The inventory seasonally drops because not many homeowners come on the market at the end of the year. The fewest number of sellers enter the fray in December, 64% less than May, the peak month with the greatest number of new sellers. The second fewest come on in November, 46% less than May’s peak. In addition, many sellers who have not found success, mainly due to price, opt to throw in the towel and pull their homes off the market. The combination of those two forces, fewer new FOR-SALE signs and unsuccessful sellers, cause the inventory to plummet until the start of the New Year.
Demand, recent escrow activity, drops substantially as well. Many buyers who have been actively looking for a home wait on the sidelines for the right home to come along. Yet, with fewer new choices as the end of the year draws closer and many sellers throwing in the towel, there is a real lack of fresh inventory, no replenishment of available homes. Moreover, there are buyers who are simply ready to pause the home search process and divert their attention to enjoying all the trimmings of the holidays. For many, it simply is not the time to hunker down and tiresomely search for a home.
This year will not be an exception and the holiday pause has already arrived. In just the past two weeks alone the inventory has dropped by 8%, shedding 295 homes, the second largest drop of the year. There are only 3,286 available homes today, the second lowest end of November level behind last year. Demand increased, adding 10 pending sales, but it too is about to drop as fewer choices remain. The Expected Market Time dropped from 89 to 81 days, a bit better for the sellers who have opted to linger on the market during the holidays. It is still a far cry from the crazy market during the first four months of 2022 when the Expected Market Time reached a low of 19 days in March.
The holidays are here for the Orange County housing market. The housing needs of many will be placed on pause to enjoy all that this season brings. As a result, expect inventory and demand to plunge and market times to grow a little bit longer as housing moves through its slowest season of the year.
Demand increased by 1% in the past couple of weeks.
Demand, a snapshot of the number of new escrows over the prior month, increased from 1,202 to 1,212 in the past couple of weeks, adding 10 pending sales, or up 1%. It was the first rise since mid-August. According to Mortgage News Daily, after remaining well above 7% for over a month, mortgage rates have dropped and have been hanging around 6.65% for nearly three weeks, providing a bit of relief to buyers looking to purchase. This has sustained demand at its current muted levels and prevented it from dropping further. Ultimately, with the number of choices dropping with fewer homes coming on the market for the rest of the year, expect demand to follow its normal seasonal drop until shaking of the holiday lull after the first couple of weeks of the New Year. From there, expect demand to rise.
Last year, demand was at 2,221, 83% more than today, or an extra 1,009. The 3-year average prior to COVID (2017 to 2019) was at 1,969 pending sales, 62% more than today, or an extra 757.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 89 to 81 days in the past couple of weeks, its lowest level since mid-October. Last year the Expected Market Time was at 20 days, substantially faster than today and home values were screaming higher. The 3-year average prior to COVID was 85 days, similar to today.