Here's the latest one, folks. These are put out every two weeks by my company to help keep abreast of the latest happenings in the local markets. As always, if you have any real estate questions or would like to talk about buying or selling your home, you are welcome to PM me!
Market Time Report: What Happened to the Buyer’s Market?
February 8, 2007
With fewer than expected new sellers, the Spring Market is off to a great start. For the time being, homeowners are not clamoring to place their home on the market in anticipation of a great Spring market. The active inventory climbed by only 88 homes in the prior two weeks to 11,983. At this time last year, the inventory grew by 501 homes in a two week period and 934 in four weeks. Hopefully homeowners understand that the nine year run is behind us and are hesitant to add their “for sale” sign to the neighborhood mix. I am still concerned that this is just a brief pause before too many homeowners place their homes on the market over the next couple of months. For now, it is a great start to 2007. The number of homes placed into escrow within the prior 30 days, demand, has increased by 533 homes to 2,463. We started 2007 with 1,442 homes placed into escrow within the prior 30 days. The market time has decreased from 6.16 months two weeks ago to 4.87 months today. Four weeks ago the market time was at 7.78 months. We started the year in a buyer’s market which has quickly evolved into a SLIGHT seller’s market. For perspective, the market time one year ago today was at 3.24 months. The number of homes placed into escrow within the prior 30 days was only an additional 184 homes or 2,647 escrows. But, the active inventory was at 8,569 homes, 3,414 fewer than today.
The disparity between detached homes and condominiums continued to narrow. There are still a lot of vacant homes on the market, but that too has begun to diminish. For detached homes, the market time decreased from 5.99 months two weeks ago to 4.73 months today. Four week ago, the market time was at 7.27 months, a drastic change in such a short period of time. The number of vacant, detached homes actively on the market dropped from 26.3% four weeks ago to 23.7% today. For condominiums, attached homes, the market time drastically decreased from 8.6 months four weeks ago to 5.08 months today. That is an incredible difference. 33.5% of all active condominiums on the market are vacant today compared to 35.6% four weeks ago.
What can we expect in the coming months? The kickoff of the Super Bowl typically marks the beginning of the Spring market. Sure enough, demand has increased and more homes are being placed into escrow. Homeowner reluctance to enter the seller pool of nearly 12,000 homes has helped the market tremendously. The buzz around the company is that there are still a lot more homeowners getting their homes ready to enter the market; so, I expect the active inventory to start to increase at a more rapid rate within the coming weeks and into March. But, demand will continue to increase as well. In 2006, the active inventory did not reach the 12,000 mark until the beginning of May. Thus far, demand has been almost a mirror image of 2006. With interest rates steady, we can expect demand to continue along that path. We will most likely hit the 16,000 home active listing mark, the height of the 2006 market reached in August. With the slower increase to the inventory, we may not hit that mark until June. The summer market, June through August, will be marked by a slight decrease in demand and an increase in the active inventory. Thus, the market time will grow during the summer months.
How should a seller approach the market? Sellers can breathe a sigh of relief right now because the Orange County market is currently not a buyers market. For homes below $1 million, sellers are experiencing a slight sellers market. But, I must caution sellers and homeowners getting ready to sell. First, buyers, for the most part, are not jumping with zeal to purchase. They are biding their time and taking a very educated approach. Second, if tomorrow a sudden onslaught of homes popped onto the market, the market time would change dramatically in the buyer’s favor. Third, there is still tremendous competition out there. There are 11,983 homes currently on the market and 2,463 homes placed into escrow within the prior 30 days. Based upon current demand, 9,520 sellers will not be successful over the course of the next month. So, sellers should throw out the expectation of a HOT Spring market. Instead, approach the market with patience, the best real estate representation and all of the latest data and information to make informed decisions. Sellers must price their homes according to the MOST RECENT comparable sales and escrows. Like last year, this is NOT the market to test the waters. Sellers must be motivated to do whatever it takes to get their homes sold. That means maintaining their home like a model with all lights on, soft music playing in the background, clean from top to bottom and all excess clutter boxed up and placed into the garage. With so much competition, the home in the best condition often achieves success. Lastly, sellers should take care of any cosmetic fixes that will result in a net increase in what they take away once escrow closes: paint, carpet, broken fixtures, leaking roofs, etc.
How should a Buyer approach the market? Well, it is going to take a month or two before we start hearing about the better real estate market in the media. The media typically relies on sold data for their stories. Unfortunately, sold data is a snapshot of what everybody experienced in the marketplace 45 to 60 days ago. Instead, buyers are going to be experiencing some competition for themselves. If a buyer finds a home that best matches their wish list, then they should write an offer on the home. To delay may result in another buyer entering the picture and ultimately paying more or losing the home altogether. As we move further into the Spring market, buyers can expect competition to pick up even more. Bernanke and the Federal Reserve are most likely not going to touch interest rates anytime soon, so waiting on interest rates to drop really isn’t a current option. Buyers should be careful not to fall into the trap of trying to time the bottom of the market. Most economists and experts cannot properly predict a bottom, so the average consumer should not attempt to prophesize about the bottom either. Instead, buyers should be assured that a home in beautiful, sunny Southern California is historically not only a safe bet, it’s a great long term investment as well.
The following areas have inventories of less than three and a half months: Aliso Viejo, Buena Park, Cypress, Fullerton and Rancho Santa Margarita.
The following areas have inventories between six and ten months: Coto de Caza, Dana Point, Laguna Beach, Laguna Hills, Laguna Niguel, Laguna Woods, Newport Beach, Newport Coast, San Clemente, Santa Ana, Talega and all home ranges between $1 million and $4 million.
The following areas have inventories greater than ten months: Canyon Areas, Dove Canyon, Villa Park and all ranges above $4 million.
Have a fantastic weekend.