Quartiles and much more.

These reports provide weekly information on sales activity for attached homes inLake Forest.  Measurements include Median List Price, Asking Price Per Square Ft., Supply & Demand, Pricing

Quartiles and much more.

These reports provide weekly information on sales activity for attached homes inLake Forest.  Measurements include Median List Price, Asking Price Per Square Ft., Supply & Demand, Pricing

Quartiles and much more.

Quartiles and much more.

Orange County Housing Report:  The Great Thaw

April 29, 2012

Good Afternoon!

The Orange County housing market has reached a new phase and

is beginning to thaw.

The Great Thaw:  The market is changing in just about every way.

The Great Housing Bubble paved the way for the Great Recession.  The housing market has officially entered the next phase, the Great Spring Thaw.  The housing market seems to move from one extreme to another.  Back in the early 2000’s, buyers zealously bought homes without regard to someday becoming sellers.  Contrast that with the subsequent, unprecedented downturn, the housing market transitioned into a deep six year hibernation.  The sleeping giant, housing, has awakened.  The most fascinating aspect of this latest shift in the market is that absolutely nobody forecasted this major step in a housing recovery.  The current statistics are staggering:

• Listing Inventory is at its lowest point since June 2005;
• Demand is at its highest level since June 2005;
• The expected market time is at its lowest level since June 2005;
• Closed sales have not been this high since October 2006 (May 2010 was at a similar level, but only  temporary due to the expiration of the first time home buyer tax credit);
• The distressed property inventory is at lows not seen since September 2007.

Ask any buyer, seller, lender, REALTOR® who participated in 2005 and they will recount a very crazy market where homes flew off the market with multiple offers.  Buyers were extremely frustrated back then after writing offers on home after home without success.  Ask any buyer, seller, REALTOR® who is involved in today’s market and they will articulate how homes are flying of the market with multiple offers.  The only difference between 2005 and 2012 is that values were rapidly rising.  Today, with distressed homes still making up 23% of the active listing inventory, appreciation has been a bit restrained.  That does not mean that values are not rising; it means that distressed properties are keeping a lid on rapid appreciation.  With so few homes on the market, those in the real estate trenches are describing homes that are generating so many offers that the ultimate agreed upon sales price is often above the list price.  NOTE TO BUYERS:  carry a very sharp pencil when writing an offer to purchase your next potential home.  There is tremendous competition in every range below $1.5 million.  The best approach to writing an offer to purchase is to meticulously consider all of the comparable pending and closed sales taking into consideration the positives and negatives of each property that will add or subtract to value.  NOTE TO SELLERS:  do NOT get too carried away and wildly overprice your home.  There are still homes that are sitting on the market without success due to being overzealous.  It is best to price based upon the current market value of the home in initially approaching the market.  The most activity a home receives is in the first few weeks.  To waste this short, one-time opportunity is foolish.  Carefully arrive at price in order to take advantage of the initial surge of activity.

The Active Listing Inventory: The listing inventory dropped an additional 5% in the past two weeks.

The drop in the active listing inventory has displayed no signs of slowing, shedding an additional 310 homes in the past two weeks, now totaling 6,044.  Since starting the year with 8,114, the active listing inventory has dropped 26% unabated, that’s 2,070 homes.  Eventually the housing inventory drop will slow, but it has shown no signs of such a change thus far.  There are 46% fewer homes on the market this year compared to last year.  Last year at this time there were 11,144 homes, 5,100 more than today.  There are 35% fewer than 2010.  Back then, even though demand was good due to the first time home buyer tax credit, the inventory increased unabated through September.  In 2012, the inventory has decreased unabated since June 2011, dropping by over 5,300 homes.  Every range is experiencing a tighter inventory compared to last year.  Below $500k, the inventory is down 56%.  From $500k to $1 million, it is down 42%.  From $1 million to $2 million, the inventory is tighter by 25%.  Even homes above $2 million are experiencing fewer homes, 15% fewer.

Demand:  Demand has reached its highest level since 2005.

Even with stronger demand this year, I wondered if it would surpass the levels reached at the end of April 2010, the absolute deadline to taking advantage of the first time home buyer tax credit.  Everybody was clamoring to find a home to purchase by April 30^th.  Contracts had to be signed by that date.  The surge in demand was temporary, prompting many buyers to purchase earlier in the year.  This year is completely different.  There has been no rush to purchase.  Instead, there are a ton of buyers who just want to buy and it doesn’t appear that demand is going to slow any time soon.  This is not a blip of activity.  And, “yes,” this year’s demand did surpass the levels at the end of 20102.  The current strong demand is already translating to stronger year over year closed sales.  When the media catches wind of the strong resale numbers for April 2012, reported in mid-May, real estate will become the topic of May.  It will be the strongest April in years.  Orange County demand, the number of new pending sales over the past month, increased by 102 homes in the past two weeks and now totals 3,992, a 3% increase.  It is about to reach the milestone of 4,000 pending sales, a level not reached since June 2010.  Demand is 25% stronger than last year.  The expected market time for homes priced below $500,000 is now 1 month, a very hot seller’s market.  For homes priced between $500,000 to $1 million, the expected market time is 2.3 months.  Between $1 million to $2 million, it is 3.6 months.  The only range that is not experiencing a lot of activity is the above $2 million range, the top 11% of the market.  The expected market time for that range is 14.2 months.

Distressed Market:  Since October, the distressed inventory has shed 2,164 homes, a 61% drop.

That is not a typo; the total active distressed inventory, both foreclosures and short sales, has dropped 61%.  Since the beginning of this year, the drop has been a staggering 55%. Today there are 1,399 total short sales and foreclosures on the active listing inventory.  Last year at this time there were 3,834.  Absolutely nobody predicted a sharp drop in distressed homes either.  This was an unanticipated step and a crucial ingredient to the current recovery that is underway.  There are only 304 foreclosures in all of Orange County, a drop of 24 in the past two weeks.  The foreclosure inventory has not been this low since August 2009.  The expected market time is an incredible .6 months.  Having the winning bid on a foreclosure is almost as good as winning a lottery.  There are a ton of buyers competing for very few homes.  Short sales aren’t much different with a .8 month inventory.  After shedding 179 homes in the past two weeks, the short sale inventory now totals 1,095, levels not seen since the distressed inventory began to rise in 2007.  There are government mandated changes coming down the pike in regards to lender response time.  The jury is still out on whether or not lenders will take this program seriously or if they will find yet another loophole to continue to stall the short sale process.  With multiple lenders, delinquent HOA dues, unpaid property taxes, liens against the title, short sales still have a reputation of being “long” sales.

Have a wonderful week.

Sincerely,
Steven Thomas
Quantitative Economics and Decision Sciences

Cell      949.874.8221

Copyright 2012 – Steven Thomas, www.ReportsOnHousing.com – All Rights Reserved.   This report may not be reproduced in whole or part without express written permission by author.

Each month Leslie Appleton-Young, Chief Economist for the California Association of REALTORS, or one of her staff members, reports on Real Estate activity throughout the state.  Total sales, annual projections, trends and projections are discussed.  We invite you to join Leslie and her team each month.

Read more….

Each month Leslie Appleton-Young, Chief Economist for the California Association of REALTORS, or one of her staff members, reports on Real Estate activity throughout the state.  Total sales, annual projections, trends and projections are discussed.  We invite you to join Leslie and her team each month.

Quartiles and much more.

These reports provide weekly information on sales activity for attached homes inLake Forest.  Measurements include Median List Price, Asking Price Per Square Ft., Supply & Demand, Pricing

Quartiles and much more.