IN COMPARING THIS YEAR TO LAST YEAR, THE HOUSING MARKET IS PROFOUNDLY DIFFERENT WITH HIGHER MORTGAGE RATES, MORE AVAILABLE HOMES, MUCH LOWER DEMAND, AND SIGNIFICANTLY LONGER MARKET TIMES.
The Orange County housing market has transitioned from an Expected Market Time (the number of days between hammering in the FOR-SALE sign to opening escrow) of 19 days in March to 72 days today. Anything below 60-days is considered a Hot Seller’s Market. Below 40-days is insane, and at 19-days it is nothing short of nuts, almost instantaneous. That is where buyers trip over each other to see every home that enters the fray, sellers call all the shots, multiple offers and bidding wars are the norm, and home values uncontrollably skyrocket higher. Yet today, the Expected Market Time has risen to 72 days, a Slight Seller’s Market, where sellers still get to call more of the shots, but there are fewer multiple offers, home values are not appreciating that fast, the market is no longer instant, and properly pricing is absolutely crucial to find success.
What happened in just a few short months? When mortgage rates climbed from 3.25% at the start of the year to over 6% in June, home affordability took a massive hit, buyers backed off, and demand dropped. Year-over-year, demand (the number of pending sales over the prior 30- days) is down by 40%, or 1,119 fewer pending sales. In fact, Orange County demand is at its lowest level since tracking began in 2004, slightly lower than the start of the housing meltdown in 2007. It is down in every price range, including luxury, due to Wall Street volatility. Demand is down the most (by more than 50%) in the lower price ranges, homes priced below $750,000, where higher mortgage rates and qualifying for loans has had a deeper impact.
Many sellers are approaching housing as if nothing has changed. They are stretching the asking price and testing the market as if home values are continuing to rocket higher. Unfortunately, OVERPRICED homes are now quite common. An astonishing 35% of all homes available to purchase today have reduced their asking price at least once. It was at 19% in May. These price reductions are not indicative of a drop in home values; instead, it illustrates the volume of sellers who initially price their homes out of bounds, much higher than their true Fair Market Value. In the process these overpriced sellers lose out on the most valuable marketing period, the first couple of weeks after placing their home on the market.
ATTENTION SELLERS: Carefully arriving at the Fair Market Value by scrutinizing the most recent comparable and pending sales is essential to be successful, meticulously taking into consideration the condition, location, and amenities.
Overzealous sellers who require future price reductions will procure fewer interested buyers, fewer offers to purchase, and, ultimately, will net less money.
ATTENTION BUYERS: While the market is slower than the start of the year, it is NOT a Buyer’s Market where values are going down.
Homes that are upgraded, in great condition, and priced well will fly off the market. The longer a home has been on the market, the more willing a seller is to negotiate.
Click on the image below the Read the Orange County Housing Report.
