Orange County Housing Report:  A Successful Approach

November 12, 2024

With so many varying viewpoints and narratives swirling about the housing market, it is best to take a step back from the noise and focus on the latest trends.

Meticulously Arriving at Price

Setting an accurate, initial asking price is one of the most critical steps in a seller securing an interested buyer and achieving a successful outcome of the sale of their home. 

It takes months of preparation and a detailed step-by-step approach for anyone looking to run a marathon for the first time. Most marathon training plans range from 12 to 20 weeks, with the weekly mileage ramping up steadily until peaking at 20+ mile runs. The long, arduous process includes proper nutrition, appropriate footwear, plenty of stretching, good rest, and putting in miles and miles of workouts three to five times per week. The occasional runner who opts to show up to the starting line of their first marathon with very little training and forethought will probably not finish, and the risks of injury are high. 

For the homeowner looking to sell their home, it takes careful preparation and a step-by-step approach, just like the first-time marathoner. Addressing deferred maintenance, from a fresh coat of paint to new light fixtures to new flooring, is essential in enhancing a home’s allure. Sprucing up the curb appeal with topsoil, flowers, new plants, and a fresh coat of paint on the garage and front doors may be an additional necessary step. This attention to detail is often suggested by a seasoned, carefully chosen, professional REALTOR®. The goal is to maximize a seller’s net proceeds with a successful closed sale. The final and most important crucial step is to arrive at the asking price. 

Arriving at the ultimate asking price is not guesswork. There is no need to pad the price for future negotiations, which will ultimately lead to becoming overpriced without success. Additionally, sellers wishing to “test the market” in today’s much slower-paced housing market will languish for quite some time, unable to cross the finish line. The best approach is to spend as much time as is needed to carefully consider all recent pending and closed sales. 

Buyers are savvy. They will scrutinize every detail of a home before climbing in a car to take a closer look at a home: the pictures, virtual tours, condition, upgrades, amenities, style, curb appeal, age, location, and, most importantly, its price. Price is the most critical first impression. Sellers only get one shot at making that first impression. After the initial seven to ten days, most buyers have “seen” the home. Armed with their favorite real estate app, they initially tour the home electronically. They then decide to either schedule a showing appointment or move on and wait for the next home that pops up. The longer a home is on the market, the less fanfare and excitement it receives. Even if a seller reduces the asking price down the road, it is not met with eager buyer anticipation and enthusiasm like it does when it first hits the market. Currently, 35% of today’s active listing inventory has reduced the asking price at least once. 

Yet, the data illustrates that starting overpriced, requiring a reduction to secure success, results in the seller walking away with a smaller net proceeds check. The sales price to last list price ratio is very revealing. This refers to the final list price before becoming a pending sale. These are averages, meaning there are exceptions, but the overall trend is eye-opening. In Orange County, 72% of all closed sales in October did not reduce the asking price. It was 88% in May. The sales price to last list price ratio for these homes was 99.3%, meaning, on average, a home appropriately priced sold close to its initial asking price. A house listed at $1 million sold for $993,000, $7,000 below the asking price. The median days on the market before becoming a pending sale was only 11, indicating that accurate pricing also means considerably less time on the market.

13% of all closed sales reduced their asking prices between 1% and 4%. The sales-to-last list price ratio for these homes was 97.6%; on average, it took 48 days to become a pending sale. A house that reduced its list price to $1 million sold for $976,000, a substantial $17,000 less than homeowners with no reduction. 

For homes that reduced their asking prices by 5% or more, 15% of closed sales in October, the sales-to-last list price ratio was 95.8% after being on the market for 59 days. A home that finally reduced its price to $1 million sold for $958,000, a staggering $35,000 less than homeowners who did not need to reduce the asking price. 

The sales price to original list price ratio reveals how far off many sellers are in considering a home’s actual market value. This is the price of a home when it initially comes on the market before any price reductions. For homes that reduced the asking price between 1% to 4%, the sales price to original list price ratio was 94.8%. For example, a house initially listed at $1,030,000 had to reduce the asking price to $1 million to secure success and ultimately sold for $976,000, an astonishing $54,000 less the original price.  

Homes that reduced the asking price by at least 5% had a sales-to-original list price ratio of 86.3%. A house initially listed at $1,110,000 had to lower the asking price, often more than once, to $1 million to find success, and ultimately sold for $958,000. That is an overwhelming $152,000 less than the original asking price. 

The data is loud and clear. For sellers to net as much as possible at the closing table, it is essential to carefully arrive at a home’s Fair Market Value no matter how much time and effort it takes. It is wiser to spend hours sifting through all the most recent comparable pending and closed sales, carefully considering a home’s condition, upgrades, amenities, and location, than to linger on the market without success, left with a decision to reduce the asking price or throw in the towel and pull the home off the market. In other words, the most successful home-selling approach is meticulously arriving at the initial asking price. 

Active Listings

The inventory will continue to fall until the beginning of the New Year.

The active listing inventory decreased by 124 homes in the past two weeks, down 3%, and now sits at 3,516, its lowest level since mid-August and its largest drop of the year. The inventory peak in Orange County for 2024 occurred four weeks ago at 3,694, 48% higher than last year’s November 9th peak. Expect the inventory to continue to fall for the remainder of the year. It will fall faster starting next week, the start of the Holiday Market, just a week before Thanksgiving. The New Year will start similar to 2023, with around 2,400 homes. The three-year average start to the year before COVID (2017 to 2019) was 4,550.

Last year, the inventory was 2,496 homes, 29% lower, or 1,020 fewer. The 3-year average before COVID (2017 through 2019) was 5,822, an additional 2,306 homes, or 66% more. 

Homeowners continue to “hunker down” in their homes, unwilling to move due to their current underlying, locked-in, low fixed-rate mortgage. It became a crisis once rates skyrocketed higher in 2022. For October, 2,377 new sellers entered the market in Orange County, 626 fewer than the 3-year average before COVID (2017 to 2019), 21% less. Last October, there were 1,891 new sellers, 20% fewer than this year. More sellers are opting to sell compared to the previous year. 

Demand

Demand plunged by 7% in the past couple of weeks. 

Demand, a snapshot of the number of new pending sales over the prior month, plunged from 1,572 to 1,458 in the past couple of weeks, down 235 pending sales, or 7%. This reflects rates climbing from 6.1% in mid-September to 7.13% on November 6th, up more than 1%. This rise was due to economic readings that were stronger than expected, along with investors’ election positioning. The higher rate environment has eroded demand due to affordability issues. Rates were stuck above 7% again for 9 days. They have since retreated, falling below the 7% threshold, and currently sit at 6.92%. Expect demand to continue to fall through the end of the year. The speed of the drop totally depends upon what happens to mortgage rates from here. 

As the Federal Reserve has indicated, it is essential to watch all economic releases for signs of slowing. These releases can potentially move mortgage rates higher or lower, depending on how they compare to market expectations. This week will include two different inflation prints, the Consumer Price Index (CPI) and the Producer Price Index (PPI). In addition, retail sales will be released on Friday.

Last year, demand was 1,223, down 235 pending sales or 16%. The 3-year average before COVID (2017 to 2019) was 2,139 pending sales, 47% more than today, or an additional 681.

With demand falling faster than supply, the Expected Market Time (the number of days it takes to sell all Orange County listings at the current buying pace) increased from 69 to 72 days in the past couple of weeks. Last year, it was 61 days, faster than today. The 3-year average before COVID was 85 days, slower than today.

Luxury Market

The luxury market slowed in the past couple of weeks.  

In the past couple of weeks, the luxury inventory of homes priced above $2 million (the top 10% of the Orange County housing market) decreased from 1,177 to 1,138 homes, down 39 or 3%. Luxury demand decreased by 16 pending sales, down 7%, and now sits at 212, its lowest reading since February. With demand dropping faster than supply, the Expected Market Time for luxury homes priced above $2 million increased from 155 to 161 days, its highest reading since the first week of January. The luxury market is sluggish and necessitates a careful, methodical approach to pricing. 

Year over year, the active luxury inventory is up by 319 homes or 39%, and luxury demand is up by 50 pending sales or 31%. Last year’s Expected Market Time was 152 days, similar to today.

In the past two weeks, the expected market time for homes priced between $2 million and $4 million increased from 113 to 123 days. For homes priced between $4 million and $6 million, the Expected Market Time decreased from 240 to 217 days. For homes priced above $6 million, the Expected Market Time decreased from 346 to 322 days. At 346 days, a seller would be looking at placing their home into escrow around September 2025.  

Orange County Housing Summary

• The active listing inventory in the past couple of weeks decreased by 124 homes, down 3%, and now sits at 3,516, its lowest level since mid-August and its largest drop of the year. Orange County reached its annual peak at 3,694 homes four weeks ago. In October, 21% fewer homes came on the market compared to the 3-year average before COVID (2017 to 2019), 743 less. Yet, 486 more sellers came on the market this September compared to September 2023. Last year, there were 2,496 homes on the market, 1,020 fewer homes, or 29% less. The 3-year average before COVID (2017 to 2019) was 5,822, or 66% extra.

• Demand, the number of pending sales over the prior month, decreased by 114 pending sales in the past two weeks, down 7%, and now totals 1,458. Last year, there were 1,223 pending sales, 16% fewer. The 3-year average before COVID (2017 to 2019) was 2,139, or 47% more.

• With demand falling faster than supply, the Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, increased from 69 to 72 days in the past couple of weeks. The 3-year average before COVID (2017 to 2019) was 85 days, slower than today.

• In the past two weeks, the Expected Market Time for homes priced below $750,000 increased from 52 to 54 days. This range represents 17% of the active inventory and 23% of demand. 

• The Expected Market Time for homes priced between $750,000 and $1 million increased from 46 to 53 days. This range represents 15% of the active inventory and 20% of demand.

• The Expected Market Time for homes priced between $1 million and $1.25 million decreased from 52 to 50 days. This range represents 11% of the active inventory and 15% of demand.

• The Expected Market Time for homes priced between $1.25 million and $1.5 million increased from 57 to 62 days. This range represents 11% of the active inventory and 13% of demand.

• The Expected Market Time for homes priced between $1.5 million and $2 million decreased from 76 to 73 days. This range represents 14% of the active inventory and 14% of demand.

• In the past two weeks, the expected market time for homes priced between $2 million and $4 million increased from 113 to 123 days. For homes priced between $4 million and $6 million, the Expected Market Time decreased from 240 to 217 days. For homes priced above $6 million, the Expected Market Time decreased from 346 to 322 days. 

• The luxury end, all homes above $2 million, account for 32% of the inventory and 15% of demand.

• Distressed homes, both short sales and foreclosures combined, comprised only 0.3% of all listings and 0.1% of demand. Only seven foreclosures and two short sales are available today in Orange County, with nine total distressed homes on the active market, up two from two weeks ago. Last year, six distressed homes were on the market, similar to today.

• There were 1,622 closed residential resales in September, down 2% compared to September 2023’s 1,647 and down 14% from August 2024. The sales-to-list price ratio was 98.9% for Orange County. Foreclosures accounted for 0.1% of all closed sales, and there were no short sales. That means that 99.9% of all sales were good ol’ fashioned sellers with equity.

Orange County Housing Report:  A Jump in Demand 

September 30, 2024

After topping 7.5% in April, mortgage rates have declined to the low sixes and have remained there with duration, paving the way for an uncharacteristic late September rise in demand.

Lower Rates Impact Demand

Demand jumped by 10% in the past couple of weeks.

Everyone is always looking for a good deal. With Thanksgiving around the corner, many holiday shoppers will look to Black Friday and Cyber Monday for deep discount savings. Inevitably, in the early morning hours on the day after Thanksgiving, a long line of eager customers will arrive hours before stores open their doors. With the cost of living increases since the pandemic, consumers are looking for huge savings, especially on high-ticket items.

Mortgage rates have been stubbornly high this year. For most of 2024, they have remained above 7%, even topping 7.5% several times in April. They have been falling ever since, dropping below 7% in July and below 6.5% at the end of August. Now that interest rates have been dancing in the low sixes for several weeks, it is as if the entire housing industry suddenly went on sale with deep discounts. Buyers who had paused their hunt for a home are coming off the sidelines and reviving their search. Just as consumers look for deals on Black Friday and Cyber Monday, buyers are looking to cash in on favorable rates and significant improvements in affordability. 

Ever since the Federal Reserve raised the short-term Federal Funds rate substantially a couple of years ago, rates climbed during the Autumn Market and hit their annual heights, reaching 7.37% in 2022 and eclipsing 8% in 2023. Affordability eroded, and demand slowed. But not this year. Rates recently dropped to their lowest level since February 2023, a considerable improvement from 7.5% just five months ago. They have persisted at these lower levels for several weeks now. This has resulted in a jump in demand and a noticeable drop in the Expected Market Time. 

Mortgage rates are currently at 6.21%. For a $1 million home purchase with 20% down, the monthly payment would be $4,905. That is much better than last year’s 7.61% rate and monthly payment of $5,654. Today’s payment is $749 per month lower, or nearly a $9,000 yearly savings. It is a $252 monthly savings, or $3,024 annually, compared to two years ago when rates were at 6.69% and climbing. 

With a significant improvement in home affordability, buyer demand (a snapshot of the number of new pending sales over the prior month) jumped from 1,413 two weeks ago to 1,554 days today, up 141 pending sales or 10%. It was the first late September rise in demand since 2012. Last year, during the same two-week period, demand dropped by 4%, shedding 60 pending sales. Two years ago, it plunged by 158 or 9%. The 3-year average before COVID (2017 to 2019), when housing was predictable year in and year out, was a drop in demand by 4%. 

Combine the surge in demand with a slight drop in the inventory, down 1% in the past couple of weeks, and the market is uncharacteristically heating up amid the Autumn Market.  The Expected Market Time (the number of days it takes to sell all Orange County listings at the current buying pace) sank from 78 to 71 days in the past couple of weeks, its largest drop at this time of year since tracking began twenty years ago.

Demand has been subdued, bouncing along a shallow bottom since October 2022. It has not fluctuated much and has remained flat, at bare-bone, inherent levels. There are always buyers in every market regardless of where rates climb. Yet, more buyers enter the market as mortgage rates improve and persist at lower levels. The lower rates fall, the more affordability recuperates, resulting in considerable improvements in demand. Currently, mortgage rates are knocking on the door of falling into the fives for the first time since August 2022. 

This unconventional shift in demand and subsequent drop in the Expected Market Time is a "green shoot" for the Orange County housing market, a positive data point illustrating a new path to an eventual recovery in the lack of home sales. Due to very low demand, closed sales have also been down substantially. Not many homes have exchanged hands. 

There is pressure on mortgage rates to fall further with a cooling economy and a slowing job market. Expect demand to continue to push higher in year-over-year comparisons and for closed sales to rise as well. 

Active Listings

The active inventory may have reached a peak two weeks ago.

The active listing inventory decreased by 29 homes in the past two weeks, down 1%, and now sits at 3,666, its first drop since March. This drop may be the beginning of a steady fall in the inventory for the remainder of the year, indicating that a peak was reached a couple of weeks ago in mid-September. Nonetheless, the peak is late, typically occurring between July and August. Last year’s peak occurred in November, even later. The earlier the peak, the further the inventory falls for the remainder of the year. Orange County housing peaked because of the sharp rise in demand, which ultimately chipped away at the inventory. During the Autumn Market, fewer homes are placed on the market compared to the spring and summer months. The number of sellers coming on the market declines further each month, with the fewest in December followed by the second-fewest in November. The slow, steadfast fall during the autumn changes to a rapid decline during the holidays, from Thanksgiving to the New Year. The inventory drops to its lowest level by year’s end.  

Last year, the inventory was 2,340 homes, 36% lower, or 1,326 fewer. The 3-year average before COVID (2017 through 2019) was 6,400, an additional 2,734 homes, or 75% more. This difference has been diminishing. 

Homeowners continue to “hunker down” in their homes, unwilling to move due to their current underlying, locked-in, low fixed-rate mortgage. It became a crisis once rates skyrocketed higher in 2022. For August, 2,454 new sellers entered the market in Orange County, 1,083 fewer than the 3-year average before COVID (2017 to 2019), 31% less. Last August, there were 2,154 new sellers, 12% fewer than this year. More sellers are opting to sell compared to the previous year. 

Demand

Demand jumped by 10% in the past couple of weeks. 

Demand, a snapshot of the number of new pending sales over the prior month, jumped from 1,413 to 1,554 in the past couple of weeks, up 141 pending sales, or 10%, its largest increase since February and its highest level since July. A substantial rise at this time of the year is unprecedented and is a direct result of a significant increase in affordability. Even though mortgage rates already had the Federal Reserve half-of-a-percent cut in the short-term rate baked into long-term mortgage rates before their announcement a couple of weeks ago, many buyers waited for the news before writing an offer to purchase. With the Federal Reserve initiating its rate-cut cycle, many buyers have decided to cash in on the improving mortgage rate environment. As long as mortgage rates hover around today’s current levels or drop even lower, expect demand to continue to improve and outpace last year’s demand levels. 

As the Federal Reserve has indicated, watching all economic releases for signs of slowing is essential. These releases can potentially move mortgage rates higher or lower, depending on how they stack up compared to market expectations. This week is jobs week, which includes the number of job openings, wages, the number of jobs created or lost, and unemployment. This week will be the most consequential week for rates and will set the tone for the remainder of October. 

Last year, demand was 1,414, down 140 pending sales or 9%. The 3-year average before COVID (2017 to 2019) was 2,262 pending sales, 46% more than today, or an additional 708.

With supply falling and demand surging higher, the Expected Market Time (the number of days it takes to sell all Orange County listings at the current buying pace) decreased from 78 to 71 days in the past couple of weeks. Last year, it was 50 days, faster than today. The 3-year average before COVID was 86 days, slower than today.

Luxury End

The luxury market improved slightly in the past couple of weeks.  

In the past couple of weeks, the luxury inventory of homes priced above $2 million (the top 10% of the Orange County housing market) increased from 1,198 to 1,207 homes, up nine or 1%. Luxury demand increased by eight pending sales, up 3%, and now sits at 247. With demand rising faster than supply, the Expected Market Time for luxury homes priced above $2 million decreased from 150 to 147 days, its strongest reading since the start of July. Nonetheless, at 147 days, the luxury market is considerably slower than the lower ranges. For homes priced below $2 million, the Expected Market Time is 56 days. 

Year over year, the active luxury inventory is up by 418 homes or 53%, and luxury demand is up by 56 pending sales or 29%. Last year’s Expected Market Time was 124 days, a bit faster than today.

In the past two weeks, the expected market time for homes priced between $2 million and $4 million decreased from 111 to 108 days. For homes priced between $4 million and $6 million, the Expected Market Time decreased from 257 to 199 days. For homes priced above $6 million, the Expected Market Time increased from 295 to 391 days. At 391 days, a seller would be looking at placing their home into escrow around October 2025.  

Orange County Housing Summary

• The active listing inventory in the past couple of weeks decreased by 29 homes, down 1%, and now sits at 3,666, its first drop since March and a strong indicator that a peak was reached a couple of weeks ago. In August, 31% fewer homes came on the market compared to the 3-year average before COVID (2017 to 2019), 1,083 less. Yet, 300 more sellers came on the market this August compared to August 2023. Last year, there were 2,340 homes on the market, 1,326 fewer homes, or 36% less. The 3-year average before COVID (2017 to 2019) was 6,400, or 75% extra.

• Demand, the number of pending sales over the prior month, jumped by 141 pending sales in the past two weeks, up 10%, and now totals 1,554, its largest increase since the start of February and its highest level since the beginning of July. Last year, there were 1,414 pending sales, 9% fewer. The 3-year average before COVID (2017 to 2019) was 2,262, or 46% more.

• With supply falling slightly and demand surging higher, the Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, decreased from 78 to 71 days in the past couple of weeks, its most significant improvement since the start of February. It was 50 days last year, faster than today. The 3-year average before COVID (2017 to 2019) was 86 days, slower than today.

• In the past two weeks, the Expected Market Time for homes priced below $750,000 decreased from 50 to 49 days. This range represents 16% of the active inventory and 24% of demand. 

• The Expected Market Time for homes priced between $750,000 and $1 million decreased from 54 to 47 days. This range represents 14% of the active inventory and 21% of demand.

• The Expected Market Time for homes priced between $1 million and $1.25 million decreased from 62 to 50 days. This range represents 11% of the active inventory and 16% of demand.

• The Expected Market Time for homes priced between $1.25 million and $1.5 million decreased from 75 to 66 days. This range represents 11% of the active inventory and 12% of demand.

• The Expected Market Time for homes priced between $1.5 million and $2 million decreased from 103 to 84 days. This range represents 15% of the active inventory and 12% of demand.

• In the past two weeks, the expected market time for homes priced between $2 million and $4 million decreased from 111 to 108 days. For homes priced between $4 million and $6 million, the Expected Market Time decreased from 257 to 199 days. For homes priced above $6 million, the Expected Market Time increased from 295 to 391 days. 

• The luxury end, all homes above $2 million, account for 33% of the inventory and 15% of demand.

• Distressed homes, both short sales and foreclosures combined, comprised only 0.1% of all listings and 0.1% of demand. Only four foreclosures and one short sale are available today in Orange County, with five total distressed homes on the active market, down two from two weeks ago. Last year, six distressed homes were on the market, similar to today.

• There were 1,877 closed residential resales in August, down 5% compared to July 2023’s 1,979 and down 8% from July 2024. The sales-to-list price ratio was 99.0% for Orange County. Foreclosures accounted for 0.1% of all closed sales, and there were no short sales. That means that 99.9% of all sales were good ol’ fashioned sellers with equity.

Orange County Housing Report: Go for Gold – Don’t Wait

August 5, 2024

Mortgage rates have plunged from 7.5% in April to 6.34% today, opening up a window of opportunity for buyers who should not wait.

A Window of Opportunity

Since rates have dropped in anticipation of future Federal Reserve rate cuts, now is the ideal time, and waiting will prove to be the incorrect strategy.

Olympic gold medal winners perfect their game plans and execute precise timing and strategy to succeed. On the track, many runners wait too long for their final push and cross the finish line out of medal contention. The commentators exclaim that they “should have gone sooner.” The athletes are left second-guessing themselves, wishing they had not waited. 

Many buyers have been sitting on the sidelines, waiting for rates to come down. Now that rates have plummeted from 7.5% in April to 6.34% today, according to Mortgage News Daily, many buyers wonder if they should pull the trigger and purchase now or wait for rates to fall further. Sitting on the fence and waiting will prove to be the incorrect strategy, leaving many to wish that they had bought sooner.

Long-term, 30-year mortgage rates move ahead of the Federal Reserve Rate cuts. The Federal Reserve (Fed) has not cut rates once since the historical increases from 2022 through 2023, yet mortgage rates have moved all over the place, even eclipsing 8% last October. The movement is based on where investors believe the direction that the Fed’s short-term Federal Funds rate policy will move. 

With inflation continuing to ease, the job market cooling, and unemployment rising, it is becoming increasingly clear that the FED is too restrictive, and they will need to cut rates when they meet in mid-September. As a result, in less than two weeks, mortgage rates have plunged from 6.91% to 6.34% today. September’s rate cut, currently projected to be a 0.5% snip by Wall Street, is already baked into today’s mortgage rates. When they do trim the Federal Funds rate in September, do NOT expect mortgage rates to drop another 0.5%. This is where buyers sitting on the sidelines are mistaken. They hear that the Fed will cut, but the headlines and news refer to the short-term Federal Funds rate, not long-term mortgage rates. When they do cut, expect credit card, automobile, and equity lines of credit rates to all drop, which are all tied to the Federal Funds rate, but NOT long-term rates utilized in purchasing homes. 

Can long-term rates go lower? Yes, they can. But today's mortgage rates are already factoring in future cuts totaling 1.25%. If the economy cools even more, which the trends in the data currently support, expect rates to fall further next year. Yet, with the recent plunge, affordability has improved dramatically. More potential buyers qualify. Buyers already in the marketplace have witnessed their purchasing power increase; they can now afford a much higher-priced home. With improving affordability, demand will rise just as the inventory is about to reach its summer peak and begin to fall. As demand increases and supply falls, market times will drop. There will be more buyer competition, and values will rise again from here. 

For a buyer looking to purchase a $1 million home today with 20% down and a 6.5% rate, the principal and interest payment would be $5,057. Due to a further constrained inventory and increased demand, values are anticipated to rise at least 5%. That $1 million home would appreciate to $1,050,00. Even if rates drop to 6%, the monthly payment would be $5,036, nearly identical to today’s payment at 6.5%. It is only $21 less per month or $252 annually. In waiting, the buyer loses out on $50,000 appreciation and is looking at a $10,000 additional down payment. 

What if 30-year rates drop to 5.5%? Isn’t it better to wait until that occurs? There is a rule of thumb when it comes to refinancing: when mortgage rates drop by 1% or more from the current locked-in, fixed rate, then it is an excellent time to refinance. The buyer that purchases a $1 million home today could refinance next year if rates fall to 5.5%. The monthly payment would drop from $5,057 to $4,542, a savings of $515 every month or $6,180 annually. 

For the buyer who waits to purchase until next year, the $1 million home is anticipated to appreciate at least 5% to $1,050,000. The monthly payment would be $4,769. That is $227 per month higher or $2,724 annually compared to purchasing now and refinancing once rates drop to 5.5%. In addition, waiting requires an extra $10,000 in down payment, and the buyer once again misses out on $50,000 in appreciation. 

Today is already one of the best times to purchase in the past couple of years. The Orange County inventory is at 3,426, up 28% or 951 homes compared to last year. There are way more choices in every price range. Demand, a snapshot of the number of new pending sales over the prior month, is at 1,530, down 3% compared to last year, 50 fewer pending sales. With much higher inventory levels and demand on par with the previous year, the Expected Market Time, the number of days it takes to sell all Orange County listings at the current buying pace, is 67 days, much slower than last year’s 47-day speed. As rates remain at these low levels with duration, expect the inventory to fall, demand to rise, and the Expected Market Time to drop for the remainder of the year. 

The most favorable condition for buyers is NOW. Just like so many Olympic athletes crossing the finish line first, it is time for buyers to make that gold medal decision and pull the trigger now. Do not wait. 

Active Listings

The active inventory increased by 2% in the past couple of weeks.

The active listing inventory increased by 55 homes in the past two weeks, up 2%, and now sits at 3,426, its highest level since November 2022. With rates dropping and demand anticipated to accelerate in the coming weeks, expect the Orange County inventory to reach its annual peak at its typical time between July and August. As the inventory is reaching its peak, the inventory climbs at a much slower pace. After reaching its peak, expect the inventory to fall slowly. As demand accelerates with easing rates, the inventory has a high likelihood of dropping at a faster pace than usual. Combine the Autumn Market drop with the end-of-the-year Holiday Market plunge, and 2024 inventory levels could reach very anemic levels upon ushering in a New Year.

Last year, the inventory was 2,475 homes,28%lower, or 951 fewer. The 3-year average before COVID (2017 through 2019) was 6,753, an additional 3,327 homes, or 97% more, nearly double the current level. This difference illustrates that the inventory crisis is still impacting Orange County housing. 

Homeowners continue to “hunker down” in their homes, unwilling to move due to their current underlying, locked-in, low fixed-rate mortgage. It became a crisis once rates skyrocketed higher in 2022. For July, 2,711 new sellers entered the market in Orange County, 996 fewer than the 3-year average before COVID (2017 to 2019), 27% less. Last July, there were 2,270 new sellers, 16% fewer than this year. More sellers are opting to sell compared to last year. 

Demand
Demand remained unchanged in the past couple of weeks. 

Demand, a snapshot of the number of new pending sales over the prior month, decreased from 1,531 to 1,530 in the past couple of weeks, down one pending sale, nearly unchanged. Demand has remained at incredibly anemic, inherent levels since October 2022. There are always buyers willing to purchase. With the high mortgage rate environment, rates stuck around 7% or higher for the better part of a year now, very few buyers have been willing to participate. That is why 2024 demand levels have remained very close to last year’s. Yet, since the end of July, rates have dropped from 6.91% to a low of 6.34% today, according to Mortgage News Daily. That is the lowest rate in 16 months since April 2023. A year ago, rates rose from 7% at the end of July to 8% in October. This year, mortgage rates are improving affordability and will ultimately drive more demand. Expect demand to rise in the coming weeks, instigated by more buyers who now qualify and an increase in buyers’ purchasing power. Buyers who were already looking to purchase a home can suddenly purchase a higher priced home with no change in payment. Expect more buyer competition chasing a falling supply for the remainder of the year. 

As the Federal Reserve has indicated, watching all economic releases for signs of slowing is essential. These releases can potentially move mortgage rates higher or lower, depending on how they stack up compared to market expectations. There are not too many economic releases until next week, when the Consumer Price Index will be released on Wednesday, and U.S. retail sales will be released on Thursday. Both have a high potential to move mortgage rates. 

Last year, demand was 1,580, 3% more than today, or 50 additional pending sales. The 3-year average before COVID (2017 to 2019) was 2,630 pending sales, 72% more than today, or an additional 1,100.

With supply rising and demand unchanged, the Expected Market Time (the number of days it takes to sell all Orange County listings at the current buying pace) increased from 66 to 67 days in the past couple of weeks. Last year, it was 47 days, faster than today. The 3-year average before COVID was 78 days, a bit slower than today.

Luxury End

The luxury market has not changed much in the past couple of weeks. 

In the past couple of weeks, the luxury inventory of homes priced above $2 million increased from 1,188 to 1,206 homes, up 18 or 2%, the highest level since October 2019. Luxury demand increased by six pending sales, up 3%, and now sits at 232. With demand rising slightly faster than demand, the Expected Market Time for luxury homes priced above $2 million decreased from 158 to 156 days. The luxury market feels exceptionally sluggish compared to the lower ranges. The higher the price, the longer it takes to secure success. Typically, financial market volatility impacts the velocity of luxury. If Wall Street does not recover quickly, expect the luxury market to slow further. 

Year over year, the active luxury inventory is up by 413 homes or 52%, and luxury demand is up by 16 pending sales or 7%. Last year’s Expected Market Time was 110 days, much faster than today.

In the past two weeks, the expected market time for homes priced between $2 million and $4 million decreased from 116 to 114 days. For homes priced between $4 million and $6 million, the Expected Market Time increased from 156 to 170 days. For homes priced above $6 million, the Expected Market Time increased from 630 to 656 days. At 656 days, a seller would be looking at placing their home into escrow around May 2026.

Orange County Housing Summary

· The active listing inventory in the past couple of weeks increased by 55 homes, up 2%, and now sits at 3,426, its highest level since November 2022. In July, 27% fewer homes came on the market compared to the 3-year average before COVID (2017 to 2019), 996 less. Yet, 441 more sellers came on the market this July compared to July 2023. Last year, there were 2,475 homes on the market, 951 fewer homes, or 28% less. The 3-year average before COVID (2017 to 2019) was 6,753, or 97% extra, nearly double.

· Demand, the number of pending sales over the prior month, decreased by one pending sale in the past two-week, nearly unchanged, and now totals 1,530, still its lowest level since February. Last year, there were 1,580 pending sales, 3% more. The 3-year average before COVID (2017 to 2019) was 2,630, or 72% more.

· With supply climbing and demand unchanged, the Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, increased from 66 to 67 days in the past couple of weeks. It was 47 days last year, faster than today. The 3-year average before COVID (2017 to 2019) was 78 days, a bit slower than today.

· In the past two weeks, the Expected Market Time for homes priced below $750,000 decreased from 47 to 45 days. This range represents 15% of the active inventory and 23% of demand.

· The Expected Market Time for homes priced between $750,000 and $1 million decreased from 46 to 42 days. This range represents 13% of the active inventory and 22% of demand.

· The Expected Market Time for homes priced between $1 million and $1.25 million increased from 46 to 49 days. This range represents 11% of the active inventory and 15% of demand.

· The Expected Market Time for homes priced between $1.25 million and $1.5 million increased from 52 to 57 days. This range represents 10% of the active inventory and 12% of demand.

· The Expected Market Time for homes priced between $1.5 million and $2 million increased from 65 to 76 days. This range represents 15% of the active inventory and 13% of demand.

· In the past two weeks, the expected market time for homes priced between $2 million and $4 million decreased from 116 to 114 days. For homes priced between $4 million and $6 million, the Expected Market Time increased from 156 to 170 days. For homes priced above $6 million, the Expected Market Time increased from 630 to 656 days.

· The luxury end, all homes above $2 million, account for 36% of the inventory and 15% of demand.

· Distressed homes, both short sales and foreclosures combined, comprised only 0.3% of all listings and 0.3% of demand. Only six foreclosures and three short sales are available today in Orange County, with nine total distressed homes on the active market, up one from two weeks ago. Last year, seven distressed homes were on the market, similar to today.

· There were 1,809 closed residential resales in June, down 9% compared to June 2023’s 1,993 and down 15% from May 2024. The sales-to-list price ratio was 100.3% for Orange County. Short sales accounted for 0.1% of all closed sales and no foreclosures. That means that 99.89% of all sales were good ol’ fashioned sellers with equity.

Orange County Housing Report: July 8, 2024

Housing is in the middle of the Summer Market when seasonally, the inventory rises, demand slowly declines, and market times grow longer from week to week. 

The Summer Housing Market

Demand peaked at the beginning of May, and the inventory has yet to peak, so the market continues to slow.

Summer is here with all of its many distractions. It is time to pack the suitcases and take a much-needed family vacation. An easy answer to the blistering heat is to head to the pool, lake, or beach and splash around until the sun goes down. Parents are busy Ubering their kids to summer school, camps, and movies. Many additional extracurricular activities are on the calendar, from museums to amusement parks to day hikes. Summertime is chock full of interruptions to everyday daily life. It is no wonder that the housing market is evolving and downshifting a bit from the heated pace of spring.

Cyclically, in nearly every market across the country, including Orange County, spring is the hottest time of the year for housing. Buyers transact year-round, but their preference, especially families, is to pull the trigger on isolating a home during the spring that ultimately closes in the summer. That is when the kids are out of school, the perfect time for a household move. Even if it requires a school change, the best time is when they are transitioning between grade levels. Throw into the mix the list of summer activities, including travel, and the goal of purchasing a home often takes a back seat to all the fun. As a result, demand drops from its Spring Market peak. 

In Orange County, demand, a snapshot of the number of new pending sales over the prior month, peaked at the start of May at 1,759 homes. Since then, it has dropped by 8% or 135 pending sales and sits at 1,624 today. It was at 1,560 last year, 4% less or 64 fewer pending sales. Compared to normal markets before COVID, the 3-year average between 2017 and 2019 was 2,582, 59% higher or 958 additional pending sales. 

Many homeowners mistake summer as the best time of the year to sell a home and decide to place their homes on the market from June through August. Yet, since demand typically peaks during the spring, and there is still an elevated number of homes that come on the market during the summer, the extra homes accumulate until a peak is reached between mid-July and the end of August. Back in May, when demand peaked, there were 2,470 homes on the market. Since then, the inventory has grown by 23%, adding 582 homes, and sits at 3,052 today. The inventory has yet to find a peak. Last year, with rising mortgage rates that reached 8% in October, a late peak was reached in November at 2,496 homes, a phenomenon that only occurs when rates jump during the second half of a year. Last year, there were 2,276 homes on the market, 776 fewer FOR-SALE signs, or 25% less. Yet, even with this year’s higher inventory levels, it is still far lower than the 3-year pre-COVID average of 6,708, an astonishing 55% lower or 3,656 fewer signs. 

Since demand found its peak during the spring and the inventory has yet to reach its peak, the market has slowed considerably in the past couple of months. In fact, since May, the Expected Market Time, the time between coming on the market and becoming a pending sale, has grown from 42 days to 56 days today. While housing may be faster compared to the 3-year pre-COVID average of 78 days, at 56 days, most homes are not snapped up instantly. Sellers expecting a hot summer housing market like this year and last year’s early Spring Markets may be unaware that the market has slowed considerably. Overzealous sellers who stretch their asking price without carefully considering the current market dynamics and the need to meticulously pour over all recent pending and closed sales activity to arrive at a home’s true Fair Market Value will not find success until they adjust their expectations. That is precisely why 29% of the active inventory has reduced the asking price at least once. The number of price reductions has also been growing from week to week. 

The housing market has been downshifting. There are more open houses. As long as they are priced properly, only homes that are in tip-top shape with all the bells and whistles and are genuinely turnkey, ready to be moved into with very little work, fly off the market. For everyone else, the Summer Market feels a bit more subdued. 

Active Listings

The active inventory remained unchanged in the past couple of weeks.

The active listing inventory increased by only four homes in the past two weeks, nearly unchanged, and now sits at 3,052, its highest level since December 2022. Could this be the inventory peak for Orange County? Only time will tell. A peak is typically reached between mid-July and the end of August when the kids go back to school. The inventory has grown at a faster pace this year compared to 2023 because more homeowners are opting to come on the market. With demand readings very close to last year, the extra homeowners are accumulating and building a much-needed inventory of available homes in a market starved for more choices. While from January through July, there were 36% fewer homes placed on the market compared to the 3-year pre-COVID average (2017 to 2019), or 7,888 missing FOR-SALE signs, there are 1,906 more signs this year compared to 2023. Many homeowners choose to “hunker down” in their homes, unwilling to move due to their underlying, locked-in, low fixed-rate mortgage. 

Last year, the inventory was 2,276 homes, 25% lower, or 776 fewer. The 3-year average before COVID (2017 through 2019) was 6,708, an additional 3,656 homes, or 120% more, more than double the current level. 

Homeowners continue to “hunker down” in their homes, a phenomenon that became a crisis once rates skyrocketed higher in 2022. For June, 2,538 new sellers entered the market in Orange County, 1,323 fewer than the 3-year average before COVID (2017 to 2019), 34% less. Last June, there were 2,284 new sellers, 10% fewer than this year. More sellers are opting to sell compared to the previous year. 

Demand
Demand rose by nine pending sales in the past couple of weeks. 

Demand, a snapshot of the number of new pending sales over the prior month, increased from 1,615 to 1,624 in the past couple of weeks, up nine pending sales, or 1%. In Orange County, demand has closely resembled last year’s levels and will continue to as long as mortgage rates remain persistently above 7%. Since the Federal Reserve declared war against inflation in 2022, rates have remained elevated. They have committed to keeping rates at these higher levels until inflation adequately retreats and all threats of further escalation diminish. Inflation readings are cooperating and continuing their path down after a bit of a hiccup earlier this year, and many economic readings are showing the beginning of an economic slowdown in the U.S. Both of these factors will lead to an eventual cut in interest rates. Demand readings will rise with a more favorable mortgage rate environment when this occurs. 

As the Federal Reserve has indicated, it is essential to watch all economic releases for signs of slowing. These releases have the potential to move mortgage rates higher or lower, and it all depends upon how they stack up compared to market expectations. Last week’s job market numbers came in at expectations for hiring, while the unemployment rate climbed to 4.1%, its highest reading since November 2021. The Consumer Price Index (CPI), a closely watched inflation gauge, will be released on Thursday, a crucial day for mortgage rates. 

Last year, demand was 1,560, 4% less than today, or 64 fewer pending sales. The 3-year average before COVID (2017 to 2019) was 2,582 pending sales, 59% more than today, or an additional 958.

With supply unchanged and demand rising slightly, the Expected Market Time (the number of days it takes to sell all Orange County listings at the current buying pace) decreased from 57 to 56 days in the past couple of weeks. Last year, it was 44 days, faster than today. The 3-year average before COVID was 78 days, slower than today.

Luxury End

The luxury market improved slightly in the past couple of weeks. 

In the past couple of weeks, the luxury inventory of homes priced above $2 million increased from 1,119 to 1,130 homes, up 11 or 1%, the highest level since November 2019. Luxury demand increased by eight pending sales, down 4%, and now sits at 230. With demand rising faster than supply, the Expected Market Time for luxury homes priced above $2 million decreased from 151 to 147 days. Nonetheless, at 147 days, the luxury market is a long way from instant, which requires a careful approach to pricing with the knowledge that it may take much longer to secure success.

Year over year, the active luxury inventory is up by 356 homes or 46%, and luxury demand is up by 43 pending sales or 23%. Last year’s Expected Market Time was 124 days, faster than today.

In the past two weeks, the expected market time for homes priced between $2 million and $4 million increased from 104 to 109 days. For homes priced between $4 million and $6 million, the Expected Market Time decreased from 197 to 148 days. For homes priced above $6 million, the Expected Market Time decreased from 715 to 557 days. At 557 days, a seller would be looking at placing their home into escrow around January 2026.

Orange County Housing Summary

· The active listing inventory in the past couple of weeks increased by only four homes, nearly unchanged, and now sits at 3,052, its highest level since December 2022. In June, 34% fewer homes came on the market compared to the 3-year average before COVID (2017 to 2019), 1,323 less. Yet, 254 more sellers came on the market this May compared to May 2023. Last year, there were 2,276 homes on the market, 776 fewer homes, or 25% less. The 3-year average before COVID (2017 to 2019) was 6,708, or 120% extra, more than double.

· Demand, the number of pending sales over the prior month, increased by nine pending sales in the past two weeks, up 1%, and now totals 1,624. Last year, there were 1,560 pending sales, 4% less. The 3-year average before COVID (2017 to 2019) was 2,582, or 59% more.

· With supply unchanged and demand rising slightly, the Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, decreased from 57 to 56 days in the past couple of weeks. It was 44 days last year, faster than today. The 3-year average before COVID (2017 to 2019) was 78 days, slower than today.

· In the past two weeks, the Expected Market Time for homes priced below $750,000 increased from 42 to 44 days. This range represents 17% of the active inventory and 22% of demand. 

· The Expected Market Time for homes priced between $750,000 and $1 million increased from 33 to 35 days. This range represents 13% of the active inventory and 21% of demand.

· The Expected Market Time for homes priced between $1 million and $1.25 million increased from 39 to 42 days. This range represents 10% of the active inventory and 14% of demand.

· The Expected Market Time for homes priced between $1.25 million and $1.5 million decreased from 45 to 39 days. This range represents 10% of the active inventory and 15% of demand.

· The Expected Market Time for homes priced between $1.5 million and $2 million decreased from 55 to 49 days. This range represents 13% of the active inventory and 14% of demand.

· In the past two weeks, the expected market time for homes priced between $2 million and $4 million increased from 104 to 109 days. For homes priced between $4 million and $6 million, the Expected Market Time decreased from 197 to 148 days. For homes priced above $6 million, the Expected Market Time decreased from 715 to 557 days. 

· The luxury end, all homes above $2 million, account for 37% of the inventory and 14% of demand.

· Distressed homes, both short sales and foreclosures combined, comprised only 0.2% of all listings and 0.3% of demand. Only four foreclosures and three short sales are available today in Orange County, with seven total distressed homes on the active market, up two from two weeks ago. Last year, 12 distressed homes were on the market, similar to today.

• There were 2,127 closed residential      resales in May, up 5% compared to May 2023’s 2,030 and up 8% from April      2024. The sales-to-list price ratio was 100.3% for Orange County. Foreclosures      accounted for 0.1% of all closed sales, and short sales accounted for      0.1%. That means that 99.8% of all sales were good ol’ fashioned sellers with equity.

Orange County Housing Report: May 13, 2024

While the inventory may still be limited and not even close to returning to pre-pandemic levels, there are finally more homes coming on the market. 

A Rise in Sellers

There are 18% more sellers than last year.

The pandemic severely disrupted the new car supply chain, resulting in inventories hitting an unprecedented low in 2021. New car dealerships looked like empty parking lots. Many interested buyers were forced to pre-order their new automobile purchases. Sales often included a premium and ultimately sold over retail. That all changed as the inventory slowly climbed along with rising interest rates. Finally, there are a lot more cars sitting on the lots. While they have not returned to averages before the pandemic, it is a healthy step in the right direction. 

Similarly, housing inventories were severely disrupted during the pandemic. It was not until 2022, when mortgage rates climbed from 3.25% in January to 7.37% in October, that the Orange County inventory finally rose. The supply increased from 1,100 in January until it peaked in August at 4,069 homes, a rise of 269% or 2,969. Yet in 2023, the inventory fell from 2,536 in January to 2,053 in mid-April, a drop of 19%. It then slowly rose until peaking in November at 2,496, an increase of only 22% or 443 homes. Mortgage rates started the year at 6% and eclipsed 8% in October. Affordability was a significant issue, yet the inventory remained relatively flat all year. Intuitively, many thought the inventory would continue to climb rapidly as it did during the second half of 2022 due to the high mortgage rate environment. That was not the case. What happened? Too many homeowners “hunkered down” in their homes and opted not to sell.

The hunkering-down phenomenon developed because homeowners were unwilling to move due to their current underlying, locked-in, low fixed-rate mortgage. The difference between their low fixed rate and the prevailing rate of the day was substantial and precluded many homeowners from listing their homes for sale and moving to another house. Through the fourth quarter of 2023, according to the Federal Housing Finance Agency’s National Mortgage Database, 84% of all Californians with a mortgage have a mortgage rate at or below 5%. Two-thirds, 67%, have a rate at or below 4%. And an astonishing 30% are at or below 3%. In 2022, there were 22% fewer sellers compared to the 3-year average before COVID (2017 to 2019), or 8,450 missing FOR-SALE signs. In 2023, the lack of homeowners willing to participate became an acute problem. There were 42% fewer sellers, or 16,024 missing signs. Considering that the 3-year pre-pandemic average annual closed sales was 29,361, a large share of the market was absent. 

In 2024, a new trend developed. Rates have been stubbornly high for nearly two years, and many homeowners are tired of waiting for them to fall. The deficiency in home sellers over the past couple of years meant that many owners had placed their desire to sell on hold. They want to sell for a variety of reasons. Empty nesters want to downsize. Growing families want a larger home with a yard. Others want to relocate closer to their kids. There are a number of reasons people want to move, and they do not want to sit on the sidelines forever. So, in 2024, even though rates have remained high, more homeowners are finally coming on the market. 

There were 18% more new listings through April compared to last year, which is an additional 1,396 FOR-SALE signs. While there is still an overabundance of homeowners sitting on the sidelines hunkering down, the extra signs compared to last year are a welcome step in the right direction for an inventory starved for more choices. In April, there were 28% more sellers compared to April 2023, the largest year-over-year rise so far. That is over 600 more new listings. 

Compared to the 3-year average before COVID, there are still 35% fewer new listings or 4,966 missing signs through April. Yet, that is much better than last year’s 45% fewer listings or 6,362 missing signs. This new trend of more homes coming on the market occurred while rates exceeded 7% for over half of 2024. Mortgage rates hit 7.5% three times in April, according to Mortgage News Daily. They are forecasted to drop later this year, which will only incentivize more homeowners to list their homes for sale as the difference between their low fixed rate and the prevailing rate will narrow. The lower mortgage rates drop, the more homeowners sitting on the sidelines waiting to sell will jump in and list their homes. 

As a result of more homes coming on the market, the active listing inventory has grown from 1,785 at the start of the year to 2,470 today, a rise of 38% or 685 homes. There are 15% more homes available today than last year. A meaningful rise in inventory is another excellent trend that developed this year. Finally, there are more choices. 

Active Listings

The active inventory climbed by 6% in the past couple of weeks.

The active listing inventory increased by 150 homes in the past two weeks, up 6%, and now sits at 2,470, its highest level since last year’s November peak of 2,496. The inventory has climbed by 460 homes or 23% in the past six weeks. Until rates fall below 7%, the inventory will continue to climb. At this point, it appears that a typical cycle peak will be reached sometime between July and August. 

Last year, the inventory was 2,139 homes, 13% lower, or 331 fewer. The 3-year average before COVID (2017 through 2019) was 6,255, an additional 3,785 homes, or 153% more, more than double the current level. 

Demand
Demand increased by 3% in the past couple of weeks. 

Demand, a snapshot of the number of new pending sales over the prior month, increased from 1,707 to 1,759 in the past couple of weeks, up 52 pending sales, or 3%, its highest level since September 2022. Demand has not reached its 2024 peak yet. Typically, demand peaks between April and May. Yet, if rates drop later this year, as forecasted by many experts, demand is expected to improve, which could result in a much later peak. The Federal Reserve has indicated that it will cut rates sometime this year. They are currently very “data dependent,” meaning they are waiting to see trends suggesting a cooling economy and falling inflation. The path of inflation and the economy will dictate the direction of mortgage rates and the number of rate cuts ahead.     

Last year, demand was 1,660, 6% less than today, or 99 fewer pending sales. The 3-year average before COVID (2017 to 2019) was 2,765 pending sales, 57% more than today, or an additional 1,006.

With supply rising faster than demand, the Expected Market Time (the number of days it takes to sell all Orange County listings at the current buying pace) increased from 41 to 42 days in the past couple of weeks. Last year, it was 39 days, similar to today. The 3-year average before COVID was 68 days, slower than today.

Luxury End

Luxury supply and demand are rising at similar rates. 

In the past couple of weeks, the luxury inventory of homes priced above $2 million increased from 851 to 935 homes, up 84 or 10%, the highest level since October 2020. Luxury demand increased by 25 pending sales, up 10%, and now sits at 275, its highest level since May 2021. With supply and demand rising at a similar pace, the Expected Market Time for luxury homes priced above $2 million decreased slightly from 103 to 102 days. The 102-day level is hot for luxury, a direct result of financial markets reaching all-time highs this year. 

Year over year, the active luxury inventory is up by 228 homes or 32%, and luxury demand is up by 82 pending sales or 42%. Last year’s Expected Market Time was 110 days, similar to today.

In the past two weeks, the expected market time for homes priced between $2 million and $4 million increased from 65 to 66 days. For homes priced between $4 million and $6 million, the Expected Market Time decreased from 184 to 167 days. For homes priced above $6 million, the Expected Market Time decreased from 439 to 413 days. At 413 days, a seller would be looking at placing their home into escrow around June 2025.

Orange County Housing Summary

· The active listing inventory in the past couple of weeks increased by 150 homes, up 6%, and now sits at 2,470. In April, 32% fewer homes came on the market compared to the 3-year average before COVID (2017 to 2019), 1,272 less. 604 more sellers came on the market this April compared to 2023. Last year, there were 2,139 homes on the market, 331 fewer homes, or 13% less. The 3-year average before COVID (2017 to 2019) was 6,255, or 153% extra, more than double.

· Demand, the number of pending sales over the prior month, increased by 52 pending sales in the past two weeks, up 3%, and now totals 1,759. Last year, there were 1,660 pending sales, 6% fewer. The 3-year average before COVID (2017 to 2019) was 2,765, or 57% more.

· With supply rising faster than demand, the Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, increased from 41 to 42 days in the past couple of weeks. It was 39 days last year, similar to today. The 3-year average before COVID (2017 to 2019) was 68 days, slower than today.

· In the past two weeks, the Expected Market Time for homes priced below $750,000 decreased from 32 to 31 days. This range represents 17% of the active inventory and 23% of demand. 

· The Expected Market Time for homes priced between $750,000 and $1 million decreased from 24 to 23 days. This range represents 14% of the active inventory and 20% of demand.

· The Expected Market Time for homes priced between $1 million and $1.25 million increased from 26 to 28 days. This range represents 10% of the active inventory and 14% of demand.

· The Expected Market Time for homes priced between $1.25 million and $1.5 million decreased from 33 to 28 days. This range represents 10% of the active inventory and 14% of demand.

· The Expected Market Time for homes priced between $1.5 million and $2 million increased from 40 to 46 days. This range represents 13% of the active inventory and 12% of demand.

· In the past two weeks, the expected market time for homes priced between $2 million and $4 million increased from 65 to 66 days. For homes priced between $4 million and $6 million, the Expected Market Time decreased from 184 to 167 days. For homes priced above $6 million, the Expected Market Time decreased from 439 to 413 days. 

· The luxury end, all homes above $2 million, account for 38% of the inventory and 16% of demand.

· Distressed homes, both short sales and foreclosures combined, comprised only 0.2% of all listings and 0.1% of demand. Only three foreclosures and two shorts sales are available today in Orange County, with five total distressed homes on the active market, up one from two weeks ago. Last year, ten distressed homes were on the market, similar to today.

• There were 1,968 closed residential      resales in April, up 16% compared to April 2023’s 1,696, and up 10% from      March 2024. The sales-to-list price ratio was 100.4% for Orange County. Foreclosures      accounted for 0.05% of all closed sales, and short sales accounted for      0.15%. That means that 99.8% of all sales were good ol’ fashioned sellers with equity.

Orange County Housing Report: Starter Home Squeeze

April 15, 2024

First-time home buyers are not only getting squeezed by higher mortgage rates, there are also fewer homes coming on the market in the entry-level price ranges. 

The Tale of Two Markets

There is a definitive difference between starter homes and the rest of the orange county housing market.

For several years, there has been a wave of millennials turning 32, the prime first-time home buyer age. They have been getting married and having babies and now want to own a home. Unfortunately, with higher mortgage rates and higher home prices, many have been unable or unwilling to purchase. For nearly two years, since rates spiked, they have been sitting on the sidelines, waiting for either home values to plunge or mortgage rates to drop. Yet, neither has occurred. Instead, there has been a standoff between buyers and sellers, and with a limited inventory of available homes, sellers have had the edge. 

In taking a careful look under the hood, the upper ranges, anything above $1 million, has had a lot more activity than last year. There are more homes coming on the market and more closed sales. Yet, for starter homes, anything below $1 million, it is an entirely different story. There are not as many homes coming on the market, and there are far fewer closings. There is a noticeable squeeze on the starter home market. 

The data illustrates the stark differences between starter homes and the rest of the market. In 2024, through March, an extra 613 homes were placed on the market, 11% more compared to 2023. Yet, there were 8% fewer, or 211 missing FOR-SALE signs below $1 million. On the other hand, 29% more homes were placed on the market above $1 million, or an extra 824 signs. The entry-level market is already suffering from a chronically low supply. There is plenty of buyer competition due to the scarcity of available homes. As a result of the limited inventory of starter homes, the Expected Market Time (the number of days to sell all Orange County listings at the current buying pace) for all homes below $1 million is a scorching 29 days. 

Homeowners are “hunkering down” in their homes and are unwilling to move due to their current underlying, locked-in, low fixed-rate mortgage. Through March, 37% fewer homes are on the market compared to the 3-year average before COVID (2017 to 2019). Starter homeowners are even more inclined to stay put compared to homeowners in the higher price ranges. Many cannot afford to sell their homes and trade their low rates for today’s 7.4% mortgage rate. It simply does not make economic sense. According to the Federal Housing Finance Agency’s National Mortgage Database, 84% of Californians with a mortgage have a 5% or lower rate, 67% are at 4% or lower, and 30% are at 3% or lower. 

Mortgage rates have been bobbing around 7% for most of the year. With the recent sticky Consumer Price Index (CPI) inflation report and other hotter-than-expected economic reports, rates spiked to 7.44% as of April 15th. Last year, in mid-April, mortgage rates were around 6.5%, nearly a whole percentage point lower. Even with today’s higher mortgage rate environment, there have been an extra 187 closed sales, 4% more, this year compared to 2023. Yet, there were 1,941 closed sales below $1 million this year compared to 2,282 last year, 15% less or 341 fewer closed sales. Above $1 million, every price range has experienced more closed sales. There were 2,449 this year compared to 1,924 last year, 27% more, or 528 extra sales. 

The entry level will improve once mortgage rates eventually ease to the mid-6s. Many economic experts believe the U.S. economy will cool sometime this year. Rates drop with a cooling economy. If the economy downshifts enough, rates could fall to the low 6s or even into the upper 5s. The lower mortgage rates fall, the more inclined homeowners will be to move. It will also result in a spike in demand. With more homes available and more demand, the housing market would begin to thaw.

Yet, the U.S. has proven to be extremely resilient thanks to the strong consumer. The economy has exceeded expectations despite the high-interest rate environment since the start of last year. With recent economic reports, the anticipated cooldown does not look like it will appear during the first half of 2024. Only time will tell. The Federal Reserve has been very data-dependent. Future economic reports will pave the path for the entire housing market, especially in the lower price ranges.

With more FOR-SALE signs above $1 million, there are more choices, pending sales, and activity compared to the lower price points. There is a squeeze on starter homes in Orange County, and lower mortgage rates are the only eventual cure. 

Active Listings

The active inventory climbed by 9% in the past couple of weeks.

The active listing inventory increased by 174 homes in the past two weeks, up 9%, and now sits at 2,184. It was the largest rise of the year and the first time that there were more homes compared to the prior year since last April. During the Spring Market, supply and demand typically rise at similar paces. Yet, not as many homeowners are placing their homes on the market due to their underlying low fixed-rate mortgage payments. The spike in inventory may have more to do with the recent spike in mortgage rates. Rates have remained stubbornly above 7% for most of April and even climbed to nearly 7.5% today with hotter-than-expected economic news. Demand downshifts a bit when rates rise, allowing the inventory to climb. The inventory will continue to climb if rates remain above 7% with duration. 

Last year, the inventory was 2,053 homes, 6% lower, or 131 fewer. The 3-year average before COVID (2017 through 2019) was 5,780, an additional 3,596 homes, or 165% more, more than double the current level. 

Homeowners continue to “hunker down” in their homes, unwilling to move due to their current underlying, locked-in, low fixed-rate mortgage. For March, 2,285 new sellers entered the market in Orange County, 1,623 fewer than the 3-year average before COVID (2017 to 2019), 42% less. Last March, there were 2,136 new sellers, 7% fewer than this year. A few more sellers are opting to sell compared to the previous year. 

Demand
Demand increased by 2% in the past couple of weeks. 

Demand, a snapshot of the number of new pending sales over the prior month, increased from 1,617 to 1,642 in the past couple of weeks, up 25 pending sales, or 2%, its highest level since May. As rates climb, the buyer pool shrinks due to affordability issues, and many buyers are getting priced out of the home buying process. Demand continues to bounce along a bottom, similar to last year. It will eventually jump higher once mortgage rates ease, projected to occur sometime this year. Recent economic trends push that off to later in the year. Until then, expect demand to continue to bump along a trajectory that is very similar to last year. 

Last year, demand was 1,663, 1% more than today, or 21 extra pending sales. The 3-year average before COVID (2017 to 2019) was 2,777 pending sales, 69% more than today, or an additional 1,135.

With supply rising faster than demand, the Expected Market Time (the number of days it takes to sell all Orange County listings at the current buying pace) has increased from 37 to 40 days in the past couple of weeks. Last year, it was 37 days, similar to today. The 3-year average before COVID was 62 days, slower than today.

Luxury End

The luxury market slowed in the past couple of weeks. 

In the past couple of weeks, the luxury inventory of homes priced above $2 million increased from 755 to 787 homes, up 32 or 4%. Luxury demand decreased by ten pending sales, down 4%, and now sits at 254. With supply rising and demand falling, the Expected Market Time for luxury homes priced above $2 million increased from 86 to 93 days. Even at 93 days, the luxury market is still very hot. The recent slowdown may have more to do with April's equity market volatility.

Year over year, the active luxury inventory is up by 150 homes or 24%, and luxury demand is up by 64 pending sales or 34%. Last year’s Expected Market Time was 101 days, slightly slower than today.

In the past two weeks, the expected market time for homes priced between $2 million and $4 million increased from 60 to 64 days. For homes priced between $4 million and $6 million, the Expected Market Time increased from 109 to 138 days. For homes priced above $6 million, the Expected Market Time increased from 238 to 247 days. At 247 days, a seller would be looking at placing their home into escrow around December 2024.

Orange County Housing Summary

· The active listing inventory in the past couple of weeks increased by 174 homes, up 9%, and now sits at 2,184. There are more homes on the market than the prior year for the first time since last April. In March, 42% fewer homes came on the market compared to the 3-year average before COVID (2017 to 2019), 1,623 less. 149 more sellers came on the market this March compared to 2023. Last year, there were 2,053 homes on the market, 131 fewer homes, or 6% less. The 3-year average before COVID (2017 to 2019) was 5,780, or 165% extra, more than double.

· Demand, the number of pending sales over the prior month, increased by 25 pending sales in the past two weeks, up 2%, and now totals 1,642. Last year, there were 1,663 pending sales, 1% more than today. The 3-year average before COVID (2017 to 2019) was 2,777, or 69% more.

· With supply rising faster than demand, the Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, increased from 37 to 40 days in the past couple of weeks. It was 37 days last year, similar to today. The 3-year average before COVID (2017 to 2019) was 62 days, slower than today.

· The Expected Market Time for homes priced below $750,000 increased from 30 to 33 days. This range represents 19% of the active inventory and 23% of demand. 

· The Expected Market Time for homes priced between $750,000 and $1 million remained unchanged at 24 days. This range represents 13% of the active inventory and 22% of demand.

· The Expected Market Time for homes priced between $1 million and $1.25 million increased from 24 to 26 days. This range represents 10% of the active inventory and 15% of demand.

· The Expected Market Time for homes priced between $1.25 million and $1.5 million increased from 29 to 34 days. This range represents 11% of the active inventory and 12% of demand.

· The Expected Market Time for homes priced between $1.5 million and $2 million increased from 35 to 36 days. This range represents 11% of the active inventory and 13% of demand.

· In the past two weeks, the expected market time for homes priced between $2 million and $4 million increased from 60 to 64 days. For homes priced between $4 million and $6 million, the Expected Market Time increased from 109 to 138 days. For homes priced above $6 million, the Expected Market Time increased from 238 to 247 days. 

· The luxury end, all homes above $2 million, account for 36% of the inventory and 15% of demand.

· Distressed homes, both short sales and foreclosures combined, comprised only 0.2% of all listings and 0.2% of demand. Only four foreclosures and one short sale are available today in Orange County, with five total distressed homes on the active market, up two from two weeks ago. Last year, ten distressed homes were on the market, similar to today.

There were 1,785 closed residential      resales in March, nearly identical to March 2023’s 1,791, and up 41% from      February 2024. The sales-to-list price ratio was 100.4% for Orange County.      Foreclosures accounted for 0.1% of all closed sales, and short sales      accounted for 0.1%. That means that 99.8% of all sales were good ol’ fashioned sellers with equity.

Orange County Housing Report: The Rate Migration 

February 20, 2024

Mortgage rates have crept their way back above 7% with hotter than expected economic readings, resulting in a slowdown in purchase activity.

Rate Sensitivity

The 7% mortgage rate is a psychological barrier to the housing market.

Airline travel is particularly sensitive to airfare pricing. There are so many online choices to compare fares easily. Travelers quickly jump for more affordable options, even if it means changing traveling dates, accepting layovers, or flying on a red-eye. When airfares spike, many travelers alter or scrap their travel plans altogether. Yet, if fares unexpectedly drop, demand soars, and flights are booked seemingly overnight. The price sensitivity of airline consumers makes it tricky for airlines to fill planes and still earn a profit. 

Similarly, prospective buyers are very sensitive to how much their monthly payment will be, which is determined by the prevailing mortgage rate. Home values skyrocketed higher as mortgage rates plunged to record lows from 2020 through the first few months of 2022. That changed as mortgage rates soared from 3.25% at the start of 2022 to 7.37% by October. In 2023, rates climbed from 5.99% in February to 8% in October. They remained above 7% from the end of July 2023 through mid-December. Despite a limited supply, values do not change much when rates climb above 7%. The combination of elevated home prices and the high mortgage rate environment has resulted in an exceptionally rate-sensitive housing market. 

The Federal Reserve set out on a course to bring down inflation, which had spiked to 9% by June 2022. Inflation has been an international problem linked to disruptions in the global supply chain and considerable shifts in demand due to the COVID-19 pandemic. The Consumer Price Index has dropped to 3.1% but has a ways to go to hit the Federal Reserve’s 2% target. The Federal Reserve has indicated that they will most likely drop the short-term Federal Funds Rate three times this year. Still, they are very data dependent, meaning they watch every U.S. economic data point, from the number of job openings to consumption to many monthly inflation indicators.

In December, right after indicating that they would be cutting rates in 2024, rates plunged from 7.09% to 6.62%, its lowest rate in seven months. Since then, a series of economic reports suggest that the economy has not entirely cooled enough for the Fed to start its cuts. Many anticipated the cuts to begin as early as March, but now it looks more like June. This change resulted in rates climbing to 7.1%, according to Mortgage News Daily. 

The change in rates has cut into home affordability. On February 1st, mortgage rates dropped to nearly 6.5%. Buyers desirous of a $5,000 per month principal and interest payment with 20% down, at 6.5%, would be looking at a $988,750 home. As mortgage rates migrated back up to 7%, those same buyers are now looking at a $940,000 home, nearly $50,000 less of a home. 

Demand, a snapshot of new pending sales over the prior month, had been closely mirroring the previous year in December and January but is now off by 9%. Demand is currently at 1,397 pending sales compared to 1,537 last year, which is 140 fewer. The only real difference is that mortgage rates migrated back up to 7%. In February 2023, mortgage rates averaged 6.6% versus 7.0% so far this February. Affordability absolutely has had an impact on demand.

As mortgage rates migrate higher, demand slows, and the market speed slows. Rising rates are like removing pressure on the housing market gas pedal. As the economy cools, which is projected to happen sometime this year, rates will fall, and the Fed will start slashing the short-term Federal Funds rate. Home affordability will improve as rates migrate downward. At 6%, the buyer looking for a $5,000 payment could afford a $1,042,500 home, equating to $102,750 more purchasing power than 7%. As mortgage rates drop, demand improves, and the speed of the market accelerates. The lower rates fall, the more pressure is placed on the housing market gas pedal, and the hotter the housing market will become.

Another way of looking at affordability is to look at various payments for a home based on changing mortgage rates. Buyers looking to purchase a $1 million home with 20% down would be looking at a monthly principal and interest payment of $5,322 at today’s 7% rate. When rates were at 8% last October, the payment was $5,870, an additional $548 per month or $6,576 per year. Yet, as many economists project, if rates drop to 6%, the monthly payment would fall to $4,796, a $526 monthly savings compared to 7%, or $6,312 per year. 

Higher rates dampen housing activity. It not only impacts demand, but it also affects the number of homeowners willing to sell. An astonishing 85% of all homeowners with a mortgage have a rate at or below 5%. Many have rates far below that threshold. Nearly a third, 30%, have a mortgage at or below 3%. Higher rates cut into affordability, and fewer homeowners are willing to part with their low fixed-rate payments in exchange for a much higher mortgage rate and payment. In 2023, 41% fewer Orange County homeowners were willing to sell their homes compared to the 3-year average before COVID (2017 to 2019), a mindboggling 16,110 fewer FOR-SALE signs.

When mortgage rates migrate lower, not only will demand rise, but the number of homeowners willing to sell will rise. The closer rates dive toward 6%, the more inclined homeowners will be to list their homes. When rates eventually fall below 6% and into the upper 5% level, the needle will move even further for the number of homeowners willing to participate in the housing arena. Just as 7% is a psychological barrier for so many consumers that ultimately downshifts the speed of the housing market as rates surpass that mark, 6% is another psychological barrier where housing will heat up noticeably as rates drop into the 5’s. 

The Orange County housing market is particularly rate-sensitive. As rates slowly migrate higher, the market cools, limiting supply and demand. When rates eventually fall, demand will rise, more homeowners will sell, the housing market will speed up, and there will be a noticeable increase in closed sales. 

Active Listings

The active inventory was flat in the past couple of weeks.

The active listing inventory decreased by three homes in the past two weeks, nearly unchanged, and now sits at 1,939. Last year, the inventory dropped from week to week and reached a bottom in mid-April. This year, after initially climbing during January, the inventory has remained relatively flat. The bottom line is that the number of available homes has not changed much so far this year. That is precisely what occurs during the Winter Market; the inventory rises a bit, remains flat, or drops slightly. It is in mid-March that the inventory typically rises at a much faster pace. The issue is that the housing market has not behaved normally since pre-COVID. If rates remain stubbornly at 7% or higher, the inventory is much more likely to finally rise during the Spring Market. A lot can happen with rates over the next four weeks. If they fall by the start of spring, it will be much harder for inventory levels to grow. The trajectory of the inventory will rely on the trajectory of rates this year. 

Last year, the inventory was 2,305 homes, 19% higher, or 366 more. The 3-year average before COVID (2017 through 2019) was 4,977, an additional 3,038 homes, or 157% extra, more than double where it stands today. 

Homeowners continue to “hunker down” in their homes, unwilling to move due to their current underlying, locked-in, low fixed-rate mortgage. For January, 1,982 new sellers entered the market in Orange County, 1,072 fewer than the 3-year average before COVID (2017 to 2019), 35% less. Last January, there were 1,705 new sellers, 14% fewer than this year. More sellers are finally opting to sell compared to the prior year. 

Demand
Demand increased by 8% in the past couple of weeks. 

Demand, a snapshot of the number of new pending sales over the prior month, increased from 1,290 to 1,397 in the past couple of weeks, up 107 pending sales, or 8%, its highest level since September. Yet, it is the lowest mid-February reading since tracking began in 2004. Surprisingly, demand is lower than last year despite more homes coming on the market. This has everything to do with affordability and rates climbing above 7%. The direction of demand depends upon the direction of mortgage rates. Mortgage rates will noticeably fall along with data that details a cooling economy, which is what the Federal Reserve wants to see before cutting the short-term federal funds rate. When rates fall, demand will increase along with affordability. When that occurs, demand will be higher than last year. Precisely when that happens is anybody’s guess. It all depends upon the many monthly economic readings. 

Last year, demand was 1,537, 10% more than today, or 140 extra pending sales. The 3-year average before COVID (2017 to 2019) was 2,393 pending sales, 71% more than today, or an additional 996.

With demand rising and supply unchanged, the Expected Market Time (the number of days to sell all Orange County listings at the current buying pace) decreased from 45 to 42 days in the past couple of weeks, its lowest level since June. Last year, the Expected Market Time was 45 days, similar to today. The 3-year average before COVID was 64 days, slower than today. 

Luxury End

The luxury market has improved dramatically in the past couple of weeks. 

In the past couple of weeks, the luxury inventory of homes priced above $2 million increased from 675 to 681 homes, up six, or 1%. Luxury demand jumped by 43 pending sales, up 24%, and now sits at 222, its highest level since Mary 2022. With demand surging higher compared to the smaller rise in supply, the Expected Market Time for luxury homes priced above $2 million plunged from 113 to 92 days, its lowest reading since May 2022. The luxury price ranges are heating up and are more resilient and stronger than last year. 

Year over year, luxury demand is up by 72 pending sales or 48%, and the active luxury listing inventory is up by 75 homes or 12%. Last year’s Expected Market Time was 121 days, slower than today.

For homes priced between $2 million and $4 million, the Expected Market Time in the past two weeks decreased from 80 to 63 days. For homes priced between $4 million and $6 million, the Expected Market Time increased from 133 to 136 days. For homes priced above $6 million, the Expected Market Time decreased from 337 to 240 days. At 240 days, a seller would be looking at placing their home into escrow around October 2024.

Orange County Housing Summary

· The active listing inventory in the past couple of weeks decreased by three homes, nearly unchanged, and now sits at 1,939. It is the second-lowest mid-February reading since tracking began in 2004, only behind 2022. In January, 35% fewer homes came on the market compared to the 3-year average before COVID (2017 to 2019), 1,072 less. 277 more sellers came on the market this year compared to January 2023. Last year, there were 2,305 homes on the market, 366 more homes, or 19% higher. The 3-year average before COVID (2017 to 2019) was 4,977, or 157% extra, more than double.

· Demand, the number of pending sales over the prior month, increased by 107 pending sales in the past two weeks, up 8%, and now totals 1,397, the lowest mid-February reading since tracking began. Last year, there were 1,537 pending sales, 10% more than today. The 3-year average before COVID (2017 to 2019) was 2,393, or 71% more.

· With demand rising and supply unchanged, the Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, decreased from 45 to 42 days in the past couple of weeks. It was 45 days last year, similar to today. The 3-year average before COVID (2017 to 2019) was 64 days, slower than today.

· For homes priced below $750,000, the Expected Market Time decreased from 36 to 33 days. This range represents 20% of the active inventory and 25% of demand. 

· For homes priced between $750,000 and $1 million, the Expected Market Time remained unchanged at 25 days. This range represents 14% of the active inventory and 23% of demand.

· For homes priced between $1 million and $1.25 million, the Expected Market Time decreased from 32 to 31 days. This range represents 9% of the active inventory and 12% of demand.

· For homes priced between $1.25 million and $1.5 million, the Expected Market Time decreased from 39 to 35 days. This range represents 10% of the active inventory and 12% of demand.

· For homes priced between $1.5 million and $2 million, the Expected Market Time decreased from 45 to 44 days. This range represents 12% of the active inventory and 12% of demand.

· For homes priced between $2 million and $4 million, the Expected Market Time in the past two weeks decreased from 80 to 63 days. For homes priced between $4 million and $6 million, the Expected Market Time increased from 133 to 136 days. For homes priced above $6 million, the Expected Market Time decreased from 337 to 240 days. 

· The luxury end, all homes above $2 million, account for 35% of the inventory and 16% of demand.

· Distressed homes, both short sales and foreclosures combined, comprised only 0.3% of all listings and 0.3% of demand. Only three foreclosures and two short sales are available today in Orange County, with five total distressed homes on the active market, down two from two weeks ago. Last year, eight distressed homes were on the market, similar to today.

There were 1,182 closed residential resales in January, up 4% compared to January 2023’s 1,137. December marked a 10% drop compared to December 2023. The sales-to-list price ratio was 98.5% for all of Orange County. Foreclosures accounted for 0.1% of all closed sales, and short sales accounted for 0.1%. That means that 99.8% of all sales were good ol’ fashioned sellers with equity 

Orange County Housing Report: A Frosty Autumn

September 16, 2024

Housing has been slowing through both the Spring and Summer Markets, yet the slowdown has picked up its pace since transitioning to the Autumn Market.

Housing is Slowing

The Orange County housing market has downshifted considerably since March.

Returning to their classrooms, kids are adjusting to their busy school calendars. Fall youth sports have also resumed with their demanding practice and game schedules. Upon entering the local grocery store, boxes of bright orange pumpkins adorn the entrance. Coffee shops are busy making their most popular seasonal latte, Pumpkin Spice. The sun is setting earlier and earlier by the day. That’s right, Autumn has arrived. It may not officially start until Sunday, September 22nd, but all the signs are here. 

These changes also indicate that the start of the housing Autumn Market has arrived. The Autumn Market begins the moment kids go back to school at the end of August, a bit earlier than the fall equinox, and ends a week before Thanksgiving, the start of the Holiday Market. The best time of the year for housing is during the Spring Market. That is when buyer demand reaches a peak. Many people, especially families with children in school, prefer to isolate their home during the spring and close during the summer while the kids are on break. The inventory rises during the spring as well. 

The second best time of the year for the housing market is the Summer Market. The market slows a bit due to all the distractions, including family vacations, summer camps, the beach, the community pool, and amusement parks. There is still plenty of demand, yet it is slowly declining. The inventory normally rises until it finds its peak between July and August and then gradually falls. 

During the Autumn Market, the “prime time” season for real estate is now in the rearview mirror. Housing transitions to a slower time of the year. Typically, the inventory and demand decrease slightly at a very similar rate, and the Expected Market Time (the time between hammering in the FOR-SALE sign to becoming a pending sale) does not change much.

This year has not been typical at all. Since peaking in May with 1,759 pending sales, demand (a snapshot of the number of new pending sales over the prior month) has dropped to 1,413, shedding 346 pending sales or 20%. On the other hand, the active inventory has been on the rise all year. Since May’s 2,470 home level, the inventory has grown to 3,695, up a stunning 50% or 1,225 additional homes. With the supply of homes rising and demand falling, the Expected Market Time has grown from 42 days in May to 78 days today. 

What is occurring is that more homeowners are opting to sell this year, and they are accumulating over time. The extra sellers are competing against a dwindling buyer pool; thus, the market has been decelerating. Ask anyone within the real estate trenches, and they will attest to the downshift in the market and the fact that it is taking longer to secure a sale. 

Since the start of the Autumn Market about four weeks ago, the Orange County housing market has been rapidly cooling. The inventory has climbed from 3,490 in mid-August to 3,695 today, increasing by 205 homes or 6%. Demand has decreased from 1,594 to 1,413 pending sales, down 181 or 11%. The Expected Market Time has risen from 66 to 78 days in the past month alone. That is quite a jump when it typically is flat during this time of year. It is the highest mid-September reading since 2019, five years ago. 

This market slowdown comes when rates have been declining, improving affordability and allowing more buyers to enter the market. Rates eclipsed 7.5% in April and bounced around 7% from May through July. It was not until August, when the job market showed signs of cooling, signaling future Federal Reserve rate cuts starting this month, that mortgage rates began to fall materially. According to Mortgage News Daily, they have plunged from 6.9% at the end of July to 6.12% today, knocking on the door of rates dropping below 6% for the first time since August 2022, over two years ago. 

This is the most buyer-friendly Orange County housing market in years. With lower rates and pressure for them to continue to decline, a rising inventory, and falling demand, meaning less buyer competition, right now is a great time to be a buyer.

ATTENTION BUYERS: Do not wait for prices to plunge before purchasing. Buyers who attempt to time the market end up regretting the delay and often get burned. Since rates are forecasted to continue to fall with a cooling economy, more buyer demand is on the horizon. Rates have only plunged recently, starting at the tail end of the Summer Market. Improved affordability did not align with real estate's busiest time of the year. Yet, it will line up much better with the 2025 market, and housing will be hotter with tremendous competition and rising values. 

ATTENTION SELLERS: Today’s market requires a meticulous, cautious approach to pricing. Overprice and it will result in wasted market time and an unsuccessful outcome. Homes that are in excellent condition, attractively upgraded, recently updated, and ready for an immediate move-in will attract the most attention and will sell the fastest as long as they are appropriately priced. Competition among sellers has been on the rise, demanding careful pricing and for many to sharpen their pencils. 

It will be a frosty Autumn Market, much cooler than usual. Buyers and sellers should plan accordingly. 

Active Listings

The active inventory increased by 3% in the past couple of weeks.

The active listing inventory increased by 96 homes in the past two weeks, up 3%, and now sits at 3,695, its highest level since September 2022. Typically occurring between July and August, the Orange County peak is past due. Even though homeowners have been “hunkering down,” unwilling to move due to their current underlying, locked-in, low fixed-rate mortgages (31% fewer sellers in August compared to the 3-year average before COVID from 2017 to 2019), there were 300 morehomes that came on the market this August compared to August 2023. This has been true for every month in 2024. So far this year, it has amounted to 2,695 extra FOR-SALE signs, up 16% in a year. These extra sellers have faced nearly identical year-over-year demand, resulting in a considerable rise in the inventory. The peak will continue to be delayed, and the market slowdown will persist until demand picks up due to falling rates. 

Last year, the inventory was 2,353 homes, 36% lower, or 1,342 fewer. The 3-year average before COVID (2017 through 2019) was 6,520, an additional 2,825 homes, or 76% more. This difference has been diminishing as the year progressed. 

Demand
Demand declined by 4% in the past couple of weeks. 

Demand, a snapshot of the number of new pending sales over the prior month, declined from 1,470 to 1,413 in the past couple of weeks, down 57 pending sales, or 4%, its lowest level since February. Affordability continues to improve, as does a buyer’s purchasing power, but it has not yet translated to an increase in demand. The current more affordable mortgage rate levels are coming too late in the year to impact the housing market adequately. Nonetheless, as more buyers take notice and rates drop, more buyers will eventually start searching for a home. Rates are down and projected to fall further, and there are more homes to choose from than any other time in the past couple of years. Carefully watch the coming demand readings as they may rise as soon as the Federal Reserve starts its cutting cycle later this week with more cuts to come. 

As the Federal Reserve has indicated, watching all economic releases for signs of slowing is essential. These releases can potentially move mortgage rates higher or lower, depending on how they stack up compared to market expectations. It is a busy week with the Census Bureau releasing retail sales tomorrow and the Federal Reserve’s press conference on Wednesday to announce the beginning of rate cuts, the size of the cut, and a forecast for future cuts this year and into 2025. These releases have a strong potential to move mortgage rates. 

Last year, demand was 1,474, up 61 pending sales or 4%. The 3-year average before COVID (2017 to 2019) was 2,363 pending sales, 67% more than today, or an additional 950.

With supply rising and demand falling, the Expected Market Time (the number of days it takes to sell all Orange County listings at the current buying pace) increased from 73 to 78 days in the past couple of weeks, its highest level since January 2023. Last year, it was 48 days, considerably faster than today. The 3-year average before COVID was 84 days, slightly slower than today.

Luxury End

The luxury market improved slightly in the past couple of weeks. 

In the past couple of weeks, the luxury inventory of homes priced above $2 million (the top 10% of the Orange County housing market) decreased from 1,225 to 1,198 homes, down 27 or 2%. Luxury demand increased by three pending sales, up 1%, and now sits at 239. With supply falling and demand rising, the Expected Market Time for luxury homes priced above $2 million decreased from 156 to 150 days, identical to four weeks ago. Nonetheless, at 150 days, the luxury market is far from instant, especially in the even higher luxury price ranges.

Year over year, the active luxury inventory is up by 400 homes or 50%, and luxury demand is up by 56 pending sales or 31%. Last year’s Expected Market Time was 131 days, a bit faster than today.

In the past two weeks, the expected market time for homes priced between $2 million and $4 million increased from 110 to 111 days. For homes priced between $4 million and $6 million, the Expected Market Time decreased from 351 to 257 days. For homes priced above $6 million, the Expected Market Time decreased from 329 to 295 days. At 295 days, a seller would be looking at placing their home into escrow around July 2025.
 

Orange County Housing Summary

· The active listing inventory in the past couple of weeks increased by 96 homes, up 3%, and now sits at 3,695, its highest level since September 2022. In August, 31% fewer homes came on the market compared to the 3-year average before COVID (2017 to 2019), 1,083 less. Yet, 300 more sellers came on the market this August compared to August 2023. Last year, there were 2,353 homes on the market, 1,342 fewer homes, or 36% less. The 3-year average before COVID (2017 to 2019) was 6,520, or 76% extra.

· Demand, the number of pending sales over the prior month, decreased by 57 pending sales in the past two weeks, down 4%, and now totals 1,413, its lowest level since February. Last year, there were 1,474 pending sales, 3% more. The 3-year average before COVID (2017 to 2019) was 2,363, or 67% more.

· With supply rising and demand falling, the Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, increased from 73 to 78 days in the past couple of weeks, its highest level since January 2023. It was 48 days last year, faster than today. The 3-year average before COVID (2017 to 2019) was 84 days, a bit slower than today.

· In the past two weeks, the Expected Market Time for homes priced below $750,000 increased from 48 to 50 days. This range represents 16% of the active inventory and 25% of demand. 

· The Expected Market Time for homes priced between $750,000 and $1 million increased from 45 to 54 days. This range represents 15% of the active inventory and 21% of demand.

· The Expected Market Time for homes priced between $1 million and $1.25 million remained unchanged at 62 days. This range represents 11% of the active inventory and 14% of demand.

· The Expected Market Time for homes priced between $1.25 million and $1.5 million increased from 66 to 75 days. This range represents 11% of the active inventory and 12% of demand.

· The Expected Market Time for homes priced between $1.5 million and $2 million increased from 87 to 103 days. This range represents 15% of the active inventory and 11% of demand.

· In the past two weeks, the expected market time for homes priced between $2 million and $4 million increased from 110 to 111 days. For homes priced between $4 million and $6 million, the Expected Market Time decreased from 351 to 257 days. For homes priced above $6 million, the Expected Market Time decreased from 329 to 295 days. 

· The luxury end, all homes above $2 million, account for 32% of the inventory and 17% of demand.

· Distressed homes, both short sales and foreclosures combined, comprised only 0.2% of all listings and 0.2% of demand. Only six foreclosures and one short sale are available today in Orange County, with seven total distressed homes on the active market, down two from two weeks ago. Last year, four distressed homes were on the market, similar to today.

· There were 1,877 closed residential resales in August, down 5% compared to July 2023’s 1,979 and down 8% from July 2024. The sales-to-list price ratio was 99.0% for Orange County. Foreclosures accounted for 0.1% of all closed sales, and there were no short sales. That means that 99.9% of all sales were good ol’ fashioned sellers with equity.

Orange County Housing Report: The First Green Shoots 

February 5, 2024

After bouncing along a record-low number of homeowners willing to sell in the high mortgage rate environment for over a year, there were more new sellers in January compared to 2023, the first “green shoot” since rates soared higher in 2022.

Homes Coming on the Market

There were 16% more sellers opting to sell in January compared to last year. 

Southern California may not have freezing temperatures and snow on the ground like the rest of the country, but it is much cooler. Leaves still fall from the trees, and the golden rolling hills stretch as far as the eyes can see. It is winter. While it may be a time with plenty of sunshine and warmer temperatures when the wind shifts, it is also the rainy season. This year’s El Niño climate pattern has delivered a lot of rain and promises to deliver even more in the coming weeks. In no time, the rolling golden hills will magically turn green. If you look closely, there are already plenty of green shoots.

According to Investopedia.com, "green shoots" is a term used to describe signs of economic recovery or positive data during an economic downturn. They are a welcome symbol that the economy is on the mend and slowly trending upward. In this case, the housing market has been in a funk since mortgage rates rocketed from 3.25% at the start of 2022 to eclipsing 8% last October. Pending sales and closed sales plunged. Last year’s closed sales were one of the lowest totals in decades. Homeowners have opted to stay put in their homes, unwilling to sell and give up their incredible, low fixed-rate mortgages. Since tracking began, the number of sellers coming on the market has plummeted to its lowest level. Each of these data lines reached a low in 2023 and established a bottom. This bottom gave way to the first sign of recovery: green shoots in the number of homes coming on the market, homeowners willing to sell.

You cannot purchase what is not for sale. The limited number of homes coming on the market has exacerbated an already limited number of homes available to buy, which limits the number of pending and closed sales. Higher rates have significantly impacted demand, but so have the lack of sellers. Sales can only increase when more homeowners are willing to participate and sell their homes. In January, more homes were placed on the market than the prior year for the first time since June 2021. 

There were 1,982 new FOR-SALE signs in January, up 16% compared to January 2023’s 1,705 or an extra 277 sellers. It is still far below the 3-year average before COVID (2017 to 2019), 3,054 new sellers, when housing was normal. January’s reading was 35% below that average or 1,072 fewer signs. Nonetheless, it is a green shoot. More homeowners are opting to sell despite their lower fixed-rate mortgages. This is just the start, but it establishes a new trend: more available homes coming on the market for buyers to choose from. 

The trend began to unfold in October when year-over-year differences were only slightly less. Yet, the difference in January is substantial and not a fluke. It is a paradigm shift in homeowners’ thinking. Many are tired of waiting for rates to come down. They have reasons for wanting to move: increased family size, empty nesters, job opportunities elsewhere, moving closer to family, etcetera. Over time, more and more homeowners desired to sell when the timing was right. There was pent-up seller demand that accumulated over the past couple of years. Eventually, something had to give.

Still, until mortgage rates fall further, the number of homes coming on the market will remain muted. Many homeowners continue to “hunker down” in their homes, unwilling to move due to their current underlying, locked-in, low fixed-rate mortgage. Through the third quarter of 2023, according to the Federal Housing Finance Agency’s National Mortgage Database, 85% of all Californians with a mortgage have a mortgage rate at or below 5%. More than two-thirds, 69%, have a rate at or below 4%. And an astonishing 30% are at or below 3%. In 2023, there were 41% fewer sellers than the 3-year average before COVID (2017 to 2019), with 16,920 missing FOR-SALE signs. 

The January reading is a green shoot. There are more sellers, which eventually means more pending and closed sales. With mortgage rates anticipated to fall further this year, the lower rates dive, the more homeowners are willing to participate. When rates eventually fall below 6%, the increase will be substantial and more than matched by a considerable rise in demand as affordability improves. This is the year of green shoots in housing when the behemoth housing market wakes from its nearly two-year slumber.

Active Listings

The active inventory increased by 2% in the past couple of weeks.

The active listing inventory increased by 42 homes in the past two weeks, up 2%, and now sits at 1,942. That is a deficient level compared to pre-COVID years. The 3-year average before the pandemic (2017 to 2019) was 4,843, an extra 2,901 or 149%, more than double. It is hard to put into perspective just how low the inventory has been for the past several years. Yet, for buyers looking to purchase, it means that there are not that many choices. Another “green shoot” is that the inventory level is not dropping like it did last year and in 2021 but has been on the rise. With more homes coming on the market, it is finally paving the way to a typical cyclical increase in the inventory that picks up steam in the spring and peaks during the summer. It is too early to tell if the rising inventory trend will continue, but it is a healthy initial sign for 2024.   

Last year, the inventory was 2,415 homes, 24% higher, or 473 more. The 3-year average before COVID (2017 through 2019) was 4,843, an additional 2,901 homes, or 149% extra, more than double where it stands today. 

Demand
Demand jumped by 28% in the past couple of weeks. 

Demand, a snapshot of the number of new pending sales over the prior month, shot up from 1,010 to 1,290 in the past couple of weeks, up 280 pending sales, or 28%, its largest increase since last February. It is still the lowest initial February reading since tracking began 20 years ago, almost identical to last year’s 1,300 pending sales reading. Demand should start to outpace last year’s level, with more homes finally coming on the market, paving the way for another “green shoot” in 2024. The year is young, and El Niño may delay the rise, but it is bound to occur. Especially when rates materially fall from their current levels due to a weakening economy later this year. The U.S. economy has been extraordinarily resilient but will eventually cool from its rapid pace because of various headwinds. 

Last year, demand was 1,300, 1% more than today, or ten extra pending sales. The 3-year average before COVID (2017 to 2019) was 2,160 pending sales, 67% more than today, or an additional 870.

With demand soaring compared to the small rise in supply, the Expected Market Time (the number of days to sell all Orange County listings at the current buying pace) plunged from 56 to 45 days in the past couple of weeks, indicating a very hot housing market where negotiations have quickly lined up in the seller’s favor. Last year, the Expected Market Time was 56 days, slower than today. The 3-year average before COVID was 70 days, also slower than today. 

Luxury End

The luxury market improved dramatically in the past couple of weeks. 

In the past couple of weeks, the luxury inventory of homes priced above $2 million increased from 659 to 675 homes, up 16, or 2%. Luxury demand grew by 27 pending sales, up 18%, and now sits at 179, its highest level since October. With demand surging higher compared to the smaller rise in supply, the Expected Market Time for luxury homes priced above $2 million plunged from 130 to 113 days, its lowest reading since the start of August. For perspective, the lower ranges (less than $2 million) have an Expected Market Time of 34 days. While 113 days is not instant, it is substantially better than the 168-day level reached at the start of December. The best approach to today’s luxury market remains careful pricing and plenty of patience.

Year over year, luxury demand is up by 55 pending sales or 44%, and the active luxury listing inventory is up by 83 homes or 14%. Last year’s Expected Market Time was 143 days, slower than today.

For homes priced between $2 million and $4 million, the Expected Market Time in the past two weeks decreased from 89 to 80 days. For homes priced between $4 million and $6 million, the Expected Market Time decreased from 165 to 133 days. For homes priced above $6 million, the Expected Market Time decreased from 396 to 337 days. At 337 days, a seller would be looking at placing their home into escrow around January 2025.

Orange County Housing Summary

· The active listing inventory in the past couple of weeks increased by 42 homes, up 2%, and now sits at 1,942. It is the second-lowest initial February reading since tracking began in 2004, only behind 2022. In January, 35% fewer homes came on the market compared to the 3-year average before COVID (2017 to 2019), 1,072 less. 277 more sellers came on the market this year compared to January 2023. Last year, there were 2,415 homes on the market, 473 more homes, or 24% higher. The 3-year average before COVID (2017 to 2019) was 4,843, or 149% extra, more than double.

· Demand, the number of pending sales over the prior month, soared higher by 280 pending sales in the past two weeks, up 28%, and now totals 1,290, still the lowest initial February reading since tracking began. Last year, there were 1,300 pending sales, 1% more than today. The 3-year average before COVID (2017 to 2019) was 2,160, or 67% more. 

· With demand soaring compared to the smaller rise in supply, the Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, plunged from 56 to 45 days in the past couple of weeks. It was 56 days last year, slower than today. The 3-year average before COVID (2017 to 2019) was 70 days, also slower than today.

· For homes priced below $750,000, the Expected Market Time decreased from 42 to 36 days. This range represents 21% of the active inventory and 25% of demand. 

· For homes priced between $750,000 and $1 million, the Expected Market Time decreased from 32 to 25 days. This range represents 13% of the active inventory and 25% of demand.

· For homes priced between $1 million and $1.25 million, the Expected Market Time decreased from 41 to 32 days. This range represents 9% of the active inventory and 13% of demand.

· For homes priced between $1.25 million and $1.5 million, the Expected Market Time decreased from 53 to 39 days. This range represents 10% of the active inventory and 12% of demand.

· For homes priced between $1.5 million and $2 million, the Expected Market Time decreased from 66 to 45 days. This range represents 12% of the active inventory and 12% of demand.

· For homes priced between $2 million and $4 million, the Expected Market Time in the past two weeks decreased from 89 to 80 days. For homes priced between $4 million and $6 million, the Expected Market Time decreased from 165 to 133 days. For homes priced above $6 million, the Expected Market Time decreased from 396 to 337 days. 

· The luxury end, all homes above $2 million, account for 35% of the inventory and 13% of demand.

· Distressed homes, both short sales and foreclosures combined, comprised only 0.4% of all listings and 0.6% of demand. Only three foreclosures and four short sales are available today in Orange County, with seven total distressed homes on the active market, down one from two weeks ago. Last year, seven distressed homes were on the market, identical to today.

• There were 1,310 closed residential      resales in December, down 6% compared to December 2022’s 1,393. December      marked an 8% drop compared to November 2023. The sales-to-list price ratio      was 98.1% for all of Orange County. Foreclosures accounted for 0.1% of all      closed sales, and there were no closed short sales. That means that 99.9%      of all sales were good ol’ fashioned      sellers with equity.

Orange County Housing Report: January 8, 2024

A Powerful Beginning

Unlike the sluggish start to 2023, this year’s housing market has kicked off with a scarcity of homes available and a much faster pace.

The 2024 Start. With the second-fewest homes to start a year since tracking began in 2004, the Orange County housing market is already hotter than pre-COVID years.

Farmers markets are growing in popularity. There are plenty of booths and crowds of people eager to shop outdoors and support the community even in the middle of winter. Those who have frequented them for years know January is not a great month for fruits. The selection is limited mainly to citrus. It is not the season for peaches, plums, melons, pineapple, berries, or apples. Squeezing between the crowds reveals half-empty shelves with very few options.

That is precisely what buyers are facing at the start of 2024. The Orange County housing shelves are half empty. It is tough being a buyer looking for a home today with higher mortgage rates and very few options to purchase. Demand is muted due to affordability constraints and fewer FOR-SALE signs. Still, the inventory crisis eclipses today’s diminished demand, resulting in a market that already feels hot at the start of January. 

After a late but muted inventory peak in 2023 at 2,496 homes, the lowest peak since tracking began in 2004, the inventory dropped by 28% to where it sits today at 1,785. That is the second-lowest start to a year behind 2022. There were 42% more homes available last year, with 2,530 homes available, which is still very low compared to long-term averages. The average start from 2013 through 2020 was 4,421, a staggering 147% more. That is an extra 2,636 available homes. Contributing to the supply scarcity is the fact that fewer homeowners are willing to give up their underlying, low, fixed-rate mortgages. In 2023, there were 16,151 missing FOR-SALE signs compared to the 3-year average before COVID (2017 to 2019), 41% fewer. Mortgage rates are anticipated to drop this year, and the further they fall, the more homeowners will be more inclined to sell their homes. 

With a higher mortgage rate environment and far fewer homes coming on the market, demand, a snapshot of the last 30 days of pending sales activity, is at its lowest level to start a year since tracking began 20 years ago, only 861. Last year was the prior low with a demand reading of 900 pending sales, an extra 39 or 5%. As rates drop this year, demand readings will increase due to more available homes and improving home affordability. 

Today, demand may be at record low levels to start a year, even lower than last year, but when it is combined with a catastrophically low inventory, the Expected Market Time (the number of days to sell all Orange County listings at the current buying pace) is pretty hot compared to pre-pandemic levels. It may not be as insane as 2021 and 2022, but it is considerably hotter than what is considered “normal.” The long-term average start before COVID (2013 to 2022) was an Expected Market Time of 91 days, an additional 29 days, nearly a month longer. 

The Orange County housing market will thaw from the holidays and improve from here. Cyclically, far more homes will be placed on the market in January and February compared to November and December, the cycle lows yearly. Buyer demand will increase with the distractions of the holidays in the rearview mirror and more homes entering the fray. Further fueling the increase is how rates are now hovering around 6.75% today, after remaining above 7% since the end of July and even breaching 8% in October. The housing market’s direction is predicated on the direction of mortgage rates and home affordability. As rates drop, affordability will eventually improve enough to instigate more demand. Mortgage rates will gradually fall as the economy slows this year and inflation continues to fall.

ATTENTION BUYERS: Waiting for the market to slow and negotiations to line up in a buyer's favor is not the answer. For the market to lean in favor of buyers, there needs to be considerably more homes available to purchase compared to weak demand. Unfortunately, there is a chronic scarcity of homes with FOR-SALE signs in the yard. This will not suddenly change anytime soon based on all current trends. With mortgage rates anticipated to drop further this year, there will be increased buyer competition with increased home affordability. Yes, more homes will opt to sell as rates drop, but the more robust demand will offset any increase. Instead, buyers should pursue a purchase with patience and steadfast determination. It may take several offers to find success, but it is that kind of persistence that is ultimately rewarded with the keys to a new home. 

ATTENTION SELLERS: Take advantage of the hotter market by pricing a home close to the last comparable or pending sale. Careful pricing will allow a seller to tap into all the buyers waiting for every home that hits the market. A realistic price will allow a seller to attract immediate interest. Sellers who stretch the asking price too much and grossly overprice will result in wasted market time and less activity as the price is adjusted down the road. In this market, it is best to take advantage of the buyer pool that is carefully watching and waiting for every new home that matches their search requirements.

Active Listings

The active inventory dropped by 4% in the past couple of weeks.

The active listing inventory dropped by 77 homes in the past two weeks, down 4%, and now sits at 1,785, its lowest level since April 2022. It was the second lowest reading to start a year since tracking began in 2004, only behind 2022’s 1,100 homes. The inventory dropped to its current catastrophically low level because November and December are when the fewest homeowners come onto the market and opt to sell their homes. It is also when many unsuccessful sellers pull their homes off the market to enjoy the holidays. Further aggravating the issue is that homeowners are unwilling to sell and are hunkering down. From here, expect the inventory to remain muted through January. Last year, the inventory did not rise until April due to more favorable rates and the hunkering-down effect. This year could be more of the same, depending on the direction of mortgage rates. Only time will tell. 

Last year, the inventory was 2,530 homes, 42% higher, or 745 more. The 3-year average before COVID (2017 through 2019) was 4,665, an additional 2,880 homes, or 151% extra, more than double where it stands today. 

Homeowners continue to “hunker down” in their homes, unwilling to move due to their current underlying, locked-in, low fixed-rate mortgage. For December, 962 new sellers entered the market in Orange County, 532 fewer than the 3-year average before COVID (2017 to 2019), 36% less. Last year, there were 1,028 new sellers, 7% more than today. It will be much easier to isolate when more sellers finally enter the fray in the future, which is anticipated as rates drop. 

Demand
Demand plunged by another 18% in the past couple of weeks. 

Demand, a snapshot of the number of new pending sales over the prior month, plunged from 1,113 to 861 in the past couple of weeks, down 192 pending sales, or 18%, its lowest initial January reading since tracking began in 2004. This two-week plunge is typical for this time of year. This low demand reading is due to sky-high mortgage rates and very few homes on the market. Demand readings will improve as more homes come on the market. It will dramatically increase over the next couple of months and further increase when rates drop to between 6% and 6.5% when the U.S. economy cools later this year.

Last year, demand was 900, 5% higher than today, or an extra 39 pending sales. The 3-year average before COVID (2017 to 2019) was 1,391 pending sales, 32% more than today, or an additional 530.

With demand plunging compared to the drop in supply, the Expected Market Time (the number of days to sell all Orange County listings at the current buying pace) increased from 59 to 62 days in the past couple of weeks. Last year, the Expected Market Time was 84 days, slower than today. The 3-year average before COVID was 104 days, much slower than today. 

Luxury End

The luxury market has not changed much in the past couple of weeks. 

In the past couple of weeks, the luxury inventory of homes priced above $2 million decreased from 664 to 620 homes, down 44, or 7%. Luxury demand decreased by five pending sales, down 4%, and now sits at 115. With supply falling slightly faster than demand, the Expected Market Time for luxury homes priced above $2 million decreased from 166 to 162 days. At 162 days, the luxury market is substantially slower than the 47-day Expected Market Time in the lower ranges (less than $2 million). Careful pricing and plenty of patience are the best approaches to today’s luxury market.

Year over year, luxury demand is up by 24 pending sales or 26%, and the active luxury listing inventory is up by 41 homes or 7%. Last year’s Expected Market Time was 191 days, slower than today.

For homes priced between $2 million and $4 million, the Expected Market Time in the past two weeks decreased from 121 to 105 days. For homes priced between $4 million and $6 million, the Expected Market Time increased from 235 to 357 days. For homes priced above $6 million, the Expected Market Time increased from 293 to 374 days. At 374 days, a seller would be looking at placing their home into escrow around January 2025.

Orange County Housing Summary

· The active listing inventory in the past couple of weeks decreased by 77 homes, down 4%, and now sits at 1,785, its second-lowest start to a year since tracking began in 2004, only behind 2022. In December, 36% fewer homes came on the market compared to the 3-year average before COVID (2017 to 2019), 532 less. Last year, there were 2,530 homes on the market, 745 more homes, or 42% higher. The 3-year average before COVID (2017 to 2019) was 4,665, or 151% extra, more than double.

· Demand, the number of pending sales over the prior month, plunged by 192 pending sales in the past two weeks, down 18%, and now totals 861, its lowest initial demand reading since tracking began in 2004. Last year, there were 900 pending sales, 5% more than today. The 3-year average before COVID (2017 to 2019) was 1,391, or 32% more. 

· With demand plunging compared to the drop in supply, the Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, increased from 53 to 62 days in the past couple of weeks. It was 84 days last year, slower than today. The 3-year average before COVID (2017 to 2019) was 104 days, considerably slower than today.

· For homes priced below $750,000, the Expected Market Time increased from 37 to 39 days. This range represents 19% of the active inventory and 31% of demand. 

· For homes priced between $750,000 and $1 million, the Expected Market Time increased from 36 to 43 days. This range represents 15% of the active inventory and 22% of demand.

· For homes priced between $1 million and $1.25 million, the Expected Market Time increased from 34 to 47 days. This range represents 10% of the active inventory and 13% of demand.

· For homes priced between $1.25 million and $1.5 million, the Expected Market Time increased from 38 to 55 days. This range represents 9% of the active inventory and 11% of demand.

· For homes priced between $1.5 million and $2 million, the Expected Market Time decreased from 56 to 72 days. This range represents 12% of the active inventory and 10% of demand.

· For homes priced between $2 million and $4 million, the Expected Market Time in the past two weeks decreased from 121 to 105 days. For homes priced between $4 million and $6 million, the Expected Market Time increased from 235 to 357 days. For homes priced above $6 million, the Expected Market Time increased from 293 to 374 days. 

· The luxury end, all homes above $2 million, account for 35% of the inventory and 13% of demand.

· Distressed homes, both short sales and foreclosures combined, comprised only 0.6% of all listings and 0.3% of demand. Only six foreclosures and four short sales are available today in Orange County, with ten total distressed homes on the active market, up one from two weeks ago. Last year, 15 distressed homes were on the market, similar to today. There      were 1,427 closed residential resales in November, identical to November  2022. November marked a 13% drop compared to October 2023. The sales-to-list      price ratio was 98.8% for all of Orange County. Foreclosures accounted for 0.1% of all closed sales, and there were no closed short sales. That means  that 99.9% of all sales were good ol’ fashioned sellers with equity.

Orange County Housing Report: December 11, 2023

Split Market

It is the telling of two different markets, the incredibly hot lower price ranges due to low inventory versus the sluggishness of the luxury market and longer market times. 

Luxury is Much Slower

With an Expected Market Time of 168 days, nearly six months, the luxury housing market in Orange County is much slower than the lower ranges. 

There is no wait time at the TSA security checkpoint at LAX. The drive-thru at Starbucks has no cars. The local favorite restaurant, typically booked for weeks ahead of time, has a table for two available for Friday night. It is sunny with no rain in the forecast, yet there is no wait when pulling up at the car wash. That just about sums up Orange County’s luxury housing market: there are simply not enough buyers compared to the number of sellers. Demand is low. There is no line of buyers waiting for another luxury home to be placed on the market. 

The Los Angeles Times detailed how “Southern California home values near record despite the high cost of borrowing.” CNBC touts that “Home prices kept rising even as mortgage rates surged.” Yahoo Finance describes “Why the current housing market is a 'seller's paradise.'” It is understandable how luxury sellers have high expectations. The trouble is that these headlines describe the overall market and not luxury. Luxury today is a much different segment of housing.

The headlines can be confusing. They seem to paint a strong housing market for all price ranges. They are NOT reporting on the luxury market. The housing market is split between luxury and the rest of the market. Luxury housing, the top 10% of closed sales, homes priced above $2 million, is sluggish. Weekend open houses are not flooded with potential buyers. Multiple offers are not as common as the lower ranges. It is not unusual to go a week, or even weeks, without a single buyer touring a luxury home. There is not as much buyer competition.

The Orange County housing market has cooled noticeably since the spring. From the end of April to today, the overall market slowed from an Expected Market Time (the number of days between coming on the market and pending status) of 37 to 59 days. On average, it takes 22 more days to sell a home. Yet, the differences are staggering in splitting the market between non-luxury and luxury. For homes priced below $2 million, this range has decelerated from 28 to 44 days, adding 16 days, a little over two weeks to the Expected Market Time. Yet, the luxury market moved from 101 days in the Spring to 168 days today, an extra 67 days. The lower ranges take a little over six weeks to sell today compared to 24 weeks for luxury, nearly six months. 

Compared to last year’s 84-day Expected Market Time, the overall market is 25 days faster. The lower ranges are 29 days faster than last December’s 73 days. Luxury was 192 days last year, 24 days slower than today’s 168 days level. Thus, the housing market is stronger this December compared to last year. 

The sluggishness of luxury today still feels a lot like a buyer’s market. Yet prices are not falling in the upper ranges. Luxury prices do not fall much at all when the market decelerates like it has this year because sellers stick to their guns and do not adjust their asking price as often as the lower ranges. Most high-end sellers state that they “don’t have to sell.” It is common for homes to sit for a very long time without a price reduction.

As is true in all price ranges, success is determined by motivation and a seller’s willingness to price their home according to its Fair Market Value. This value is calculated by carefully scouring all comparable pending and recent closed sales. Motivated sellers are unafraid to listen to the market and adjust the asking price when appropriate. Sellers willing to sharpen their pencil when it comes to price are much more likely to find success and achieve their objective in selling. 

For most luxury sellers, it takes a lot longer to sell their homes successfully. There are a limited number of buyers looking for a luxury home. Sellers with the best price, terms, condition, location, and upgrades will stand out among the competition.

The market is split between luxury and the rest of the market. Luxury expectations should not be for instantaneous success, even with the right price. While it may be true for buyers looking to purchase a detached home below $1 million, there is not a line of buyers waiting to pounce on the next luxury home to come on the market. Instead, these sellers should focus on the data, statistics, and information that will help them navigate the more challenging luxury end.  

Active Listings

The active inventory dropped by another 6% in the past couple of weeks.

The active listing inventory plunged by 129 homes in the past two weeks, down 6%, and now sits at 2,180, its lowest level since May. It was the second largest drop of the year behind two weeks ago. Orange County is deep within the Holiday Market. December is when the fewest homeowners come onto the market and opt to sell their homes. It is also when many unsuccessful sellers pull their homes off the market to enjoy the holidays, ultimately postponing their real estate desires for a different time. Expect the inventory to plunge through the end of this year. 

Last year, the inventory was 3,182 homes, 46% higher, or 1,022 more. The 3-year average before COVID (2017 through 2019) is 4,988, an additional 2,808 homes, or 129% extra, more than double where it stands today.  

Homeowners continue to “kick back” in their homes, unwilling to move due to their current underlying, locked-in, low fixed-rate mortgage. For November, 1,511 new sellers entered the market in Orange County, 743 fewer than the 3-year average before COVID (2017 to 2019), 33% less. The kick back trend deepened in the second half of 2022. Year-over-year comparisons are much more relevant today. Last year, there were 1,521 new sellers, nearly identical to today. It will be much easier to isolate when more sellers finally enter the fray. 

Demand

Demand dropped by another 5% in the past couple of weeks. 

Demand, a snapshot of the number of new pending sales over the prior month, decreased from 1,173 to 1,113 in the past couple of weeks, down 60 pending sales, or 5%, its lowest December level since tracking began in 2004. Demand is tracking last year’s low anemic levels but is not plunging like it typically does at the end of the year. This is because current demand readings are at inherent levels. There are always buyers willing to purchase in every market, regardless of the time of year. Expect demand to fall to its lowest level upon ringing in 2024. Demand will quickly rise starting in mid-January, the Winter Market. 

Last year, demand was at 1,133, 2% higher than today, or an extra 20 pending sales. The 3-year average before COVID (2017 to 2019) was 1,774 pending sales, 59% more than today, or an additional 661.

With supply and demand falling at similar rates, the Expected Market Time (the number of days to sell all Orange County listings at the current buying pace) remained unchanged at 59 days in the past couple of weeks. Last year, the Expected Market Time was 84 days, slower than today. The 3-year average before COVID was 87 days, also slower than today. 

Luxury End

The luxury market has not changed much in the past couple of weeks. 

In the past couple of weeks, the luxury inventory of homes priced above $2 million decreased from 776 to 745 homes, down 31, or 4%. Luxury demand decreased by nine pending sales, down 6%, and now sits at 133. With demand falling slightly faster than supply, the Expected Market Time for luxury homes priced above $2 million increased from 164 to 168 days, its highest level since January. At 168 days, the luxury market is far from instant and is much slower than the lower ranges. Careful pricing and plenty of patience are the best approaches to today’s luxury market.

Year over year, luxury demand is up by 24 pending sales or 22%, and the active luxury listing inventory is up by 47 homes or 7%. Last year’s Expected Market Time was 192 days, much slower than today.

For homes priced between $2 million and $4 million, the Expected Market Time in the past two weeks increased from 115 to 122 days. For homes priced between $4 million and $6 million, the Expected Market Time decreased from 240 to 213 days. For homes priced above $6 million, the Expected Market Time decreased from 444 to 372 days. At 372 days, a seller would be looking at placing their home into escrow around December 2024.

Orange County Housing Summary

• The active listing inventory in the past couple of weeks plunged by 129 homes, down 6%, and now sits at 2,180, its lowest level since May. In November, 33% fewer homes came on the market compared to the 3-year average before COVID (2017 to 2019), 743 less. Last year, there were 3,182 homes on the market, 1,002 more homes, or 46% higher. The 3-year average before COVID (2017 to 2019) was 4,988, or 129% extra, more than double.

• Demand, the number of pending sales over the prior month, decreased by 60 pending sales in the past two weeks, down 5%, and now totals 1,113, its lowest December level since tracking began in 2004. Last year, there were 1,133 pending sales, 2% more than today. The 3-year average before COVID (2017 to 2019) was 1,774, or 59% more. 

• With supply and demand dropping at similar rates, the Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, remained unchanged at 59 days in the past couple of weeks. It was 84 days last year, slower than today. The 3-year average before COVID (2017 to 2019) was 87 days, also slower than today.

• For homes priced below $750,000, the Expected Market Time increased from 41 to 45 days. This range represents 19% of the active inventory and 26% of demand. 

• For homes priced between $750,000 and $1 million, the Expected Market Time increased from 38 to 42 days. This range represents 16% of the active inventory and 22% of demand.

• For homes priced between $1 million and $1.25 million, the Expected Market Time decreased from 44 to 36 days. This range represents 10% of the active inventory and 16% of demand.

• For homes priced between $1.25 million and $1.5 million, the Expected Market Time decreased from 44 to 39 days. This range represents 8% of the active inventory and 12% of demand.

• For homes priced between $1.5 million and $2 million, the Expected Market Time decreased from 68 to 65 days. This range represents 12% of the active inventory and 11% of demand.

• For homes priced between $2 million and $4 million, the Expected Market Time in the past two weeks increased from 115 to 122 days. For homes priced between $4 million and $6 million, the Expected Market Time decreased from 240 to 213 days. For homes priced above $6 million, the Expected Market Time decreased from 444 to 372 days.

• The luxury end, all homes above $2 million, account for 35% of the inventory and 13% of demand.

• Distressed homes, both short sales and foreclosures combined, comprised only 0.4% of all listings and 0.2% of demand. Only five foreclosures and four short sales are available today in Orange County, with nine total distressed homes on the active market, up one from two weeks ago. Last year, 12 distressed homes were on the market, similar to today.

• There were 1,632 closed residential resales in October, 5% less than October 2022’s 1,726 closed sales. October marked a 1% drop compared to September 2023. The sales-to-list price ratio was 98.9% for all of Orange County. Foreclosures accounted for 0.1% of all closed sales, and there were no closed short sales. That means that 99.9% of all sales were good ol’ fashioned sellers with equity.

Orange County Housing Report: 

November 13, 2023

Housing is about to shift to the Holiday Market when both the supply of available homes and purchase demand falls to their lowest levels of the year on New Year’s Day. 

The Holiday Market

With all the distractions of the holidays, supply and demand will plunge through the end of the year. 

Immediately after all the little ones enjoy going door-to-door trick-or-treating, all the Halloween decorations come down in the snap of a finger. It is the first sign that a holiday downshift is upon us. Daylight savings ends in early November; clocks roll back an hour, and suddenly, it is dark at 5 PM. This is yet another sign. Starbucks cups, holiday romantic movies on Netflix, and neighbors’ early installation of Christmas lights are all further indications that the festivities and distractions of the season are about to hit the housing market. 

With Thanksgiving next week, the diversion of family gatherings, holiday parties, plenty of shopping, eggnog, and nonstop festive music has arrived. Orange County transitions to the Holiday Market starting this week in the blink of an eye. The inventory plunges, demand plunges, and the Expected Market Time will not change much this year. This is the season where many sellers and buyers will place their real estate goals and needs on pause to enjoy the merriment. 

Last year, the number of available homes grew all year due to surging mortgage rates until it peaked in August at 4,069 homes, reaching levels last seen 22 months earlier in October 2020. After peaking, the inventory dropped to 3,581 to start November, shedding 25%. It was hard to imagine that it could fall further, but during the Holiday Market, November through the New Year, it plunged another 29%, reaching 2,530 during the first week of January. The 3-year average inventory drop before COVID (2017 to 2019) was 23%. 

Demand, a snapshot of the number of new pending sales over the prior month, tumbled by 25%, from 1,202 to 900 pending sales during last year’s Holiday Market. The 3-year average dive in demand prior to COVID was 37%. The Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, dropped from 89 to 84 days last year, shedding 5 days. That was far different than the 19-day rise prior to COVID. The difference is because of chronically low inventory levels compared to pre-COVID years. 

Contributing to the drop in inventory is the rise in the number of homes pulled off the market in November and December. Last year, 1,370 sellers threw in the proverbial towel, unable to find success and opting to place their desire to sell on hold until a later date. That is more than half the current inventory. The pre-COVID 3-year average was 1,977 when many more homes were available. 

The inventory drops during the holidays because fewer homeowners list their homes at the end of the year. The fewest sellers enter the fray in December, 64% less than May, the peak month with the greatest number of new sellers. The second fewest come on in November, 46% less than May’s peak. Fewer FOR-SALE signs combined with sellers throwing in the towel pave the way for the inventory to drop substantially. 

Demand drops, and many buyers sideline their home-buying efforts. The buyers that continue their search are faced with a diminishing number of available homes, also contributing to a drop in pending sales. Buyers cannot purchase what is unavailable, and the entry levels have been starved for fresh inventory all year. 

The inventory has not changed much from the start of the year, actually falling for the first several months. It appeared as if it had reached a normal peak in August at 2,475, but due to rates rising above 7% since July and even eclipsing 8% last month, Orange County just reached a new peak this week at 2,496 homes. Yet, it is still the second lowest level to start November since tracking began in 2004, behind 2021. From here, expect the inventory to drop to just under 1,800 homes to start 2024.

Demand is currently at 1,223 pending sales, similar to last year’s level at the start of November. Expect demand to drop to around 900 pending sales and match the start of this year, the lowest start since tracking. The Expected Market Time will not change much from now through the end of the year and will start January at around 59 days, much faster than the 84-day start to this year. 

The Orange County Holiday Market has officially arrived with Thanksgiving a little more than a week away. Many sellers, prospective sellers, and buyers will divert their attention from housing to enjoy the yuletide season. 

Active Listings

The active inventory climbed by 4% and hit a new, late peak.

The active listing inventory increased by 90 homes in the past two weeks, up 4%, and now sits at 2,496 homes, its highest level since January. It appeared as if Orange County reached an inventory peak at the start of August at 4,475, but this late surge eclipsed that level and reached a new peak. It was not behaving like a normal peak anyhow, not changing much from week to week. Typically, the inventory slowly falls after peaking, gaining momentum as the end of the year draws closer. Now that the Holiday Market has arrived, today will be the peak because November and December are months with the fewest homes coming on the market, and many unsuccessful sellers throw in the towel and pull their homes off the market. As a result, the inventory will plunge from now until New Year’s Day. 

Last year, the inventory was 3,581 homes, 43% higher, or 1,081 more. The 3-year average before COVID (2017 through 2019) is 5,822, an additional 3,326 homes, or 133% extra, more than double where it stands today. 

Homeowners continue to “kick back” in their homes, unwilling to move due to their current underlying, locked-in, low fixed-rate mortgage. For October, 1,910 new sellers entered the market in Orange County, 1,093 fewer than the 3-year average before COVID (2017 to 2019), 36% less.

Demand
Demand dropped by another 5% in the past couple of weeks. 

Demand, a snapshot of the number of new pending sales over the prior month, decreased from 1,284 to 1,223 in the past couple of weeks, down 61 pending sales, or 5%. Demand levels are very low, inherent levels. This is due to the time of the year, with fewer homes coming on the market. It is also because of the sky-high mortgage rate environment remaining stubbornly above 7% and even surpassing 8% last month. As sellers pull their homes off the market and fewer homeowners opt to sell in November and December, demand will continue to slowly fall and reach a bottom on New Year’s Day. 

Last year, demand was at 1,202, 2% lower than today, or 21 fewer. The 3-year average before COVID (2017 to 2019) was 2,139 pending sales, 75% more than today, or an additional 916.

With the supply rising and demand falling, the Expected Market Time (the number of days to sell all Orange County listings at the current buying pace) increased from 56 to 61 days in the past couple of weeks, its highest level since the January. Last year, the Expected Market Time was 89 days, slower than today. The 3-year average before COVID was 85 days, also slower than today. 

Luxury End

The luxury market slowed considerably in the past couple of weeks. 

In the past couple of weeks, the luxury inventory of homes priced above $2 million increased from 807 to 819 homes, up 12, or 1%. Luxury demand decreased by 30 pending sales, down 16%, and now sits at 162, its lowest level since February. With inventory rising and demand plunging, the Expected Market Time for luxury homes priced above $2 million increased from 126 to 152 days, its highest level since January. At 152 days, the luxury market has slowed substantially since April when it was 101 days, a little over 3 months. Luxury sellers must carefully approach the housing market.

Year over year, luxury demand is up by 27 pending sales or 20%, and the active luxury listing inventory is up by 44 homes or 6%. Last year’s Expected Market Time was 172 days, slower than today.

For homes priced between $2 million and $4 million, the Expected Market Time in the past two weeks increased from 87 to 103 days. For homes priced between $4 million and $6 million, the Expected Market Time increased from 175 to 231 days. For homes priced above $6 million, the Expected Market Time increased from 385 to 469 days. At 469 days, a seller would be looking at placing their home into escrow around February 2025.

Orange County Housing Summary

· The active listing inventory in the past couple of weeks increased by 90 homes, up 4%, and now sits at 2,496. In October, 36% fewer homes came on the market compared to the 3-year average before COVID (2017 to 2019), 1,093 less. Last year, there were 3,581 homes on the market, 1,085 more homes, or 43% higher. The 3-year average before COVID (2017 to 2019) was 5,822, or 133% more, more than double.

· Demand, the number of pending sales over the prior month, decreased by 61 pending sales in the past two weeks, down 5%, and now totals 1,223. Last year, there were 1,202 pending sales, 2% fewer than today. The 3-year average before COVID (2017 to 2019) was 2,139, or 75% more. 

· With the inventory rising and demand falling, the Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, increased from 56 to 61 days in the past couple of weeks, its highest level since January. It was 89 days last year, slower than today. 

· For homes priced below $750,000, the Expected Market Time increased from 42 to 45 days. This range represents 18% of the active inventory and 25% of demand. 

· For homes priced between $750,000 and $1 million, the Expected Market Time increased from 37 to 41 days. This range represents 16% of the active inventory and 24% of demand.

· For homes priced between $1 million and $1.25 million, the Expected Market Time increased from 35 to 46 days. This range represents 10% of the active inventory and 13% of demand.

· For homes priced between $1.25 million and $1.5 million, the Expected Market Time decreased from 48 to 46 days. This range represents 10% of the active inventory and 13% of demand.

· For homes priced between $1.5 million and $2 million, the Expected Market Time remained unchanged at 70 days. This range represents 13% of the active inventory and 12% of demand.

· For homes priced between $2 million and $4 million, the Expected Market Time in the past two weeks increased from 87 to 103 days. For homes priced between $4 million and $6 million, the Expected Market Time increased from 175 to 231 days. For homes priced above $6 million, the Expected Market Time increased from 385 to 469 days.

· The luxury end, all homes above $2 million, account for 33% of the inventory and 13% of demand.

· Distressed homes, both short sales and foreclosures combined, comprised only 0.2% of all listings and 0.1% of demand. Only four foreclosures and two short sales are available today in Orange County, with six total distressed homes on the active market, up two from two weeks ago. Last year, seven distressed homes were on the market, similar to today.

• There      were 1,632 closed residential resales in October, 5% less than October      2022’s 1,726 closed sales. October marked a 1% drop compared to September      2023. The sales-to-list price ratio was 98.9% for all of Orange County. Foreclosures      accounted for 0.1% of all closed sales, and there were not closed short      sales. That means that 99.9% of all sales were good ol’ fashioned sellers with equity.