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New Trends Emerging
The Orange County market has been hot, but new trends are emerging! Under the pressure of a market that has been heating up (increase in inventory), a cooling down trend (decrease in demand) has caused noticeable “cracks” to appear. Let’s examine the cracks and what that means for our market.
Cracks in the Orange County Market
Current trends demonstrate that the six-year housing run is beginning to cool. Across the county, headlines are the same – there is simply not enough homes on the market and buyers are having an extremely tough time finding a home. For the past six years, it has been an issue of supply and demand. Until now, the story has not changed much.
To clarify, signs of a cooling market do not mean that the housing market is suddenly tilting in favor of buyers. The days of multiple offers and homes flying off the market have not passed. Below the $1 million mark, there is still a lack of available homes on the market. Sellers are still in the driver’s seat. However, trends have surfaced that indicate a cooling marketplace.
The current active inventory has increased by 15% in the past month. After a slow, anemic start to 2018, the active inventory on the Orange County market has surged adding 726 homes in just four weeks. This is the largest one-month gain since July 2013.
For the first time since August 2016, there are more homes on the market compared to the year prior. Year over year, for 20 consecutive months, active inventory has been less compared to the same time last year. On New Year’s Day, there were 674 fewer homes on the market compared to January 1, 2017. As we have moved through the year, the difference diminished over time.
Demand is at its lowest level since 2018 for this time of year. When we talk about “demand,” we are referring to the number of pending sales over the past 30 days. Demand has been muted since the start of 2018. There are simply fewer pending sales compared to the past several years, but the difference has been substantial over the past six weeks. Demand is down 11% or 2,675 pending sales compared last year, during what is typically the busiest time of year – the Spring Market.
A total of 11% of all active listings reduced their asking price during the past week. This phenomenon is indicative of a marked inundated by overpricing. What does this mean? Many sellers are arbitrarily pricing and not relying on real estate experts to be successful – resulting in price reductions.
We are seeing these trends not just in Orange County but across Southern California as a whole. Across the board, more homes are coming on the market compared to last year and with a lot less demand. This is the first time we have seen active inventory up for Southern California since 2015. What does this mean? The trend of a cooler market is not isolated.
The Bottom Line
Despite cracks in the over six-year housing run, the market is still a seller’s market. The difference is that today’s Orange County market is just not as hot as Spring of 2017. Cooling trends developed this year, which are cautionary flags before you approach your local market. If these trends continue, the market will cool further, but it will take time.
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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