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After bouncing along a record-low number of homeowners willing to sell in the high mortgage rate environment for over a year, there were more new sellers in January compared to 2023, the first “green shoot” since rates soared higher in 2022.
According to Investopedia.com, "green shoots" is a term used to describe signs of economic recovery or positive data during an economic downturn. They are a welcome symbol that the economy is on the mend and slowly trending upward. In this case, the housing market has been in a funk since mortgage rates rocketed from 3.25% at the start of 2022 to eclipsing 8% last October. Pending sales and closed sales plunged. Last year’s closed sales were one of the lowest totals in decades. Homeowners have opted to stay put in their homes, unwilling to sell and give up their incredible, low fixed-rate mortgages. Since tracking began, the number of sellers coming on the market has plummeted to its lowest level. Each of these data lines reached a low in 2023 and established a bottom. This bottom gave way to the first sign of recovery: green shoots in the number of homes coming on the market, homeowners willing to sell.
Until mortgage rates fall further, the number of homes coming on the market will remain muted. Many homeowners continue to “hunker down” in their homes, unwilling to move due to their current underlying, locked-in, low fixed-rate mortgage. Through the third quarter of 2023, according to the Federal Housing Finance Agency’s National Mortgage Database, 85% of all Californians with a mortgage have a mortgage rate at or below 5%. More than two-thirds, 69%, have a rate at or below 4%. And an astonishing 30% are at or below 3%. In 2023, there were 41% fewer sellers than the 3-year average before COVID (2017 to 2019), with 16,920 missing FOR-SALE signs.
The January reading is a green shoot. There are more sellers, which eventually means more pending and closed sales. With mortgage rates anticipated to fall further this year, the lower rates dive, the more homeowners are willing to participate. When rates eventually fall below 6%, the increase will be substantial and more than matched by a considerable rise in demand as affordability improves. This is the year of green shoots in housing when the behemoth housing market wakes from its nearly two-year slumber.
What we're seeing:
→ More open house activity
→ Interest rates went down
→ Buyer activity increasing
→ Limitation in active inventory
→ High leasing rates
→ Accurate pricing & turnkey have multiple offers
What we can expect:
→ People will list their homes after Superbowl
→ Buyer push in the spring
→ Market trend for spring will be strong
Orange County Housing Market Summary:
- The active listing inventory in the past couple of weeks increased by 42 homes, up 2%, and now sits at 1,942. It is the second-lowest initial February reading since tracking began in 2004, only behind 2022. In January, 35% fewer homes came on the market compared to the 3-year average before COVID (2017 to 2019), 1,072 less. 277 more sellers came on the market this year compared to January 2023. Last year, there were 2,415 homes on the market, 473 more homes, or 24% higher. The 3-year average before COVID (2017 to 2019) was 4,843, or 149% extra, more than double.
- Demand, the number of pending sales over the prior month, soared higher by 280 pending sales in the past two weeks, up 28%, and now totals 1,290, still the lowest initial February reading since tracking began. Last year, there were 1,300 pending sales, 1% more than today. The 3-year average before COVID (2017 to 2019) was 2,160, or 67% more.
- With demand soaring compared to the smaller rise in supply, the Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, plunged from 56 to 45 days in the past couple of weeks. It was 56 days last year, slower than today. The 3-year average before COVID (2017 to 2019) was 70 days, also slower than today.
- For homes priced below $750,000, the Expected Market Time decreased from 42 to 36 days. This range represents 21% of the active inventory and 25% of demand.
- For homes priced between $750,000 and $1 million, the Expected Market Time decreased from 32 to 25 days. This range represents 13% of the active inventory and 25% of demand.
- For homes priced between $1 million and $1.25 million, the Expected Market Time decreased from 41 to 32 days. This range represents 9% of the active inventory and 13% of demand.
- For homes priced between $1.25 million and $1.5 million, the Expected Market Time decreased from 53 to 39 days. This range represents 10% of the active inventory and 12% of demand.
- For homes priced between $1.5 million and $2 million, the Expected Market Time decreased from 66 to 45 days. This range represents 12% of the active inventory and 12% of demand.
- For homes priced between $2 million and $4 million, the Expected Market Time in the past two weeks decreased from 89 to 80 days. For homes priced between $4 million and $6 million, the Expected Market Time decreased from 165 to 133 days. For homes priced above $6 million, the Expected Market Time decreased from 396 to 337 days.
- The luxury end, all homes above $2 million, account for 35% of the inventory and 13% of demand.
- Distressed homes, both short sales and foreclosures combined, comprised only 0.4% of all listings and 0.6% of demand. Only three foreclosures and four short sales are available today in Orange County, with seven total distressed homes on the active market, down one from two weeks ago. Last year, seven distressed homes were on the market, identical to today.