End of Year Expectations
Seven more weeks until the slowest season of the year starts, the Holiday Market.
Before the blink of an eye, everyone will be gathering for a day of gratitude, family, feasting, and football. That is correct, Thanksgiving is less than two months away. From there, it will be turkey leftovers, calendars filled with holiday parties, Amazon, UPS, and FedEx trucks will be parked in front of every door, and families will gather again and swap gifts with the ones they love. The holiday season is around the corner. From now through the week before Thanksgiving, it is the LAST HURRAH before housing transitions from the Autumn Market to the Holiday Market, the slowest time of the year for real estate in terms of supply and demand. The holidays are filled with distractions. As a result, the hunt for a home takes a back seat for many buyers and fewer homeowners take advantage of selling their homes regardless of how incredibly hot the rest of the year will be for real estate. The overall speed of the market cools slightly, and the market time increases a little bit.
The supply of homes available to purchase will plunge as many unsuccessful sellers throw in the towel to enjoy the holidays and hold off until the Spring Market. It is hard to imagine that there are that many homeowners lingering on the market, unable to sell, given how hot housing is right now. Yet, there are 513 sellers today, 24% of the current active inventory, who have been exposed to the market for more than two months. Also, November and December are when the fewest number of homeowners opt to list their homes for sale during the year. The five-year average number of homes coming on the market from 2015 to 2019 (intentionally omitting 2020 due to the skew from COVID) for November is 2,275 homes, 46% less than the annual height in May of 4,177. In December it drops to 1,533 homes, 63% less than the height in May. With both sellers throwing in the towel and fewer homeowners coming on the market, the inventory plunges. From 2015 to 2019 the inventory dropped, on average, by 23% by year’s end.
With the inventory dropping, there are fewer available options for buyers to choose from. Many buyers also place their home shopping desires on hold while they enjoy the holiday season. As a result, demand, the number of new escrows over the prior month, plunges. From 2015 to 2019 demand sank by 35% to its lowest levels of the year by year’s end.
As demand plunges a little bit more than the inventory, the Expected Market Time (the amount of time between pounding in the FOR-SALE sign and opening escrow) increases slightly. Today’s ultra-low, insanely hot 26 day Expected Market Time may eclipse 30 days by the time everyone rings in a New Year. This means that for those buyers and sellers that do participate in the real estate market during the holidays, they can expect housing to continue to soar at an insane pace with a ton of showings, bidding wars with multiple offers, and homes selling for above their asking prices. It will continue to be a white-Hot Seller’s Market.
Until the start of the Holiday Market in mid-November, it remains the Autumn Market. Autumn is when both the inventory and demand drop slightly. There are still quite a few more homes that come on the market during October compared to the average between November and December, 55% more. Demand will remain elevated. Today’s incredibly low 3% mortgage rate continues to fuel demand. Rates are not expected to change much for the remainder of the year as well.
ATTENTION BUYERS: The incredibly crazy, Hot Seller’s Market persists and that will not change for the remainder of the year, even with demand plunging during the holidays. Remember, it is not just demand that is plunging, the number of available homes to purchase will be plunging as well. To wait until later in the year for a “deal” during the “slowest time of the year for real estate” simply does not make sense. The temperature of housing will not feel much different in December compared to today.
ATTENTION SELLERS: It really is the last call to cash in on the 2021 housing market and find success. Sellers who are clearly overpriced will run out of time and run into an end of the year with drastically fewer participating home buyers due to the holidays. The time to be accurately priced and taking full advantage of maximum market exposure is right now, today.
Orange County Housing Summary
• The active listing inventory shed 110 homes in the past two weeks, down 5%, and now totals 2,179 homes. From September 1st through the 15th, there were 12% fewer homes that came on the market compared to the 3-year average between 2017 to 2019 (2020 was skewed due to COVID-19), 184 less. Last year, there were 4,153 homes on the market, 1,974 additional homes, or 91% more.
• Demand, the number of pending sales over the prior month, decreased by 102 pending sales in the past two weeks, down 4%, and now totals 2,521. Last year, there were 3,254 pending sales, 29% more than today due to a delay in the Spring Market because of COVID.
• With large drops in both supply and demand, the Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, remained unchanged at 26 days in the past couple of weeks, an extremely Hot Seller’s Market (less than 60 days). It was at 38 days last year slightly slower than today.
• For homes priced below $750,000, the market is a Hot Seller’s Market (less than 60 days) with an Expected Market Time of 23 days. This range represents 30% of the active inventory and 34% of demand.
• For homes priced between $750,000 and $1 million, the Expected Market Time is 20 days, a Hot Seller’s Market. This range represents 20% of the active inventory and 27% of demand.
• For homes priced between $1 million to $1.25 million, the Expected Market Time is 19 days, a Hot Seller’s Market. This range represents 9% of the active inventory and 13% of demand.
• For homes priced between $1.25 million to $1.5 million, the Expected Market Time is 23 days, a Hot Seller’s Market. This range represents 8% of the active inventory and 9% of demand.
• For homes priced between $1.5 million and $2 million, the Expected Market increased from 28 to 29 days. For homes priced between $2 million and $4 million, the Expected Market Time decreased from 43 to 41 days. For homes priced above $4 million, the Expected Market Time increased from 122 to 135 days.
• The luxury end, all homes above $1.5 million, accounts for 32% of the inventory and 17% of demand.
• Distressed homes, both short sales and foreclosures combined, made up only 0.5% of all listings and 0.3% of demand. There are only 8 foreclosures and 3 short sales available to purchase today in all of Orange County, 11 total distressed homes on the active market, up 2 from two weeks ago. Last year there were 16 total distressed homes on the market, similar to today.
• There were 3,119 closed residential resales in August, 1% less than August 2020’s 3,153 closed sales. August marked a 3% drop compared to July 2021. The sales to list price ratio was 101.3% for all of Orange County. Foreclosures accounted for just 0.2% of all closed sales, and short sales accounted for 0.1%. That means that 99.7% of all sales were good ol’ fashioned sellers with equity.
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