Orange County Housing Report
April 1, 2010
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Orange County Housing Demand is Picking Up Steam
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Call it a coincidence, but with the wet weather turning to sunshine, demand has dramatically increased. Demand, the number of new pending sales over the prior month, increased by 352 homes over the prior two weeks and now totals 3,622, an 11% increase. Demand has not been this high since the beginning of July, 2009. Demand is 375 pending sales stronger than last year at this time and 1,337 stronger than two years ago.
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Developing Trends: More short sales are being approved and are finally closing.
A short sale is when a seller owes more than the home is worth. When this occurs, the sale is subject to the lender(s) approval. The lender approval process can take anywhere from a few weeks to several months, with the vast majority taking several months. If the seller has more than one loan on the property, a short sale becomes much more difficult and lengthy. Ask most any buyer or REALTOR® involved in a short sale and you will quickly find that the short sale process is both frustrating and long. The good news is that a record number of short sales closed last month, 611, a 60% increase year over year, however the average length of time it takes to close a short sale is a major contributor to the record total pending sales count that now stands at 7,150. At the beginning of the year, the total pending sales count was at 5,864. It has increased by 1,286 pending sales so far in 2010, and will continue to increase until lenders start approving short sales in a more timely fashion. Short sales represent 26% of all sales activity. Sales of Foreclosed properties, on the other hand, dropped 59% year over year and only account for 15% of all activity.
Active Inventory Statistics: The active inventory continues a gradual incline.
Contrary to last year when the inventory only grew by 319 by mid-March before gradually falling for the rest of the year, the active inventory has grown by 1,618 homes so far in 2010. Over the past two weeks, the inventory has increased by 135 homes. That's the smallest increase thus far, a sign that the inventory may be leveling out. Last year the active inventory was at 11,026, 2,115 additional homes compared to today. Two years ago it was at 15,474, 6,563 additional homes. The expected market time for all of Orange County dropped from 2.68 months two weeks ago to 2.46 months today, a seller's market. Even though it is a seller's market, prices are not increasing that much because the distressed sales are keeping a lid on appreciation.
Distressed Inventory: Not much has changed in the distressed inventory.
The number of active distressed homes on the market, all short sales and foreclosures combined, increased by 19 homes to 2,814 and now represent 31.6% of the inventory. Last year at this time, there were 4,092 distressed homes on the market, representing 37.1% of the active inventory. The number of foreclosed homes for sale within the active listing inventory has increased by 24 homes in the past two weeks from 394 to 418. There are only 418 active foreclosed on the market in all price ranges in all of Orange County. The expected market time for foreclosed homes is an astonishing 1.03 months, an unbelievably HOT seller's market. The number of short sales within the active listing inventory has decreased by 5 homes and now total 2,396. The expected market time for short sales is 1.67 months, also a HOT seller's market.
Lower End Market vs. Upper End Market: The lower price ranges are on FIRE, but the top tier price ranges are FROZEN.
The upper and lower end markets are polar opposites. For all homes priced below $1 million, the expected market time is 2.02 months, a seller's market. This range accounts for 77% of the active listing inventory and 95% of demand. Homes priced below $500,000 have an expected market time of less than two months, the lower the price range, the crazier the market. Buyers in the lower price ranges are experiencing multiple offer situations, offers above the list price and homes that are sold off the market as quickly as they become available. For homes priced above $1 million, the expected market time is at 9.26 months, a frigid buyer's market. This range represents 23% of the active listing inventory, but only 5% of demand. Homes priced above $2 million have an expected market time in the double digits, a virtual standstill, the higher the price range, the slower the market. For example, above $4 million, there are 329 active listings with demand at only 8 homes. Based upon the current pace of activity, it would take 41 months to sell all 329 homes.
Home Buyer Tax Credits: California just approved a first time home buyer tax credit of $10,000 and a new home tax credit of $10,000 as well.
With the Federal first time home buyer tax credit set to sunset after April 30th (a sale must be pending by April 30th and close by June 30th), the state of California wants to help prop up demand with a first time home buyer tax credit for transactions that close escrow on or after May 1, 2010. The state $10,000 credit is spread out over three years. There is an additional short, but substantial, window of opportunity. Buyers who enter a contract to purchase by April 30, and who close escrow between May 1 and June 30, may, between federal and state, realize tax credits up to $18,000.
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Source: Steven Thomas, President, Altera Real Estate
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