It's that time again! Here's my company's latest market time report for Orange County. As always, if you're looking to buy or sell your home, please give me a call (or PM me!) We can sit down and discuss your goals and how I can help you achieve them.
I have some great connections with mortgage people as well, so whether this is your first home or your fourteenth, they're going to know of some good programs to help get you financed.
Or if you are thinking of buying 6 months down the road and would just like to start looking at listings, let me know what you're interested in and I can start emailing you some that fit your needs. That will help you get a feel for the specific market you're looking to buy in, so that when the right homes comes along, you'll have enough background to recognize it as the right deal for you.
Okay, enough of that. Here's the market time report:
Originally Posted by Market Time ReportMarket Time Report: At 16,000 HOMES, WHY ARE YOU ON THE MARKET?
August 24, 2006
For sellers, it is time for a “gut check”: price accordingly for a Fall and Holiday market, or DO NOT SELL. We are about to enter the Fall market, where demand for homes diminishes and more and more sellers pull their homes off of the market. At 16,006 homes, the Orange County inventory has nearly finished its gigantic 2006 growth spurt. There are 8,763 additional homes on the market today compared to January 1st of this year. In the past 2 weeks, the inventory grew by only 131 homes. But, it is surprising that homes are still coming on the market at a faster pace than they are coming off. The number of homes placed into escrow has risen from the incredibly slow July numbers. There were 2,357 homes placed into escrow within the prior 30 days; that’s 225 additional homes compared to July 13th. As the inventory has slowed its climb and more homes are placed into escrow, market time has dropped slightly from 7.2 months on July 13th to 6.79 months today. Over the past two weeks, market time only dropped from 6.81 months to 6.79 months. As more sellers recall that, cyclically, the Fall and Holiday market are not the best times to sell, the number of homes that are pulled off the market will reach numbers not seen in quite some time. The inventory will most likely drop from here. For proper perspective, one year ago today, there were only 6,917 homes on the market (that’s 9,089 fewer homes) and there were 3,730 homes placed into escrow within the prior 30 days (1,373 additional escrows). Market time was at 1.85 months. During the Fall and Holiday markets in 2005, the market time slowly rose from the 1.85 mark to 4.01 months by the end of December. Part of the normal real estate cycle, demand consistently slowed from week to week. It all started when the kids went back to school. Demand, the number of homes placed into escrow within the prior 30 days, reached its 2006 peak back on April 6th, 2,958 homes. The peak for 2005 was April 7th, 4,326 homes (1,368 additional escrows compared to the 2006 peak). All ranges above $750,000 are within the definition of a buyer’s market. All ranges above $1.5 million are above the 10 month mark. There is virtually NO difference in market time between attached homes (6.79 months for condominiums and townhomes) and detached homes (6.78 months). BUT, the market time for attached homes within the $500,000 to $750,000 range is 7.91 months. Above $750,000, the market time for attached homes is 11.3 months. Today’s market is not for the light hearted. For the best approach and strategy to capitalize on the market, buyers and sellers must turn to the expertise of their real estate agent.
What can we expect for the rest of the year? “Back to school” typically features the start of a slow drop in demand. Finally, more and more sellers will pull their homes off the market. There’s just not a high probability of success. With 16,006 homes on the market and only 2,357 homes placed into escrow within the prior 30 days, given the most recent snapshot of demand, 13,649 sellers will not sell their homes over the next month. AND, demand is most likely going to drop from here. After the kids run from house to house pleading, “trick or treat,” demand will again soften as the distractions of the holidays set in. Demand will not pick up again until the middle of January 2007.
How should a seller approach the market? It is quite simple; a homeowner should not place their home on the market unless they are motivated to sell. Sellers that are currently on the market and do not have legitimate reasons to sell and are not motivated should pull their homes off the market IMMEDIATELY and enjoy the seasons, relaxing in their Southern California homes. After four to six months on the market, many sellers understand the big picture; it does not matter what price a seller would like to get for their home, they are only going to achieve a realistic market value. Maintaining a home in “showing condition” is exhausting; it pays to be realistic. I am surprised by the number of sellers who are overpriced. An overpriced listing amounts to a gigantic waste of everybody’s time, theirs included. This is not a market to be stubborn on price. That may have worked for the prior 9 years, but not in 2006. It is time for unrealistic sellers to either get realistic or pull their homes off the market. A seller should not expect for their home to sell in the first 60 days UNLESS they have an incredible home that stands out compared to all of the competition or they are prepared to sell their home for less than the last comparable sale. Sellers who require a quick sale must have a GREAT PRICE. Sellers must now be prepared to be on the market for months. A very important key to success is choosing a very experienced agent with local market knowledge, excellent communication skills and a detailed marketing strategy. Communication is very important as the market is constantly evolving with aggressive sellers, new escrows and sales, changes in demand and other market influences. Do not fall into the trap of choosing an agent based upon a promised price, a recipe for disaster and a big waste of time. Sellers must ignore their neighbors, family, friends and out of area real estate agents when it comes to real estate advice. It is natural for people to give advice to a seller whose home has not sold. Yet, they are not the localreal estate expert who knows the details and intricacies of a seller’s specific market. Pricing is crucial to success. In arriving at the market value, sellers should scrutinize the most recent comparable sales and apply more emphasis on escrow activity. Sellers should look to active homes on the market only to ascertain where they would rank on the market at a given price and to see if there are any aggressive sellers pricing their homes below the last comparable sale or escrow. After a home is placed on the market, the most activity is realized within the first few weeks. It is best to capitalize on this period by exposing the initial pool of buyers to a very realistic price. If a seller opts to price their home to allow for “negotiating room,” a seller will most likely waste the first few precious weeks on an unrealistic price.
How should a Buyer approach the market? Great news, rates have fallen in recent weeks as the Federal Reserve paused its string of rate hikes. It is unclear whether Bernanke, the new Federal Reserve Board Chairman, and the rest of the board are going to raise rates again or continue to hold. If rates are increased, affordability drops. After eight years, it’s the buyer’s turn. There are so many homes to choose from and sellers are more realistic today than they were just a few months ago. Stories abound about renters who are sitting on the sidelines waiting for the most ideal time to purchase. The best advice to the fence sitter is to not try and predict the bottom of the market. That is extremely difficult and next to impossible for the most decorated economist. Unless a buyer enjoys gambling, a buyer should only wait for the home that best fits their desired wish list in a home and make an offer to purchase without hesitation. To hesitate, a buyer risks losing the home to another interested buyer. Many homes today still receive more than one offer. Why? After locating a home that a buyer really likes, often the buyer sits on the sideline to wait and see if something better comes along. Along comes another interested party who writes an offer. The original buyer does not want to lose the home, so they too write an offer. Home prices are not going to fall drastically, either. Employment is still strong, the local economy is diverse, vacant land is scarce and Orange County is a highly desirable place to live. The pessimistic crowd brings up the real estate recession of the 1990’s. That was a different era where the military made up a large portion of the economic pie as several military bases closed and the aerospace industry virtually vanished from Southern California. Also, the county of Orange filed bankruptcy from poor investments in junk bonds. How should a buyer arrive at an offer price? First, their agent should ascertain the motivation of the seller to gauge a seller’s willingness to listen. Then, buyers need to carefully ascertain the market value of a home by scrutinizing the most recent sales and emphasizing all escrow activity.
The following areas have less than a five and a half month inventory: Aliso Viejo, Cypress, Dove Canyon and Mission Viejo.
The following areas have inventories between eight and ten months: Anaheim Hills, Brea, Corona Del Mar, Ladera Ranch, Laguna Beach, San Clemente and Yorba Linda.
The following areas have inventories greater than ten months: Canyon Areas, Coto de Caza, Dana Point, Newport Beach, Newport Coast, Talega, Villa Park and all ranges above $1.5 million.