Orange County Housing Report - Season's Greetings

Posted by Hartanov Real Estate Team on Tuesday, November 3rd, 2020 at 11:07am.

Orange County Housing Report:   Season’s Greetings

November 2, 2020 

The holidays are knocking on the door, which will result in a drop in both the inventory and buyer demand. 

 

The Holiday Market
From now through the end of the year, the active inventory typically drops about 27% and demand drops by 31%. 

Daylight saving time just ended. Everybody got an extra hour of sleep, but it now gets darker earlier. In adjusting the clocks in the house, it marked the beginning of a new season, a season of preparation and festivities, the holidays. With Halloween 2020 in the past, it is time to get the holiday lists in order. Many are thinking, it is just too soon. It is not “officially” the holidays until the red cups arrive at Starbucks. NEWSFLASH: they will debut this Saturday, November 7th. In the blink of an eye, 2020 will come to an end as everyone celebrates the arrival of 2021.

The inventory will steadily drop from now through the end of the year. Fewer homeowners will place their homes on the market since 2020’s end is fast approaching. Intuitively, many will simply “wait until spring.” It is a common phenomenon that repeats itself every year. There will still be homeowners lured to enter the fray due to the public knowledge that housing is by far the strongest sector of the United States economy, yet most will opt to wait until at least March of 2021.

 

The bottom line: Expect the number of homes available to purchase to consistently drop for the rest of the year.

On the flip side, demand is going to drop as well. After writing offer after offer, only to be turned down repeatedly, buyers will divert their attention away from jumping on every home that hits the market, to pumpkin pie, eggnog, and kissing their significant other under the mistletoe. They will merely place their home buying aspirations on hold while they plug into the theme of “season’s greetings.” And, the number of new buyers to enter the real estate arena will drop until ushering in a New Year.

The bottom line: The Holiday Market will still be quite busy with plenty of buyer activity compared to recent years.

Many buyers will mistakenly expect that December will finally be their opportunity to snatch a home during the slowest time of the year, pointing to the seasonal drop in demand. Unfortunately, that will not be the case yet again. Remember, the Holiday Market not only experiences a drop in demand, but there is also a significant drop in the number of homes available to purchase. With  a drop in both supply and demand, the overall Expected Market Time (the amount of time it would take to open escrow after pounding in the FOR-SALE sign), or the speed of the market, will remain flat. The lower the Expected Market Time, the HOTTER the market. Orange County is currently running an Expected Market Time of 39 days, a Hot Seller’s Market (below 60-days). Through the end of the 2020, the market will remain sizzling hot. 

Grab your red Starbucks cup, the holidays are here, and so is the Holiday Market.

Active Listings

The current active inventory decreased by 5% in the past two weeks.

The active listing inventory plunged by 229 homes in the past two-weeks, down 5%, and now sits at 3,944, dropping below 4,000 homes for the first time since the start of January. It is also at its lowest level for this time of the year since tracking began in 2004. From here, expect the inventory to drop, picking up steam the week prior to Thanksgiving. There will be fewer and fewer active, available homes to purchase for the remainder of the year. 

Last year at this time, there were 5,921 homes on the market, 1,977 additional homes, or 50% more. There were a lot more choices for buyers last year.

Demand

Demand dropped by 4% in the past two weeks. 

Demand, the number of new pending sales over the prior month, decreased from 3,153 to 3,019 in the past couple of weeks, shedding 134 pending sales, down 4%. It is still the strongest level for an end to October since 2012. For the remainder of the year, demand will consistently drop, picking up steam the week prior to Thanksgiving. Even with the Holiday Market sidelining many buyers due to holiday distractions, it will remain quite elevated compared to recent years.

Last year, demand was at 2,275, that is 744 fewer pending sales compared to today, or 25% less.

Luxury End

The luxury market continued to cool slightly.

In the past two-weeks, demand for homes above $1.25 million decreased by 36 pending sales, down 6%, and now totals 533. Yes, the Holiday Market has arrived for luxury housing as well, with a drop in both the active inventory, supply, and demand (the prior 30-days of new escrow activity). The luxury home inventory decreased by 57 homes, or 4%, and now totals 1,560. With a drop in supply and a larger drop in demand, the overall Expected Market Time for homes priced above $1.25 million increased from 85 to 88 days in the past couple of weeks, still a hot market for luxury.

Year over year, luxury demand is up by 226 pending sales, or 74%, and the active luxury listing inventory is down by 530 homes, or 25%. The Expected Market Time last year was at 204 days, substantially slower than today.

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