Hey guys, sorry this is so late in coming. Been so busy what with the WDW trip and all. Obviously a new Market Time report is due out soon, so keep your eyes peeled!
Here's the report from 10/20:
Market Time Report: LAST CALL!!
October 19, 2006
While searching for bug spray at our local Lowes, the kids jumped with glee at the holiday decorations on display… the distractions of the holidays are just around the corner. Demand has softened a little from the beginning of the Fall market in August to today. We can expect demand to soften a bit more as the holiday season is officially kicked off in November. We can expect an avalanche of homes to be pulled off the market. Thus far, only a few homes have been shed off the market. Within the last four weeks, the active listing inventory has declined by 409 homes to 15,263 today. The height of the inventory, 16,006 homes, was achieved at the end of August. Over the past four weeks, 197 fewer homes were placed into escrow within the prior 30 days (demand). At the end of August, there were 2,357 homes placed into escrow within the prior 30 days compared to 2,011 homes today. The Orange County market time dropped over the past two weeks, from 7.78 months to 7.59 months today. At the end of August, the market time was at 6.79 months. The drop over the past two weeks can be attributed to homes pulled off the market. The active inventory dropped by 219 homes while the number of homes placed into escrow within the prior 30 days remained steady, climbing by only 20 homes. Attached homes are still experiencing a slightly cooler market in comparison to detached homes. The market time for attached homes is at 7.91 months compared to 7.37 months for detached homes. The number of vacant homes on the market remained at 28.3%. 33.6% of all attached homes on the market are vacant compared to 24.8% of all detached homes.
A year ago, the active inventory was slowly growing and had reached a height of 8,266 homes, 6,997 fewer homes than today. Typical for the Fall market, demand was slowly diminishing a year ago as well, dropping to 2,781 homes placed into escrow within the prior 30 days, 770 more escrows than today. A year ago, market time had climbed to 2.97 months. Since the beginning of this year, the inventory has climbed by 8,020 homes and there are only 204 additional homes placed into escrow within the prior 30 days today compared to January 1st.
The various price ranges tell the biggest story. Detached homes below $750,000 are still below a six month inventory, very close to equilibrium. Detached homes priced between $750,000 and $1.5 million are between eight and nine months, a buyers market with a little bit of pressure. For detached homes above $1.5 million, the market is very, very slow with a ton of competition. However, within the past two weeks, those ranges all experienced a significant drop in their respective inventories. For attached homes priced below $500,000, sellers are experiencing a slight buyers market. For all homes above $500,000, the buyers market is a little deeper. However, for those attached homes above $750,000, their respective inventories improved dramatically.
What can we expect for the rest of the year and the beginning of 2007? Last year, demand dropped considerably from the beginning of November through the first few weeks of January this year. The number of homes placed into escrow dropped from 2,750 on November 2, 2005, to 1,573 homes on January 12, 2006. But, we must remember that we were transitioning from the fantastic nine year sellers market to the market we are experiencing today. This time around, we can expect a cyclical drop in demand, and most likely end at around the same level at the beginning of this year, just about 1,600 homes placed into escrow within the prior 30 day period. The drop in demand will be accompanied by a larger drop in the active inventory. We can probably expect the inventory to drop by nearly 2,000 homes. So, we will start the New Year with about an eight month inventory, a buyers market, but not a “fire sale” buyers market. By the end of January, demand will start to pick up, but so will the number of new sellers to enter the market. We are most likely looking at a similar level of demand for 2007, so homeowners should not rush to place their home on the market in preparation for the Spring market. A better barometer will be to watch the local inventory levels for the best time to enter the market.
How should a seller approach the market? The Holiday market is not for the faint of heart. The number one key to success is MOTIVATION. Motivation is not just a desire to sell, it is the willingness to do whatever it takes to get a home sold. The next key to success is PRICE. Accurate pricing is crucial and is the difference between selling and spinning everybody’s wheels. But, keep in mind that an extremely well priced home is NOT a guaranteed sale. PATIENCE is another key to success.The distractions of the holidays are profound. There may be a week where a seller will not even experience a single showing. CONDITION is another key to success. A home that is not presentable, has a lot of clutter, smells of cigarette smoke or other odors will not sell with so much competition. Sellers need to do whatever it takes to have their home looking like a model. With less traffic at new home developments, this would be a perfect time for a seller to sneak a peek at model homes and get ideas. All lights are on, the homes have a wonderful aroma, they are always immaculate, and there’s just the right amount of pictures, knick-knacks, and furniture. Sellers should then pack up unnecessary clutter and out of place furniture and store it. In arriving at price, pay special attention to recent sales, homes currently in escrow and active listings priced below recent comparable sales or escrows. Sellers must price appropriately right out of the gate; DO NOT CHASE THE MARKET DOWN WITH PRICE. For example, a seller with a home priced at $800,000 today that should be at $750,000 may drop their price in 45 to 60 days to the $750,000 level only to find that the local market has decreased by another $30,000. The moral to the story: price it right from day one. Remember, there are 15,263 homes currently on the market and only 2,011 homes placed into escrow within the prior 30 days (demand). Based upon the most recent snapshot of demand, only 2,011 homeowners will place their homes into escrow over the next 30 days and 13,252 homeowners will not be successful.
How should a Buyer approach the market? Based upon all of the choices, it is better to be a buyer than a seller in today’s market. It also looks as if interest rates will remain stable for a while. Bernanke and the Federal Reserve are going to most likely leave the short term rate alone next week. The real quandary for buyers is when to buy. There are two schools of thought. The first is to watch the local market and wait for the most “optimum” time to buy. But, this is not as easy as it may appear on the surface. Even economists have a difficult time forecasting any change. The only guarantee is that everybody from the economist to the consumer will be able to discern AFTER the market picked up where the true “bottom” of the market was located. The risk here is that a buyer may wait on the sidelines for too long and miss out on an opportunity to own their HOME. The other school of thought is to approach the purchase of their home as long term investments. In 5 to 10 years, they will do just fine. Sure the market may come down off of their highs, but real estate has ALWAYS done well in the long run, especially in beautiful Southern California. Keep in mind, many sellers are becoming really motivated and willing to do whatever it takes to get their homes sold. Just as the malls will have sales on December 26th, homes will be on “sale” during the holidays.
The following areas have inventories of less than six months: Aliso Viejo, Cypress, Dove Canyon, Fountain Valley, and Yorba Linda.
The following areas have inventories between nine and ten months: Laguna Beach, Newport Beach and homes between $1 million and $1.5 million.
The following areas have inventories greater than ten months: Canyon Areas, Corona Del Mar, Coto de Caza, Dana Point, Laguna Niguel, Laguna Woods, Newport Beach, Newport Coast, San Clemente, Villa Park and all ranges above $1.5 million.