Orange County Housing Report: November Housing Heat Wave
With an astonishingly limited supply of available homes to purchase matched up with blistering hot demand due to record low mortgage Rates, the overall housing market in Orange County is insanely hot.
Hot November Housing
With an Expected Market Time of only 23 days, the Orange County housing market is hotter than it has ever been for this time of the year.
Housing has been dealing with an unrelenting heat wave of its own since last year. After coming out of the COVID lockdown protocols, the inventory dropped, demand soared, and housing reached record breaking temperatures from July through the end of 2020. It never cooled. In fact, the 37-day Expected Market Time reached in December (the time between hammering in the FOR-SALE sign to opening escrow) was the hottest level of the year for Orange County. In 2021, temperatures climbed to levels never seen before, housing grew hotter, and the market time dove to 21 days on April 1st, the hottest reading since tracking began in 2004. Today’s 23-day Expected Market Time is the lowest for mid-November by far, and not much different than April. The heat wave is intense and will continue through the end of 2021, setting up a remarkably hot start to 2022, much hotter than this year’s start.
The Expected Market Time is the 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 where there are plenty of showings, multiple offers, sellers call the shots, and home values are on the rise. A new level emerged to adequately describe this year’s heat wave, more intense than the record temperatures reached last year. Anything below 40-days is considered an Insane Seller’s Market. That is a market with a flood of showings, an overwhelming number of multiple offers, sellers get just about everything their hearts desire in calling the shots, and home values soar. Yes, despite all the news about flattening median sales prices (not an accurate gauge of home values anyways) and buyers less willing to enter bidding wars, home values are still on the rise today, in the middle of November just days before the start to the Holiday Market.
During the holidays, many buyers who have written offer after offer for months to no avail will place their home searching efforts on hold so that they can enjoy the festivities of the season. Yet, there will still be plenty of buyers willing and able to participate in the housing market fueled by the promise of cashing in on today’s historically low interest rate environment. Unfortunately, with such a limited inventory, the number of potential escrows will drop. Demand, a measure of recent new escrow activity, will plunge to its lowest level of the year upon ringing in the New Year.
Today’s Insane Seller’s Market is not going anywhere. Rather, it is setting up an extremely hot market to start 2022. It will be an Insane Seller’s Market from January 1st on. Last year there were 2,522 homes available on January 1. Upon celebrating the coming New Year, there will be less than 1,500 homes, 41% fewer than the start to this year. Match a record low supply with overabundant demand juiced by low mortgage rates, and housing will remain hot through the spring of 2022.
The current active inventory declined another 4% in the past two weeks.
The active listing inventory shed 71 homes in the past couple of weeks, down 4%, and now sits at 1,793 homes, the lowest level since tracking began in 2004. That is an unbelievably low level of homes for mid-November. For perspective, last year there were 3,843 homes at this time, 114% more, in 2019 there were 5,534 homes, 209% more, and in 2018 there were 7,218 homes, 302% more. That is correct, in 2018 there were four times the number of homes compared to today. It is hard to articulate just how acute the supply crisis has been this year, but it has underscored the incredible rise in home values and foreshadows continued appreciation to come. With the start of the Holiday Market, expect the inventory levels to plunge and drop below 1,500 homes by year’s end, at least another 17% lower than today. That will be on the back of fewer homes coming to market and unsuccessful sellers pulling their homes off the market and waiting until next year.
For October, there were 408 fewer new FOR-SALE signs in Orange County compared to the 3-year average from 2017 to 2019, 14% less. Every single missing sign just exacerbates the inventory crisis.
Demand dropped by 4% in the past couple of weeks.
Demand, a snapshot of the number of new escrows over the prior month, decreased from 2,429 to 2,322 in the past couple of weeks, shedding 107 pending sales, down 4%. At this point the limited supply of available homes is eating into the potential number of escrows. True demand, the number of buyers in the marketplace, is a lot higher than tracked demand based upon escrow activity. True demand is impossible to gauge, but the throngs of showings for just about every home that hits the market combined with the sheer volume of multiple offers generated illustrates that there is a vast pool of buyers looking to secure a home. Expect demand to continue to plunge with the start of the Holiday Market simply due to a dropping supply of homes. From now until New Year’s Eve, demand will sink to its lowest levels of the year. It will rise again in January after celebrating the start to 2022.
With a similar 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 23 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. The lowest level of the year occurred on April 1st at 21 days, not much different than today. Last year the Expected Market Time was at 41 days. The 3-year average prior to COVID was at 85 days, much slower than today, but still a Slight Seller’s Market.
The luxury market improved dramatically in the past couple of weeks with a giant drop in the supply of available luxury homes to purchase.
In the past two weeks the luxury inventory of homes priced above $1.5 million decreased by 69 homes, down 10%, and now sits at 603, its largest drop of the year and the lowest level since tracking began. Luxury demand increased by 20 pending sales, up 5%, and now sits at 416. With a large drop in the supply and an increase in demand, the overall Expected Market Time for luxury homes priced above $1.5 million plunged from 51 to 43 days, its lowest level since tracking began and a very Hot Seller’s Market for luxury.
For homes priced between $1.5 million and $2 million, the Expected Market increased from 24 to 25 days. For homes priced between $2 million and $4 million, the Expected Market Time decreased from 54 to 42 days. For homes priced above $4 million, the Expected Market Time decreased from 126 to 94 days. At 94 days, a seller would be looking at placing their home into escrow around February 2022.