With an astonishingly limited supply of available homes to purchase matched up with blistering hot demand due to record low mortgage
Rates, the overall housing market in Orange County is insanely hot.
Hot November Housing
With an Expected Market Time of only 23 days, the Orange County housing market is hotter than it has ever been for this time of the year.
Everyone put on their favorite pair of shorts, grabbed their flip flops, applied sunscreen, and enjoyed the usual summer activities of sunny Southern California. From the beach, to the pool, to mountain hikes, there is plenty to do when the temperature eclipses 90 degrees. Yet, it is not the middle of summer. It is a heatwave in the middle of November, just a couple of weeks until Thanksgiving. Occasionally, Mother Nature cooks up summer weather at this time of year.
Housing has been dealing with an unrelenting heat wave of its own since last year. After coming out of the COVID lockdown protocols, the inventory dropped, demand soared, and housing reached record breaking temperatures from July through the end of 2020. It never cooled. In fact, the 37-day Expected Market Time reached in December (the time between hammering in the FOR-SALE sign to opening escrow) was the hottest level of the year for Orange County. In 2021, temperatures climbed to levels never seen before, housing grew hotter, and the market time dove to 21 days on April 1st, the hottest reading since tracking began in 2004. Today’s 23-day Expected Market Time is the lowest for mid-November by far, and not much different than April. The heat wave is intense and will continue through the end of 2021, setting up a remarkably hot start to 2022, much hotter than this year’s start.
The Expected Market Time is the speed of the market, the lower the number, the faster homes are being placed into escrow. Anything below 60-days is considered a Hot Seller’s Market where there are plenty of showings, multiple offers, sellers call the shots, and home values are on the rise. A new level emerged to adequately describe this year’s heat wave, more intense than the record temperatures reached last year. Anything below 40-days is considered an Insane Seller’s Market. That is a market with a flood of showings, an overwhelming number of multiple offers, sellers get just about everything their hearts desire in calling the shots, and home values soar. Yes, despite all the news about flattening median sales prices (not an accurate gauge of home values anyways) and buyers less willing to enter bidding wars, home values are still on the rise today, in the middle of November just days before the start to the Holiday Market.
The beginning of the Holiday Market is at the end of this week, the start to the Thanksgiving recess for schools. That is when housing shifts from the Autumn Market when both the inventory and demand slowly but surely drop at a very similar pace, to the Holiday Market when both the supply of homes available to purchase and buyer demand plunge.
Today’s supply of available homes to purchase is at 1,793, the lowest level since tracking began in 2004. It is hard to imagine that the inventory will “plunge” from here, but it will most likely drop below 1,500 homes by year’s end. The fewest number of homes come on the market in the month of December, 63% fewer compared to the peak month of May (5-year average from 2015 through 2019, prior to the pandemic). The second fewest occurs in November, 46% fewer than May. Also, many unsuccessful sellers throw in the towel during the holidays and opt to wait until next year to try again. It is hard to believe, but 41% of the active inventory, 739 homes, have been on the market for more than a month. These are the sellers most apt to throw in the proverbial towel.
During the holidays, many buyers who have written offer after offer for months to no avail will place their home searching efforts on hold so that they can enjoy the festivities of the season. Yet, there will still be plenty of buyers willing and able to participate in the housing market fueled by the promise of cashing in on today’s historically low interest rate environment. Unfortunately, with such a limited inventory, the number of potential escrows will drop. Demand, a measure of recent new escrow activity, will plunge to its lowest level of the year upon ringing in the New Year.
A drop in demand does not mean that there will not be a ton of showings, multiple offers, and homes selling for at or above their asking prices. It means that there will be fewer buyers in the marketplace who are competing against each other for far fewer available homes to purchase. There are disproportionately more buyers than there are homes to purchase.
Today’s Insane Seller’s Market is not going anywhere. Rather, it is setting up an extremely hot market to start 2022. It will be an Insane Seller’s Market from January 1st on. Last year there were 2,522 homes available on January 1. Upon celebrating the coming New Year, there will be less than 1,500 homes, 41% fewer than the start to this year. Match a record low supply with overabundant demand juiced by low mortgage rates, and housing will remain hot through the spring of 2022.
Active Listings
The current active inventory declined another 4% in the past two weeks.
Demand
Demand dropped by 4% in the past couple of weeks.
Luxury End
The luxury market improved dramatically in the past couple of weeks with a giant drop in the supply of available luxury homes to purchase.