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Comparing today’s inventory and demand levels to prior years reveals the accurate temperature and trends of the current market.
To accurately determine housing’s strength and its actual temperature, it is best to turn to the data, inventory versus demand. The lack of homes available to sell favors sellers in the negotiation process, and home affordability dropping to historic lows favors buyers in the negotiation process. As rates spiked higher from 3.25% in January 2022 to eclipsing 7% in October 2022, the highest rate in over 20 years, demand came to a screeching halt, and the inventory climbed.
This year, mortgage rates have been bouncing between 6.6% and 7.1% with duration. Rate volatility has diminished dramatically since 2022. With less volatility, demand has risen despite today’s higher mortgage rate environment. Consequently, the difference between the active listing inventory and demand has narrowed. Today, the active inventory is 2,017 homes, demand is 1,617 pending sales, and the difference is only 400.
For the housing market to tip in the favor of buyers, the speed of the housing market must cool considerably. Cooler temperatures can only be achieved with a sharp increase in the inventory, which last occurred in 2022 when rates initially surged higher. In 2024, rate volatility has subsided, demand has been climbing, and the inventory has only risen slightly (even falling by 3% in the past couple of weeks).
As long as the inventory level remains considerably lower than pre-COVID levels, housing will continue at its current pace with hot temperature readings.
What we know:
→ Active inventory decreasing
→ Demand increasing
→ Usually active inventory is equal pace to demand
→ Low interest rates are affecting this
→ Strong buyer demand in South OC
→ Homes coming on the market are sellers who have to sell
→ Little inventory for listings 1.5-2.5 mil range
→ Pricing going up due to low inventory
What we can expect:
→ This will be the market the next 60-90 days
→ We'll pause going into summer
→ If sellers list with a good price they'll sell quicker
→ If priced too high, expect a price reduction within 30 days
Orange County Housing Market Summary:
- The active listing inventory in the past couple of weeks decreased by 67 homes, down 3%, and now sits at 2,017. In March, 42% fewer homes came on the market compared to the 3-year average before COVID (2017 to 2019), 1,623 less. 149 more sellers came on the market this March compared to 2023. Last year, there were 2,142 homes on the market, 125 more homes, or 6% higher. The 3-year average before COVID (2017 to 2019) was 5,533, or 174% extra, more than double.
- Demand, the number of pending sales over the prior month, increased by 79 pending sales in the past two weeks, up 5%, and now totals 1,617. Last year, there were 1,560 pending sales, 4% fewer than today. The 3-year average before COVID (2017 to 2019) was 2,668, or 65% more.
- With supply falling and demand rising, the Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, decreased from 41 to 37 days in the past couple of weeks, its lowest level since last April. It was 41 days last year, similar to today. The 3-year average before COVID (2017 to 2019) was 63 days, slower than today.
- The Expected Market Time for homes priced below $750,000 decreased from 31 to 30 days. This range represents 19% of the active inventory and 24% of demand.
- The Expected Market Time for homes priced between $750,000 and $1 million decreased from 27 to 24 days. This range represents 13% of the active inventory and 21% of demand.
- The Expected Market Time for homes priced between $1 million and $1.25 million decreased from 29 to 24 days. This range represents 9% of the active inventory and 14% of demand.
- The Expected Market Time for homes priced between $1.25 million and $1.5 million decreased from 33 to 29 days. This range represents 10% of the active inventory and 12% of demand.
- The Expected Market Time for homes priced between $1.5 million and $2 million remained unchanged at 35 days. This range represents 11% of the active inventory and 12% of demand.
- In the past two weeks, the expected market time for homes priced between $2 million and $4 million decreased from 66 to 60 days. For homes priced between $4 million and $6 million, the Expected Market Time decreased from 118 to 109 days. For homes priced above $6 million, the Expected Market Time decreased from 341 to 238 days.
- The luxury end, all homes above $2 million, account for 38% of the inventory and 17% of demand.
- Distressed homes, both short sales and foreclosures combined, comprised only 0.1% of all listings and 0.3% of demand. Only three foreclosures and no short sales are available today in Orange County, with three total distressed homes on the active market, down two from two weeks ago. Last year, ten distressed homes were on the market, similar to today.