Hey folks, sorry I didn't get this up sooner, I was just so busy all weekend! Here's the latest Market Time Report:
Market Time Report: THE CONDOMINIUM MARKET IS SLOWING CONSIDERABLY
September 21, 2006
With Fall officially starting on Saturday, we begin the season with twice the active inventory and three times the market time compared to last year. The Orange County active listing inventory did not change much over the last two weeks, dropping by only 95 homes to 15,672 today. Neither did the number of homes placed into escrow within the prior 30 days; it dropped by only 8 homes, to 2,208. But, there has been a significant change in the market; attached homes are slowing at a much faster pace compared to detached homes. The market time for attached homes is now at 7.46 months compared to 7.08 months two weeks ago. Detached homes dropped from 7.0 months two weeks ago to 6.86 months today. For attached homes, every range is above the six month mark. According to many experts, the six month mark is the beginning of a buyer’s market. Markets above 9 months are considered deep buyer’s markets. Condominiums above $750,000 are experiencing inventories in the double digits. For detached homes, all homes above $750,000 are considered a buyer’s market and all homes above $1.5 million are facing double digit inventories. 32.8% of all attached homes currently on the market are vacant compared to 24.7% of all detached homes. Overall, 28% of all homes on the market in Orange County are vacant. That is an incredible statistic. It is reasonable to conclude that most of these vacant listings are linked to motivated sellers.
In the past four weeks, the number of active listings has dropped by 334 homes and the number of homes placed into escrow within the prior 30 days has dropped by 149 homes. Last year at this time, there were only 7,747 homes on the market, 7,925 fewer than today, and 3,058 homes placed into escrow within the prior 30 days, 850 more than today. The inventory was at a 2.53 month supply, and growing, slower than the 1.13 month mark earlier in the year, but much better than today. Last Fall was marked by a slow decrease in the number of escrows and a slow increase in the active inventory. Demand, the number of homes placed into escrow within the prior 30 days, did not drop to today’s level of 2,208 homes until mid-December.
It is surprising to see the number of sellers that are opting to keep their homes on the market. Also perplexing is that within the last month 4,664 of the 15,672 homes on the market were either placed on the market for the first time or re-listed. That’s 30% of the inventory! The Fall market is here and the Holiday market is right around the corner. The market is not going to get any better for the remainder of the year. Let’s put it into perspective. With 15,672 homes on the market and only 2,208 homes placed into escrow within the prior 30 days, given this most recent snapshot, 13,464 sellers will not successfully sell their homes over the next month. Even if demand remained the same for the rest of the year, and it won’t (it is going to drop), in those three months, 6,624 homes will be placed into escrow, leaving 9,048 unsuccessful sellers behind. AND, that’s if not one more homeowner decides to place their home on the market. It is time for Sellers to really look deep within and ask whether or not they are truly motivated to do whatever it takes to sell their home. Buyers are going to approach the market with caution and will not pay top dollar anymore. Prices are softening and coming off of their recent highs. The market is very complicated. For the best result, approach, and strategy to capitalize on the market, buyers and sellers must rely on the experience of a professional real estate agent.
What can we expect for the rest of the year? Even though Fall does not officially begin until Saturday, the Fall real estate market in Orange County began about a month ago. Demand, the number of homes placed into escrow, has dropped a bit from mid-August (the height of the Summer market). We can probably expect sellers to continue to enter the market (even if it just is not the best time) as demand drops slightly. More and more sellers will have had enough and finally pull their homes off the market. This includes the large number of sellers who stubbornly refused to drop their price to a realistic level. We can expect another record number of homes pulled off the market in October, followed by a record November and a record December. Everybody is aware that the market is currently slow. Everybody is also acutely aware that the holidays are not a time to sell your home unless absolutely necessary. The chance of success during the Holiday market is at the lowest level of the year. The Holiday market begins right after the neighborhood kids dress up as their favorite character and travel door to door in anticipation of yet one more piece of candy. This market is marked by another slight drop in demand and a drop in the active inventory. Demand will not pick up until the middle of January as we ramp up for the Spring market. It will be critical to watch the attached home market over the next few weeks to see if the slowing trend and disparity in the detached market continues.
How should a seller approach the market? It is time to reevaluate the motivation to sell. Given the slower season, either a seller is 100% committed and ready to position themselves for success or they should pull their home off the market immediately. In many areas within Orange County, the increased competition has led to a drop in prices. This means that pricing a home above the last comparable sale or escrow equates to a lack of motivation and will not result in a sale. A seller needs to fasten their seatbelt, pack their patience, sharpen their pencil and seriously approach the market. If a seller is not willing to do what it takes to successfully sell a home in today’s market, they should enjoy the changing seasons and upcoming holidays and pull their home off the market. Fundamental in achieving success, a seller must carefully select the most qualified, experienced agent who will best represent their needs and utilize a sound strategy to tackle this challenging market. Look for an agent that has a tremendous grasp of the local market and exceptional communication skills. Do NOT hire an agent based upon a suggested price. The right professional will enable a seller to best ascertain the market value and proper price in approaching the market. To isolate the asking price, sellers should pay close attention to homes already in escrow and very recent comparable sales, the prior 90 days. Since there are so many active homes, look to actives only to establish where the home will rank compared to the competition and if there are any sellers below the most recent comparable sale or escrow. If there is too much competition, or a market time greater than 8 months, a seller should consider pricing their home below the last comparable sale or escrow. With declining values, a seller risks chasing the market down in price. For example, a seller that should be listed at $750,000 may initially list their home at $800,000. After reducing the home to $750,000 45 days after listing, the home is now worth $720,000, so the home continues to stagnate on the market. If the seller would have listed the home accurately to begin with, even if it was a little less than the last comparable sale or escrow, they would have achieved their objective of selling their home, and for a higher price.
How should a Buyer approach the market? After Wednesday’s announcement that Bernanke and the rest of the Federal Reserve were not going to change the short term rate, it looks as if they are done for the rest of the year. There are so many choices for buyers today. But, buyers are very nervous and are hesitating to make a move and write an offer. There is definitely uncertainty out there right now. Buyers need to remember, they are not only purchasing an investment, they are purchasing a home. If Buyers approach the purchase of their home as a 5 to 10 year investment, they will do just fine. Gone are the days of the quick 1 or 2 year flip for a hefty profit. With the proper perspective, a buyer will do fantastic in the long run. From now through the end of the year, this is the best time to buy a home. During this time of year, the Fall and Holiday market, there are more sellers who are motivated for all the right reasons and there are lot more concessions given with the purchase of a home. Demand will pick up again in the Spring of 2007 and will probably be a mirror image of the Spring of this year. Sellers are extremely realistic today compared to just a few months ago. Sellers are much more realistic today than they were just a few months ago and many really do have to sell. No, sellers are not going to just give their homes away. Most sellers are very in tune with what is going on in the market and have an excellent grasp on the market value. 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: Anaheim, Buena Park, Canyon Areas, Cypress, Fountain Valley, Garden Grove, Lake Forest and Placentia.
The following areas have inventories between eight and ten months: Foothill Ranch, Irvine, Laguna Woods, San Clemente, San Juan, 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, Laguna Beach, Newport Beach, Newport Coast, Villa Park and all ranges above $1.5 million.