Hey folks, it's time for another Market Time Report! These come out every two weeks, and are a great way to stay on top of what's happening in the Orange County real estate market.
As always, if you're looking to buy or sell your home, you can contact me via PM, or visit my website at www.ocmousehouse.com
Market Time Report: ACTIVE LISTING INVENTORY DROPS FOR THE 1ST TIME THIS YEAR, BUT MARKET TIME INCREASES
September 7, 2006
With school bells ringing, it is time for sellers to apply what they have learned, price accordingly or do the entire market a favor and do NOT sell. Sellers ARE choosing to pull their homes off the market. In August there were 3,121 homes pulled off, compared to 1,262 in August 2005. The active listing inventory dropped from 16,006 two weeks ago to 15,767 today, a 239 home drop. Yet, the market time for Orange County increased from 6.79 months two weeks ago to 7.12 months today. The increase is due to drop in demand, typical for this time of year, the official “Fall Market.” The number of homes placed into escrow within the prior 30 days, demand, is at 2,216 homes today, compared to 2,357 homes two weeks ago, a 141 home drop. Disgruntled sellers just are not pulling their homes off the market fast enough to help drop market time. We can expect a bit more of a drop in demand and quite a bit more of a drop in the active inventory as more and more sellers opt to pull their homes off the market. In the coffee room, many agents state that there are still some sellers who refuse to listen to the market and are still holding out for unrealistic values. For these sellers, no matter how stubborn and adamant they are about pricing, they will not sell. Buyers in today’s market simply are not willing to overpay for a home. There is just far too much competition. As these sellers become discouraged, they too will pull their homes off the market. Compared to January 1st of this year, there are 8,524 additional homes on the market today. Out of the 15,767 homes on the market, 4,335 are vacant, or 27.5% of the market. This statistic is very interesting and illustrates that there really is motivation in the market. At today’s demand it would take more than two months to exhaust just the vacant listing inventory. For proper perspective, one year ago today, there were only 7,319 homes on the market, 8,449 fewer compared to today, and there were 3,281 homes placed into escrow within the prior 30 days, 1,065 additional escrows compared to today. The market time was at 2.23 months. It was about this time last year that the Orange County real estate market began its transition to the market we know today. Slowly, but surely, more and more homes were placed on the market as demand dropped. The market time slowly climbed from the 2.23 month mark to 4.01 months by the end of December. Today, all ranges above $500,000 are within the definition of a buyer’s market, six months of inventory or more. All ranges above $1.5 million are above the 10 month mark. There is virtually NO difference in market time between attached homes and detached homes. The Orange County market is not for the faint of heart. For the best strategy to capitalize on the market, buyers and sellers must turn to the wisdom and experience of a professional real estate agent.
What can we expect for the rest of the year? Orange County has officially entered the Fall market. With the kids back in school, we have already realized a small drop in demand. Demand should drop a little bit more over the coming weeks. Unlike 2005, there are a tremendous number of sellers who have been on the market for months. In 2005, most sellers were successful during the first 3 quarters. Today’s sellers that have been unsuccessful for a long period of time, for whatever reason, will be inclined to pull their homes off the market, especially given the typically hotter Spring and Summer markets are now in the past. The probability of success is not high. With 15,767 homes on the market and only 2,216 homes placed into escrow within the prior 30 days, given this most recent snapshot, 13,551 sellers will not successfully sell their homes over the next month. We will enter the Holiday market after Halloween. With the distractions of the holidays, demand will drop further as fewer sellers opt to place their homes on the market. Demand will not pick up until the middle of January as we rev up for the Spring market.
How should a seller approach the market? Unmotivated sellers should do the entire market a favor and pull their homes off the market NOW. It certainly would make it a lot easier for buyers to work with motivated sellers. There is no sense of urgency for buyers. But, for a seller, sitting on the market at an unrealistic price is like fishing without bait. Gone are the days of catching a fish by just placing your hook in the water. The fish are a lot smarter now. So, if sellers are unwilling to be realistic, they should pull their homes off the market and enjoy the colors of the Fall and all of the wonderful distractions of the holidays. A reduction in the number of “for sale” signs and “open house” directional arrows would be a great thing. In the end, the market will be left with those that really have to sell or are highly motivated. Now that we have entered the Fall market and the Holiday market is right around the corner, sellers need to be prepared for fewer showings and fewer inquiries. Sellers should not expect immediate success unless they are willing to price their home for less than the last comparable sale. But, there still are no guarantees. In pricing, adding “pad” or “cushion” to make room for negotiating is not advisable. The end result will be wasted time sitting on the market. In most cases, until demand changes, homes are going to sell for less than the last comparable sale. If a seller is not willing to price their home according to the market value, they simply will not sell. For sellers, the fundamental key to success is CAREFULLY selecting their real estate agent. What should they look for in an agent? Local market knowledge, exceptional communication skills and a detailed marketing strategy are absolutely essential to achieving success in this market. DO NOT choose an agent based upon a promised price. Instead choose an agent based upon experience, knowledge and a genuine comfort level. Sellers should price their homes carefully, analyzing escrow activity first, most recent sales second and then older sales (not more than six months back). Lastly, take a look at the active inventory to see where they would rank compared to the competition and to see if there are any sellers who have priced their home below the last comparable sale or escrow.
How should a Buyer approach the market? As buyers are looking for the best location, location, location they have choice after choice after choice. But, there is a tremendous amount of hesitation and fence-sitting for buyers today. Bernanke and the rest of the Federal Reserve are keeping everybody on their toes as to whether or not they will be raising interest rates, yet again, in a couple of weeks. If rates are increased, affordability for buyers decreases. NOW HEAR THIS: we have OFFICIALLY entered the BEST time to buy a home, now through the end of the year. No, I am not crazy. By the end of January 2007, the market will pick up. Even though this year has been slower, February through May were still good months. We can expect a similar Spring in 2007. So, the Fall and Holiday markets are ideal to be a buyer. With the active inventory still high and demand slowly dropping, this is the most ideal time to bring in an offer. Sellers are much more realistic today than they were just a few months ago and many really do have to sell. That does not mean that they are going to give away the farm. It does mean that they will certainly be a lot more willing to listen, to be flexible and more likely to sell their home, within reason, below the last comparable sale. Sellers are people too, so low-balling a home runs a high risk of offending. So be conscientious in determining the market value (offer price) by carefully scrutinizing the most recent sales, all escrow activity and other active homes on the market below recent sales activity.
The following areas have inventories of less than six months: Aliso Viejo, Anaheim, Canyon Areas, Cypress, Fullerton, Garden Grove, Portola Hills and Santa Ana.
The following areas have inventories between eight and ten months: Brea, Costa Mesa, Newport Coast, San Clemente, San Juan, Talega, Tustin, Yorba Linda and homes between $1 million to $1.5 million.
The following areas have inventories greater than ten months: Corona Del Mar, Coto de Caza, Dana Point, Dove Canyon, Irvine, Laguna Beach, Newport Beach, Westminster and all ranges above $1.5 million.
Have a fantastic weekend.