Orange County Real Estate Demand Expands—Supply Doesn’t Keep Up
Category : Laguna Beach Real Estate
Coming on top of the best national jobs report in ages, the first back to back monthly job growth in Orange County in two years (see related article), and a rising stock market, demand for Orange County residential real estate moved higher. The demand increase is consistent with expected seasonal patterns, but the magnitude of the increase is much smaller than at this time last year.
This is the second biweekly real estate report in a row where we have reported considerable increases in demand for Orange County residential real estate. While two data points do not a trend make, this appears to be the start of the seasonal ramp up in home buying.
Consistent with last year, demand appears to be moving toward the 3,600 home level. Last year demand peaked during the two weeks ending 6/11/2009, at 3,652 units. But, the big year over year difference is in supply, or the inventory of active real estate listings. Last year at this time, the supply of homes on the market in Orange County began a steady and relentless decline which did not end until this January.
On March 19, 2009, there were 11,606 homes on the market in Orange County. By June 11, 2009, the biweekly period of the highest demand last year, the inventory had fallen to 9,314. Supply continued to decline steadily through all of last year, until hitting a low on January 7, 2010 of 7,293 homes. Since then, more homes have come on the market, but at a slower rate then the increase in demand.
As of April 1, 2010, the inventory of active Orange County residential real estate listings was at 8,911. This is an increase of 135 or 1.5% from two weeks earlier. This small increase in homes on the market contrasts with the 10.8% increase in demand. The net result is a market time (estimated average time on the market) which fell from 2.68 two weeks ago, to 2.46 months currently. Last year at this time, the market time was 3.40 months.
This market time is the average for all homes on the market in Orange County, but it varies greatly based on the price range. According to Steven Thomas of Altera Real Estate, “The lower end is on FIRE, but the upper end is FROZEN. The upper and lower ends are polar opposites. For all homes priced below $1 million, the expected market time is 2.02 months, a seller’s market. That 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 range, the crazier the market. Buyers in the lower ranges experience multiple offer situations, offers above the list price and homes that fly off the market as quickly as they come on. For homes priced above $1 million, the expected market time is at 9.26 months, a frigid buyer’s market. That 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 range, the slower the market.”
Last year at this time saw a surge in demand as it increased 27% over the previous biweekly period. The expansion of demand this year is more gradual. While demand expansion in the most recent two weeks is much less than last year, the increase over the last four weeks is comparable.
Demand (the number of new pending sales in the last 30 days) in the most recent period increased by 352 units, or 10.8%, to 3,622 homes. Last year at this time, demand expanded by 577 homes to a total of 3,247 homes. This was an increase of 21.6% for last year. These changes are bringing demand levels for this year and last year closer together. Back in the middle of March, this year’s demand was 600 units ahead of last year—now the difference is only 375.