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Buying or Selling... I Work for You!
Making Real Estate Simple!
Buying or Selling, I am here to help
Making Real Estate Simple!
Buying or Selling, I am here to help
Making Real Estate Simple!
Buying or Selling, I am here to help
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Housing Cracks April 18, 2022... Even though housing is insanely hot, trends have emerged that confirm that the Orange County housing market is starting to cool.
CRACK – The current active inventory has increased by 60% since mid-January. From January 20th through today, the number of available homes to purchase has risen from 1,080 to 1,732, up an astonishing 60%, or 652 additional homes. The inventory has struggled to grow since 2020, the start of the pandemic. It is the largest gain since 2019. Today’s level is still extremely anemic and far below normal levels, yet is a trend that demonstrates that not all homes are selling instantly. It will not be long before there are more homes on the market this year compared to 2021. Last year everything that was placed on the market was slammed into escrow. That is not the case today even with a muted number of homes coming on the market.
muted since the start of the year and has stalled within the past several weeks. Today’s demand is at 2,241 pending sales, down 27% compared to last year. The 3-year average demand reading prior to COVID (2017 to 2019) for this time of year was at 2,777 pending sales, 24% more than today. Demand readings have been muted by a lack of available homes and fewer homes coming on the market; yet, demand is still falling while the inventory is climbing. Typically, during the Spring Market, pending sales activity is firing on all cylinders, the busiest time of the year, and continues to climb until peaking between the end of April to the middle of May. Demand most likely already peaked at the end of March. It has not been this low in mid-April (ignoring the lockdowns of April 2020 that only initially impacted demand) since 2007 when it measured only 1,910 pending sales.
CRACK – A staggering 15% of all available homes to purchase today reduced their asking price.
While there are definite cracks in Orange County’s pandemic induced housing run, the market is still an insanely Hot Seller’s market. Due to an unprecedented spike in mortgage rates, new trends are emerging fast. These trends should be seen as cautionary flags in approaching the local housing market. Carefully pricing is rapidly becoming an essential ingredient to successfully selling. As these trends continue, if higher rates persist with duration, the market will only cool further. The housing market will not change overnight; it will evolve over time. This year still promises to be an excellent year for sellers, only a bit more challenging, necessitating a more cautious, deliberate strategy and approach to the housing market.
Demand uncharacteristically dropped in the past couple of weeks. Demand, a snapshot of the number of new escrows over the prior month, decreased from 2,286 to 2,241 in the past couple of weeks, down 45 pending sales, or 2%. It was the first drop of the year at a time when it typically rises by 4% (pre-COVID average between 2017 to 2019). It appears as if demand may have reached a premature peak a couple of weeks ago. Normally demand peaks between the end of April to the end of May. Current demand is muted due to a major spike in mortgage rates, increasing from 3.25% in January to 5.25% today according to Mortgage News Daily. Affordability has eroded tremendously since ringing in a New Year, sidelining many buyers. Buyers will be a bit stingier on price going forward, not as willing to stretch much above recent comparable pending and closed sales, especially as the year progresses. Expect demand to remain muted and slightly fall from now through summer months. Last year, demand was at 3,070, 37% more than today, or an extra 829. The 3-year average prior to COVID (2017 to 2019) was at 2,777 pending sales, 24% more than today. In Orange County, current demand readings have been muted by a lack of available homes and not enough coming on the market. With the supply surging higher and demand dropping, the Expected Market Time (the number of days to sell all Orange County listings at the current buying pace) decreased from 20 to 23 days. At 23 days it remains an insane, Hot Seller’s Market (less than 60 days) where there are a ton of showings, sellers get to call the shots during the negotiating process, multiple offers are the norm, and home values are rising rapidly. Last year the Expected Market Time was at 23 days, identical to today. The 3-year average prior to COVID was at 62 days, substantially slower than today and a Slight Seller’s Market (between 60 and 90 days).
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