compared to the previous year.

Demand
Demand plunged by 7% in the past couple of weeks. 

Demand, a snapshot of the number of new pending sales over the prior month, plunged from 1,458 to 1,363 in the past couple of weeks, down 95 pending sales, or 7%, its lowest level since February. Most of the drop is seasonal due to the start of the Holiday Market. Mortgage rates bouncing around 7% also contributed to the drop. When mortgage rates are stuck at higher levels, fewer buyers are in play due to affordability constraints. Expect demand to continue to plunge until New Year’s Day. The velocity of the drop depends on the pathway of mortgage rates. If rates drop from these higher levels, demand will become more sticky and not fall as much. 

As the Federal Reserve has indicated, it is essential to watch all economic releases for signs of slowing. These releases can potentially move mortgage rates higher or lower, depending on how they compare to market expectations. This week is a slower week due to the Thanksgiving holiday. On Tuesday, an inflation index, the Personal Consumption Expenditures, will be released. Next week is jobs week, which includes the number of job openings, wages, and the number of jobs created or lost, one of the month's most important economic data points. 

Last year, demand was 1,173, down 190 pending sales or 14%. The 3-year average before COVID (2017 to 2019) was 1,969 pending sales, 44% more than today, or an additional 606. 

With demand falling faster than supply, the Expected Market Time (the number of days it takes to sell all Orange County listings at the current buying pace) increased from 72 to 74 days in the past couple of weeks. Last year, it was 59 days, faster than today. The 3-year average before COVID was 85 days, slower than today.

Luxury End

The luxury market has improved dramatically in the past couple of weeks.  

In the past couple of weeks, the luxury inventory of homes priced above $2 million (the top 10% of the Orange County housing market) decreased from 1,138 to 1,096 homes, down 42 or 4%. Luxury demand increased by 26 pending sales, up 12%, and now sits at 138. With demand rising and the supply falling, the Expected Market Time for luxury homes priced above $2 million plunged from 161 to 138 days, its strongest level since June. `      

Year over year, the active luxury inventory is up by 320 homes or 41%, and luxury demand is up by 96 pending sales or 68%. Last year’s Expected Market Time was 164 days, slower than today. 

In the past two weeks, the expected market time for homes priced between $2 million and $4 million decreased from 123 to 104 days. For homes priced between $4 million and $6 million, the Expected Market Time decreased from 217 to 182 days. For homes priced above $6 million, the Expected Market Time increased from 322 to 359 days. At 359 days, a seller would be looking at placing their home into escrow around November 2025.   

Orange County Housing Summary

• The active listing inventory in the past couple of weeks decreased by 158 homes, down 4%, and now sits at 3,358, its lowest level since the start of July and its largest drop of the year. In October, 21% fewer homes came on the market compared to the 3-year average before COVID (2017 to 2019), 743 less. Yet, 486 more sellers came on the market this October compared to October 2023. Last year, there were 2,309 homes on the market, 1,049 fewer homes, or 31% less. The 3-year average before COVID (2017 to 2019) was 5,359, or 60% extra.
• Demand, the number of pending sales over the prior month, decreased by 95 pending sales in the past two weeks, down 7%, and now totals 1,363. Last year, there were 1,173 pending sales, 14% fewer. The 3-year average before COVID (2017 to 2019) was 1,969, or 44% more.
• With demand falling faster than supply, the Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, increased from 72 to 74 days in the past couple of weeks. The 3-year average before COVID (2017 to 2019) was 85 days, slower than today.
• In the past two weeks, the Expected Market Time for homes priced below $750,000 increased from 54 to 57 days. This range represents 18% of the active inventory and 23% of demand.
• The Expected Market Time for homes priced between $750,000 and $1 million increased from 53 to 60 days. This range represents 15% of the active inventory and 19% of demand.
• The Expected Market Time for homes priced between $1 million and $1.25 million decreased from 50 to 47 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 62 to 57 days. This range represents 10% of the active inventory and 13% of demand.
• The Expected Market Time for homes priced between $1.5 million and $2 million increased from 73 to 91 days. This range represents 14% of the active inventory and 11% of demand.
• In the past two weeks, the expected market time for homes priced between $2 million and $4 million decreased from 123 to 104 days. For homes priced between $4 million and $6 million, the Expected Market Time decreased from 217 to 182 days. For homes priced above $6 million, the Expected Market Time increased from 322 to 359 days.
• The luxury end, all homes above $2 million, account for 33% of the inventory and 19% of demand.
• Distressed homes, both short sales and foreclosures combined, comprised only 0.2% of all listings and 0.3% of demand. Only four foreclosures and two short sales are available today in Orange County, with six total distressed homes on the active market, down three from two weeks ago. Last year, eight distressed homes were on the market, similar to today.
• There were 1,842 closed residential resales in October, up 13% compared to October 2023’s 1,632 and up 14% from September 2024. The sales-to-list price ratio was 100.0% for Orange County. Foreclosures accounted for 0.1% of all closed sales, and there were no short sales. That means that 99.9% of all sales were good ol’ fashioned sellers with equity.