With an extremely limited supply, this is the hottest November since 2012.
November 16, 2020
Hot November Housing
With an Expected Market Time of 41 days, in the midst of November, the Orange County housing market is hotter than the Spring Markets of 2014 through 2019.
Just because everyone is sipping their favorite Starbucks latte from their recently unveiled holiday cups, does not mean that housing will slow this year. In fact, if a home is priced according to its Fair Market Value and is in great condition, it will procure multiple offers, a bidding war will ensue, and it will often sell for more than the asking price. Home values are on the rise. The difference this year is that there is an ultra-low supply of available properties to purchase and homes are flying into escrow nearly as fast as they are coming on the market. It is sizzling hot in the middle of November and the start of the Holiday Market, now through the first few weeks of January.
The Expected Market Time (the time between pounding in the FOR-SALE sign to opening escrow) is currently at 41 days, a Hot Seller’s Market. The Expected Market time is the overall speed of the market, the lower the number, the faster homes are being placed into escrow. Anything below 60-days is considered a Hot Seller’s Market. That is a market with a tremendous number of showings, multiple offers, sellers get to call the shots, and home values are on the rise.
The start of 2021 will be like 2013; it will be a Hot Seller’s Market upon ringing in the New Year. It will be ushered in with a record low number of available homes to purchase, beating the lows established in 2013. The depleted supply will be met with a rush of demand stimulated by a record low interest rate environment. A low supply and hot demand bode well for sellers. That is the story right now, and it will be the story in 2021.
A WARNING to Buyers: The market is hot now and will remain hot through the spring of 2021. Do not expect the market to slow just because of all the diversions of the holidays. Right now is still an unbelievable opportunity for buyers to cash in on the record low mortgage rate environment. There is plenty of buyer competition and it is not going anywhere.
A WARNING to Sellers: Carefully pricing a home based upon its condition, upgrades, and location is still fundamental to find success. Overpricing a home will not only result in a waste of market time, but it will also prevent a seller from taking advantage of the bidding war that ensues when priced according to its Fair Market Value. As a result, overpriced sellers often net less at the closing table.
The current active inventory decreased by 3% in the past two weeks.
The active listing inventory dropped by 101 homes in the past two-weeks, down 3%, and now sits at 3,843, its lowest level since January of 2018. It is also at its lowest level for this time of the year since tracking began in 2004. Expect the inventory to continue to drop and pick up pace as the year comes to an end. Fewer homes come on the market at the end of the year, and many unsuccessful sellers throw in the towel, opting to wait until the Spring Market of 2021. The ultra-low inventory will help set the stage for a very hot 2021.
Even with the drop in the active inventory, there are MORE homes coming on the market right now compared to last year. COVID-19 suppressed homeowners from entering the fray earlier in the year, but that ended in Orange County in July. Now there are more homes coming on the market year over year. In October, there were 16% more homes that came on the market compared to 2019, an additional 464 FOR-SALE signs. The fact that housing is pumping on all cylinders and mortgage rates are at record levels, more homeowners are being lured into selling their homes.
Demand plunged by 7% in the past two weeks.
Demand, the number of new pending sales over the prior month, decreased from 3,019 to 2,799 in the past couple of weeks, shedding 220 pending sales, down 7%. This is a seasonal phenomenon caused by the distractions of the holidays and a diminishing number of homes available to purchase. It is still the strongest level for November since 2012. For the remainder of the year, demand will consistently drop until ringing in a New Year. Yet, it is important to note, that current demand is elevated and at its highest level in eight years.
Luxury demand dropped by 10% in the past two weeks.
In the past two-weeks, demand for homes above $1.25 million decreased by 52 pending sales, down 10%, and now totals 481. Now that the end of the year is fast approaching, luxury demand (the last 30-days of new escrows) is rapidly cooling. The luxury home inventory only dropped by 2 homes, nearly unchanged, and now totals 1,558. With a giant drop in demand, the overall Expected Market Time for homes priced above $1.25 million increased from 88 to 97 days in the past couple of weeks. That is still an unbelievable level for this time of the year.
For homes priced between $1.25 million and $1.5 million, in the past two-weeks, the Expected Market Time increased from 50 to 56 days. For homes priced between $1.5 million and $2 million, the Expected Market Time increased from 62 to 72 days. For homes priced between $2 million and $4 million, the Expected Market Time increased from 116 to 118 days. For homes priced above $4 million, the Expected Market Time increased from 255 to 308 days. At 308 days, a seller would be looking at placing their home into escrow around September 2021.