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Starting to Pull Back
There’s a change in the air, and buyers are beginning to pull back. Home buyers are starting to approach the housing market with caution and much differently than they did between 2012 and 2017. As a result, we are experiencing a noticeable shift in the Orange County Market.
It is still a seller’s market, but buyers are much more cautious. In the tug-of-war, sellers are still “winning” but not if they are overpriced. Sellers are no longer getting away with arbitrarily stretching their asking prices.
Tug-of-War in the Orange County Market
The Orange County Market is like a big game of tug-of-war. During the Great Recession, buyers dominated and called the shots. Prices dropped from 2007 to 2011. Since 2012, sellers have been dominating with multiple offers and buyers tripping over themselves. Prices escalated reaching record levels.
Why the caution? Let’s look at the biggest culprits in this Orange County Market shift.
At the end of May 2017, interest rates were 3.95%. Today they are at 4.66%, an 18% increase in a year. Buyers still want to buy but - with higher values and higher mortgage rates - they don’t want to pay much more than the recent comparable sale.
Values have increased significantly. From April 2017 to April 2018, the median sales price was up nearly 6%. It’s been a hot seller’s market since 2012, six solid years of home price appreciation. The median price has risen 73% from 2012 to 2018.
Sellers who are not priced close to Fair Market Values are not finding success. Homes are sitting on the market for longer because buyers are not willing to write offers. A huge indicator of overpricing is the number of price reductions. Currently, 11% of the homes on the market reduce their asking price every single week.
Buyers are tugging the rope harder in every single price range except homes priced between $1.5 million to $2 million. However, in this price range, expected market time is 123 days and only represents 6% of the demand. Compared to the same time last year, for the rest of the Orange County Market, inventory and demand is:
- $0 - $500k: -5% Active Inventory / 13% Market Share / -24% Change in Demand
- $500k - $750k: -7% Active Inventory / 21% Market Share / -12% Change in Demand
- $750k - $1m: +2% Active Inventory / 19% Market Share / 0% Change in Demand
- $1m - $1.25m: +21% Active Inventory / 10% Market Share / -8% Change in Demand
- $1.25m - $1.5m: +12% Active Inventory / 9% Market Share / +28% Change in Demand
- $2m - $4m: +9% Active Inventory / 12% Market Share / +25% Change in Demand
- $4m +: +10% Active Inventory / 7% Market Share / +12% Change in Demand
The Bottom Line
It may still be a seller’s market, but seller’s must carefully price their homes to be successful in this evolving Orange County Market. As with everything, the Orange County market does not change overnight. This year still promised to be a very good year for sellers, only a bit more challenging. Approach the market with a deliberate strategy and have a local expert on your side – that’s where we come in!
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