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Sales of homes in Orange County surged last month by 33% while inventory declined by 9%. Demand has been surprisingly strong over the past four weeks. New pending sales increased in Orange County to 3,553 homes, an increase of 306 over the previous month. This is the highest number of pending sales since August of 2005. The average expected time for a home to be on the market today is 4.35 months (number of active listings divided by the number of pending sales).

Comparing the current environment to last year, there was a total of 2,374 pending sales at this time last year, or 1,179 less than today. This is an increase of 50% year-over-year. Two years ago, demand was at 1,628 homes, or 85% less than today and three years ago demand was 21% less for a total of 2,942.
In terms of the types of properties currently listed, 4,006 of the 10,561 active listings are distress sales (i.e. either a short sale or REO), or 38%. Of the distress offerings, just 613, or 15%, are REO (bank-owned) properties – less than 6% of total inventory. However, demand for REO properties strongly outstrips availability. These properties are selling in an average of just 19 days and typically sell for more than asking price. Multiple offers and bidding wars for these offerings is the norm. Of the 4,006 distress properties available, 3,393 are short sales. Short sales can provide a buyer with an outstanding value, but buyers will typically have to be patient and understanding, as the process often takes quite long (several months to get an answer back on an offer is not unusual).

As a summary of the entire Orange County market, total inventory of 10,561 is the lowest it has been since April of 2006. The average time expected to sell a home in this market is 2.97 months, compared to 6.55 months at this time last year and 7.69 months two years ago. There are 1,944 fewer distressed homes on the market today than there were in August of 2008, when distressed homes reached their peak.

With all this activity, it is important to note that the vast majority of the volume is happening at the lower and medium spectrums of the market – homes priced between $250,000 and $750,000. Homes in these ranges are selling in less than three months, on average. However, homes priced between $750,000 and $1 million are still taking nearly six months to sell. Of course, more expensive homes take longer with homes priced between $1 million and $1.5 million taking about ten months. Even more expensive homes, those above $1.5 million, are experiencing a stagnant market and can be expected to be on the market for more than a year.

The Csira Group attributes the recent market activity to a number of factors: 1) The affordability index is the best it has been for buyers in decades. This is a combination of home prices, interest rates and regional salaries; 2) The government’s stimulus packages have had an impact through lower interest rates and incentives for first-time-buyers; 3) Because of the low sales volumes over the past two years, there is a pent-up demand for affordable homes, and; 4) Finally, sellers have gotten much more realistic about pricing their properties. Not long ago, a seller would say “Sure, my neighbor’s house sold for a lot less, but it was a short sale.” Today, sellers have come to accept that these sales are genuine comparables and in order to sell, homes must be competitive with the prices of these sales.

Please let us know if we can be of assistance in any way with regard to your real estate concerns.