Could it be graduations, the end of the tax credit, Europe’s influence, a temporary housing lull? Only time will tell, but the Orange County housing market has gone over a speed bump and has slowed considerably.
Housing Demand
Over the past month, housing demand has dropped by 17%.
Demand, the number of new pending sales over the prior month, decreased by 676. After dropping 5% a couple of weeks ago, the dip in demand has gained a bit of momentum. This could be the result of the end of the tax credit, with first time home buyers rushing to purchase with the end of the tax credit on April 30th of last month. Cyclically, there is a small lull in the market due to the graduation season, but never to this level. There has been so much attention paid to the European debt crisis, buyers could be waiting for clarity in recent economic forecasts, they seem to be all over the board. The speed bump in demand has affected every price range. WARNING: if you are a buyer, the lower price ranges are still incredibly hot. Homes priced below $1 million have an expected market time of 2.52 months. That is off from 2.12 a couple of weeks ago, but still incredibly hot. Buyers can expect multiple offers and a tremendous amount of competition. The upper end, homes priced above $1 million have an expected market time of 8.19 months, the higher the price range, the slower the market.
Active Listing Inventory
From the beginning of the year, the inventory has slowly increased, unabated.
Thus far this year, the active inventory has increased from 7,165 homes to 9,839 homes today, a 37% increase. In just the past couple of weeks the inventory has risen by 283 homes, a 3% increase. This is partially due to a slowing in demand, but it also has a lot to do with many sellers with equity in their homes testing the market with unrealistic pricing. 2006 and 2007 were plagued with unrealistic homeowners who unsuccessfully attempted to sell their homes by trying to sell their homes for prices well above the most recent comparable and pending sales. In 2008 and 2009, homeowners knew that the market was difficult and success
Foreclosures and Short Sales
The number of active distressed homes on the market has reached June 2009 levels.
Like the total active listing inventory, the distressed inventory has slowly increased from 2,555 total foreclosures and short sales at the beginning of the year to 2,991 today, a 17% increase. Not quite the 37% increase like the total inventory, but, none-the-less, significant. Foreclosures have increased from 375 at the beginning of the year to 533 today, a 42% increase. Short sales have increased from 2,180 to 2,458, a 13% increase. There have been more foreclosures to hit the market thus far this year, but there are reports from the trenches that many banks have placed some of their foreclosed homes on the market at unrealistic levels and are not moving. Do not get me wrong, distressed sales are still ON FIRE. It’s like going from scorching105 degree temperatures to 95 degrees, still HOT. The number of active distressed homes on the market, all short sales and foreclosures combined, increased by 97 homes in the past two weeks and now total 2,991, or 30.3% of the current active inventory. The number of foreclosures within the active listing inventory increased by 54 homes in the past two weeks from 479 to 533. The expected market time for foreclosures is 1.58 months, an extremely HOT seller’s market. Short sales, where a homeowner attempts to sell a home for less than the total outstanding loans against a home, requiring lender approval, increased by 43 homes over the past two weeks and now total 2,458. The expected market time for short sales is 1.97 months, also a HOT seller’s market. Everybody is still looking for a deal, so there’s a lot of competition in purchasing distressed homes.
Interest Rates
Interest rates surprisingly remain at historically low levels.
Interest rates were forecast to start to climb after the Federal government stopped purchasing pools of loans in April, but that has not come to fruition so far. This has a lot to do with the unexpected European financial debt crisis. International investing has turned to a flight to safety, and purchasing United States Treasury Bonds has been at the top of the list. When this happens, interest rates drop. All forecasts still point to an increase in interest rates, about one point in the next year, but the increase has been temporarily stalled. Buyers can still take advantage of interest rates that will not return to the current historically low levels for many years to come.
Originally Posted at Orange County Real Estate
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