Housing will shift to the Holiday Market in just 7-weeks and buyer and seller activity will plunge to its lowest levels of the year.
End of Year Expectations
Seven more weeks until the slowest season of the year starts, the Holiday Market.
From now through the week before Thanksgiving, it is the LAST HURRAH before housing transitions from the Autumn Market to the Holiday Market, the slowest time of the year for real estate in terms of supply and demand. The holidays are filled with distractions. As a result, the hunt for a home takes a back seat for many buyers and fewer homeowners take advantage of selling their homes regardless of how incredibly hot the rest of the year will be for real estate. The overall speed of the market cools slightly, and the market time increases a little bit.
The supply of homes available to purchase will plunge as many unsuccessful sellers throw in the towel to enjoy the holidays and hold off until the Spring Market. It is hard to imagine that there are that many homeowners lingering on the market, unable to sell, given how hot housing is right now. Yet, there are 513 sellers today, 24% of the current active inventory, who have been exposed to the market for more than two months. Also, November and December are when the fewest number of homeowners opt to list their homes for sale during the year. The five-year average number of homes coming on the market from 2015 to 2019 (intentionally omitting 2020 due to the skew from COVID) for November is 2,275 homes, 46% less than the annual height in May of 4,177. In December it drops to 1,533 homes, 63% less than the height in May. With both sellers throwing in the towel and fewer homeowners coming on the market, the inventory plunges. From 2015 to 2019 the inventory dropped, on average, by 23% by year’s end.
With the inventory dropping, there are fewer available options for buyers to choose from. Many buyers also place their home shopping desires on hold while they enjoy the holiday season. As a result, demand, the number of new escrows over the prior month, plunges. From 2015 to 2019 demand sank by 35% to its lowest levels of the year by year’s end.
As demand plunges a little bit more than the inventory, the Expected Market Time (the amount of time between pounding in the FOR-SALE sign and opening escrow) increases slightly. Today’s ultra-low, insanely hot 26 day Expected Market Time may eclipse 30 days by the time everyone rings in a New Year. This means that for those buyers and sellers that do participate in the real estate market during the holidays, they can expect housing to continue to soar at an insane pace with a ton of showings, bidding wars with multiple offers, and homes selling for above their asking prices. It will continue to be a white-Hot Seller’s Market.
Until the start of the Holiday Market in mid-November, it remains the Autumn Market. Autumn is when both the inventory and demand drop slightly. There are still quite a few more homes that come on the market during October compared to the average between November and December, 55% more. Demand will remain elevated. Today’s incredibly low 3% mortgage rate continues to fuel demand. Rates are not expected to change much for the remainder of the year as well.
ATTENTION BUYERS: The incredibly crazy, Hot Seller’s Market persists and that will not change for the remainder of the year, even with demand plunging during the holidays. Remember, it is not just demand that is plunging, the number of available homes to purchase will be plunging as well. To wait until later in the year for a “deal” during the “slowest time of the year for real estate” simply does not make sense. The temperature of housing will not feel much different in December compared to today.
ATTENTION SELLERS: It really is the last call to cash in on the 2021 housing market and find success. Sellers who are clearly overpriced will run out of time and run into an end of the year with drastically fewer participating home buyers due to the holidays. The time to be accurately priced and taking full advantage of maximum market exposure is right now, today.
The current active inventory dropped by 5% in the past two weeks.
The active listing inventory shed 110 homes in the past couple of weeks, down 5%, and now sits at 2,179 homes, the lowest level since tracking began in 2004. It is hard to imagine that the inventory could drop much more than where it is today, yet it certainly will. It will slightly drop from now through mid-November. From there, as housing transitions into the Holiday Market, the inventory will plunge to its lowest point of the year on New Year’s Day. This will be on the backs of fewer homes coming to market and unsuccessful sellers that throw in the proverbial towel.
Last year to start October, there were 4,153 homes on the market, 1,974 additional homes, or 91% more. The 3-year average from 2017 to 2019 (intentionally omitting 2020 due to COVID skewing the data) is 6,400, an extra 4,221 homes, or 194% more, nearly triple compared to today. There were a lot more choices back then.
From September 1st through September 15th, there were 184 fewer new FOR-SALE signs in Orange County compared to the 3-year average from 2017 to 2019, 12% less. Every single missing sign just adds to the inventory crisis.
Demand dropped by 4% in the past couple of weeks.
Demand, a snapshot of the number of new pending sales over the prior month, decreased from 2,623 to 2,521 in the past couple of weeks, shedding 102 pending sales, down 4%. Demand typically drops about 4% during this time of the year. Dropping demand goes hand in hand with fewer homes coming on the market along with many families halting their home buying search because the kids are now in school. Moving during the school year can be very disruptive, so families hold off until the Spring Market to search for a home so that they can ideally move during the summer months. Expect demand to continue to slowly drop and then pick up speed and plunge from mid-November through the end of the year, the Holiday Market.
Last year, demand was at 3,254, 29% more than today due to a delay in the Spring Market because of COVID.
With a significant drop in both supply and demand, the Expected Market Time (the number of days to sell all Orange County listings at the current buying pace) remained unchanged at 26 days, an extremely insane, HotSeller’s Market (less than 60 days) where there are a ton of showings, sellers get to call the shots during the negotiating process, multiple offers are the norm, and home values are rising rapidly. Last year the Expected Market Time was at 38 days. The 3-year average from 2017 through 2019 was at 86 days, much slower than today, but still a Slight Seller’s Market.
The luxury market remained unchanged in the past couple of weeks.
In the past two weeks the luxury inventory of homes priced above $1.5 million decreased by 29 homes, down 4%, and now sits at 693, its lowest level since tracking. Luxury demand decreased by 52 pending sales, down 5%, and now sits at 432, its lowest level since February. With a large drop in both supply and demand, the overall Expected Market Time for luxury homes priced above $1.5 million remained unchanged at 48 days, a very Hot Seller’s Market for luxury. The last time luxury was this hot was back in May.
Expect the luxury market to slightly cool as housing transitions further into the Autumn Market.
Year over year, luxury demand is up by 22 pending sales or 16%, and the active luxury listing inventory is down by 579 homes or 46%. The Expected Market Time last year was at 103 days, extremely hot for luxury, but more than double where it is right now, indicating just how hot the luxury market is today.
For homes priced between $1.5 million and $2 million, the Expected Market increased from 28 to 29 days. For homes priced between $2 million and $4 million, the Expected Market Time decreased from 43 to 41 days. For homes priced above $4 million, the Expected Market Time increased from 122 to 135 days. At 135 days, a seller would be looking at placing their home into escrow around February 2022.