Orange County Housing Report:

Going, Going, GONE!

February 7, 2022

When a record low number of available homes is matched with fierce pent-up demand, it results in an auction where homes sell immediately and for more than their asking prices. 

Selling Above the Asking Price

It is common for homes that are just placed onto the market to receive dozens of offers to purchase, pushing up home values at a rapid pace.

For over a century, the predominate way to sell a home in Australia has been by auction. The appeal of an auction is that homeowners believe they can get a higher price by forcing buyers to compete against each other in a bidding war. An auctioneer is hired to conduct the bidding process. The more that participate, the higher the price. It has been argued that the auction system has resulted in sky-rocketing housing prices.

In the United States, for the most part, homes are not sold by auction. Yet, talk to any buyer over the past couple of years and they would argue that the real estate purchasing process feels more like an auction than the conventional way of buying a home. There once was a time when homes generated only one or two offers and the overall temperature of the market was much different than today. With today’s extremely limited inventory and throngs of buyers interested in every home that comes to market, a bidding war develops. The asking price can be seen as the “reserve price,” the minimum bid acceptable to a seller. Often, offers that come in at the asking price do not excite many sellers, resulting in delays in response times until “better” offers come along.

Initially, record low mortgage rates paved the way for white hot demand. An unbelievable 17 record lows were achieved after the country slipped into a pandemic back in March 2020. The lowest rate was reached during the first week of January 2021 at 2.65%, according to Freddie Mac’s Primary Mortgage Market Survey®, which dates to 1971. But recently, rates have dramatically climbed from 3.05% on December 23rd of last year to 3.55% as of February 3rd. That’s a half of a percent in a very short period, and they are poised to rise further as the U.S. economy continues to improve. 

It is no longer low mortgage rates that are stoking the fires of demand; instead, it is the severe inventory shortage. The inventory has plunged to record lows, starting off the year at 954 homes. Today, it has risen slightly to 1,426 homes, but that is still far from normal. The three years average prior to the pandemic (2017 through 2019), there were 4,843 homes, an additional 3,573, or an extra 281% more, nearly quadruple. There are simply not enough homes available to match demand.

Demand, the number of pending sales over the prior month, has exceeded the inventory level since February of last year. That’s a full year where demand has been outpacing the supply of available homes. It is no wonder that the inventory has fallen to an incredible catastrophic level. There really is nothing available to purchase. Every home that enters the fray is inundated with showings, and, if not priced ridiculously out of bounds, generates plenty of offers. With so much buyer competition, sellers get to call all the shots. Buyers have been willing to wave inspections, wave the appraisal contingency, offer a 60-day rent back, and close in a timeframe that is most suitable for the seller.

Current demand is at 1,683 pending sales. Demand is 413 higher than the active listing inventory. The three-year average for demand prior to COVID was 2,160, significantly lower than the three-year average for the active inventory of 4,843 homes, 2,683 lower to be exact. That illustrates how demand is normally a lot lower than the supply, not the other way around, as is shown in the chart above. 

When demand outstrips the supply, it indicates that it is an insane, outrageous, red-hot housing market where buyers are pit against each other and Darwinism ensues, survival of the fittest. In today’s market, typically the buyer that is most qualified with a great job, large bank account, strong credit score, willing to remove contingencies, and bend to a seller’s every whim is the victor. That includes offering more than the asking price. In January, 60% of all closed sales in Orange County sold above their asking price. And, it is not isolated to the lower end. If a home is priced right, regardless of price range, a bidding war follows. 

The auction-like atmosphere will continue if inventory remains at ultra-low levels. Higher rates are not yet deterring buyers from purchasing, but if they continue to rise, it will be a totally different story down the road.

A WARNING TO SELLERS: Carefully pricing a home is crucial to obtaining the best outcome regarding price and terms. Pricing at or slightly above the last comparable pending or closed sale will expose the home to the largest buyer pool. The auction that follows will have buyers competing against each other to achieve success. This results in sales prices above their asking prices, and in many cases, way above their asking prices. Stretching the initial asking price considerably above the comps may still result in achieving the ultimate goal in selling; HOWEVER, it will be at the expense of not obtaining the highest and best price and terms.  

Active Listings

The current active inventory added 190 homes in the past two weeks.

The active listing inventory increased by 190 homes in the past couple of weeks, up 18%, and now sits at 1,270 homes. It was the largest increase for this time of year since 2006. Even with the rise, the current level is by far the lowest level for a February start. The 3-year average prior to COVID (2017 through 2019) was 4,843, an extra 3,573 homes, or 281% more, nearly quadruple compared to today. Contributing to the unbelievably low inventory is a lot fewer homes coming on the market. In January, there were 2,437 homes placed on the market compared to the three-year average of 3,054 homes, 20% less. A combination of factors, from the Omicron variant to fear of not being able to isolate a replacement home, are precluding many homeowners from participating in today’s Orange County housing market. If rates continue to rise, demand will ultimately ebb allowing for the inventory to finally climb on the backs of overpriced homes that sit and accumulate on the market. In this kind of an environment, sellers will need to be more accurate in pricing. 

Last year, the inventory was at 2,493, 96% more, or an additional 1,223 homes. The biggest complaint last year was that there were not enough homes on the market, yet there were a lot more choices compared to today.

Demand

Demand surged by 18% in the past couple of weeks.

Demand, a snapshot of the number of new escrows over the prior month, increased from 1,426 to 1,683 in the past couple of weeks, adding 257 pending sales, up 18%. The limited number of homes available has translated to lower demand readings. Typically for a start to February, demand rises by 26%, or 450 pending sales. There is quite a bit of pent-up demand from a deluge of unsuccessful buyers who have been attempting to purchase for months now. Buyers are lining up to see every home that hits the market. Even with higher rates, buyers are willing to pay the extra premium just for the opportunity to finally own a home. Yet, if rates continue to rise and break above 4%, many buyers will begin to back off and competition will diminish. This will allow the market to slow, and the inventory will finally rise. It just depends upon where rates go from here. Only time will tell.  

Last year, demand was at 2,590, 54% more than today, or an extra 54%. Year over year comparisons will be off through the rest of this month due to market changes because of COVID. A much better comparison is looking at the 3-year average prior to COVID (2017 to 2019), which was 2,160 pending sales, 28% more than today. In Orange County, current demand readings have obviously been muted by a lack of available homes and not enough coming on the market.

With both supply and demand increasing at the same rate, the Expected Market Time (the number of days to sell all Orange County listings at the current buying pace) remained unchanged at 23 days, an insane, Hot Seller’s Market (less than 60 days) where there are a ton of showings, sellers get to call the shots during the negotiating process, multiple offers are the norm, and home values are rising rapidly. Last year the Expected Market Time was at 29 days, similar to today. The 3-year average prior to COVID was at 70 days, substantially slower than today and a Slight Seller’s Market (between 60 and 90 days). 

Luxury End

Both the luxury inventory and luxury demand climbed in the past couple of weeks.  

Even with the recent volatility on Wall Street, the luxury market in Orange County has continued to surge. In fact, luxury demand of homes priced above $2 million in the past couple of weeks increased by 27 pending sales, up 14%, and now sits at 217. The luxury inventory of homes priced above $2 million increased by 46 homes, also up 14%, and now sits at 382. A welcome relief in any price range at this point is more homes coming on the market. With both supply and demand increasing, the overall Expected Market Time for luxury homes priced above $2 million remained unchanged at 53 days, an extremely hot market for luxury.

Year over year, luxury demand is down by 28 pending sales or 11%, and the active luxury listing inventory is down by 339 homes or 47%. The Expected Market Time last year was at 88 days, exceptionally hot for luxury, but slower than today, indicating just how unbelievably hot the luxury market is right now. However, the year over year difference is beginning to narrow.

For homes priced between $2 million and $4 million, the Expected Market remained unchanged at 34 days. For homes priced between $4 million and $8 million, the Expected Market Time increased from 74 to 79 days. For homes priced above $8 million, the Expected Market Time increased from 172 to 219 days. At 172 days, a seller would be looking at placing their home into escrow around September 2022.

Orange County Housing Summary

  • The active listing inventory increased by 190 homes, up 18%, and now totals 1,270 homes, its lowest level for this time of the year since tracking began 18 years ago. In January, there were 20% fewer homes that came on the market compared to the 3-year average prior to COVID (2017 to 2019), 617 fewer. Last year, there were 2,493 homes on the market, 1,223 additional homes, or 96% more.
  • Demand, the number of pending sales over the prior month, surged by 257 pending sales in the past two weeks, up 18%, and now totals 1,683. Last year, there were 2,590 pending sales, 54% more than today due to the impact of COVID on housing. The 3-year average prior to COVID (2017 to 2019) was 2,160, or 28% more.
  • With supply and demand increasing at the same rate, the Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, remained unchanged at 23 days in the past couple of weeks, an insanely Hot Seller’s Market (less than 60 days). It was at 29 days last year, similar to today.  
  • For homes priced below $750,000, the market is a Hot Seller’s Market (less than 60 days) with an Expected Market Time of 18 days. This range represents 25% of the active inventory and 31% of demand. 
  • For homes priced between $750,000 and $1 million, the Expected Market Time is 16 days, a Hot Seller’s Market. This range represents 19% of the active inventory and 26% of demand.
  • For homes priced between $1 million to $1.25 million, the Expected Market Time is 17 days, a Hot Seller’s Market. This range represents 9% of the active inventory and 12% of demand.
  • For homes priced between $1.25 million to $1.5 million, the Expected Market Time is 21 days, a Hot Seller’s Market. This range represents 9% of the active inventory and 9% of demand.
  • For homes priced between $1.5 million to $2 million, the Expected Market Time is 22 days, a Hot Seller’s Market. This range represents 8% of the active inventory and 9% of demand.
  • For homes priced between $2 million and $4 million, the Expected Market remained unchanged at 34 days. For homes priced between $4 million and $8 million, the Expected Market Time increased from 74 to 79 days. For homes priced above $8 million, the Expected Market Time increased from 172 to 219 days.
  • The luxury end, all homes above $2 million, accounts for 31% of the inventory and 13% of demand.
  • Distressed homes, both short sales and foreclosures combined, made up only 0.2% of all listings and 0.2% of demand. There are only 3 foreclosure and no short sale available to purchase today in all of Orange County, 3 total distressed homes on the active market, up 1 from two weeks ago. Last year there were 4 total distressed homes on the market, similar to today.
  • There were 2,486 closed residential resales in December, 20% less than December 2020’s 3,091 closed sales. For the year, through December, there have been 35,180 closed sales, 16% higher than 2020 and the most sales since 2005. December marked a 3% drop compared to November 2021. The sales to list price ratio was 101.1% for all of Orange County. Foreclosures accounted for just 0.2% of all closed sales, and there were no closed short sales. That means that 99.8% of all sales were good ol’ fashioned sellers with equity.

 

December Market Report May 17, 2022
209
Listed
42
Avg. DOM
$1,992.80
Avg. $ / Sq.Ft.
$4,950,000
Med. List Price
209 Properties
Page 1 of 18
$69,800,000
Neighborhood: Crystal Cove Estate Collection (CCEC)
7
Beds
13
Baths
15,500
Sq.Ft.
2021
Year Built
107
Days on Site
NP21118313
MLS
Commandingly perched atop one of Southern California's most desirable parcels of land, this custom designed crown jewel securely nestled at the pinnacle of Crystal Cove offers unobstructed views of...
$59,800,000
Neighborhood: Crystal Cove Estate Collection (CCEC)
7
Beds
10F21/2
Baths
15,000
Sq.Ft.
2014
Year Built
94
Days on Site
NP21124827
MLS
Located within the custom gates of Newport Coast's premiere private community, Crystal Cove this estate offers timeless elegance and seclusion nestled on one of the largest custom parcels showcasing...
$47,500,000
Neighborhood: Lido Island (LIDO)
4
Beds
4F21/2
Baths
8,868
Sq.Ft.
2018
Year Built
23
Days on Site
NP22033404
MLS
An immersive sensory experience at every turn. Behold 309 Via Lido Soud, a mesmerizing waterfront retreat peerless in quality, privacy, and scale. Situated on 3.5 lots with approximately 105' of...
$39,950,000
Neighborhood: Other (OTHR)
5
Beds
8F11/2
Baths
12,000
Sq.Ft.
2023
Year Built
22
Days on Site
NP22084117
MLS
No description available...
$36,800,000
Neighborhood: Crystal Cove Estate Collection (CCEC)
4
Beds
6F21/2
Baths
15,743
Sq.Ft.
2011
Year Built
57
Days on Site
OC22056691
MLS
Spectacular custom-built masterpiece nestled on the very top of the ultra prestigious Crystal Cove Community in Newport Beach/Coast! Unobstructed views of Pacific Ocean, Catalina Island, Newport...
$35,000,000
Neighborhood: Cameo Shores (CSHO)
5
Beds
5F11/2
Baths
7,000
Sq.Ft.
2018
Year Built
418
Days on Site
NP21034222
MLS
Located in the highly exclusive Cameo Shores neighborhood, this 7,000 square foot architectural masterpiece was designed to impress. The jaw-dropping panoramic Pacific Ocean views throughout are...
$35,000,000
Neighborhood: Crystal Cove Estate Collection (CCEC)
6
Beds
7F21/2
Baths
14,809
Sq.Ft.
2022
Year Built
85
Days on Site
OC21023166
MLS
Crystal Cove's newest custom home is a masterfully-designed hilltop estate prominently positioned on a private front-row lot behind the community's prestigious second gates. Stunning architecture is...
$31,000,000
Neighborhood: Linda Isle (LIND)
4
Beds
4F11/2
Baths
5,500
Sq.Ft.
2020
Year Built
355
Days on Site
NP21115600
MLS
Just completed, this bay front home occupies the most sought-after location on Newport Harbor. Set behind the manned gates of Linda Isle, this 5,500 square foot residence of contemporary design is...
$27,995,000
Neighborhood: Cameo Shores (CSHO)
4
Beds
4F11/2
Baths
6,867
Sq.Ft.
2001
Year Built
58
Days on Site
NP22055676
MLS
This magnificent estate sits in the prestigious community of Cameo Shores. It has more than a half-acre of unobstructed views of Catalina, the Newport Jetty, and the California coastline. One enters...
$27,600,000
Neighborhood: Crystal Cove Estate Collection (CCEC)
8
Beds
8F31/2
Baths
13,787
Sq.Ft.
2022
Year Built
35
Days on Site
OC21011334
MLS
Amazing custom build to suit opportunity in one of the most exclusive enclaves in Crystal Cove. Perched atop the ultra prestigious Crystal Cove Community in Newport Beach, 6 Waves End is one of the...
$27,000,000
Neighborhood: Pelican Crest (NCPC)
5
Beds
6F41/2
Baths
11,605
Sq.Ft.
2005
Year Built
86
Days on Site
NP22023776
MLS
An enchanting palatial estate behind the guarded gates of Pelican Crest. Reminiscent of an Italian villa, the five-bedroom residence is set on an appx. 300' deep parcel over 29,800 square feet...
$26,500,000
Neighborhood: Crystal Cove Estate Collection (CCEC)
6
Beds
6F51/2
Baths
11,451
Sq.Ft.
2022
Year Built
35
Days on Site
OC21011374
MLS
Perched above the highly coveted community of Crystal Cove, the exclusive custom home lots of Crystal Cove is the epitome of luxury and exclusivity. Behind a second set of gates, all custom home...
Based on information from California Regional Multiple Listing Service, Inc. as of May 17, 2022. This information is for your personal, non-commercial use and may not be used for any purpose other than to identify prospective properties you may be interested in purchasing. Display of MLS data is usually deemed reliable but is NOT guaranteed accurate by the MLS. Buyers are responsible for verifying the accuracy of all information and should investigate the data themselves or retain appropriate professionals. Information from sources other than the Listing Agent may have been included in the MLS data. Unless otherwise specified in writing, Broker/Agent has not and will not verify any information obtained from other sources. The Broker/Agent providing the information contained herein may or may not have been the Listing and/or Selling Agent. IDX provided by Sierra Interactive.
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Eric and Adrianna Olsen
“The Weir Team represented me in bothe the sale of my previous home in Harbor View Homes area of Newport Beach and the purchase of my present home in Irvine Cove in Laguna Beach. They were wonderful! Based on my experience, I would not buy or sell a property through any-one other than the Weir Team
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“My husband and I were lucky enough to land not only fantastic agents but also true friends. The Weir Team made our buying experience the best that it could be. We started looking for homes in January of 2013. After 7 offers and who knows how many previews we found our dream home in October 2013. The Weir Team was patient, informative and honest. They had the answers to all of our questions and gave us the guidance when we needed it most. They made sure we kept our heads up when we weren’t sure we could handle another let down and kept searching for our perfect home. There is no doubt in my mind that down the road when the time comes, The Weir Team will be our go to.”
Christine and Eric Ferentz
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CJ Rolfs
Prior to the transaction described below, I had not worked with The Weir Team. However, for many years I had heard of them and that they were excellent real estate brokers in the area. Several years ago one of my clients was the trustee of her deceased mother’s trust. My client had retained the Weir Team to handle the rental of the trust’s real property in Corona del Mar. The rental arrangements continued for approximately ten years. My client was very pleased with the service she recieved from the Weir Team as their leasing agents.The real property was ultimately sold. The Weir Team was the selling broker, representing my client. I participated in the sales activities and negotiations, including drafting my own forms of Listing Agreement and Sales Agreement, and reviewing and advising with respect to offers. Both my client and I were pleased with the services and results obtained. Since the transaction I have from time to time consulted  with the Weir Team on other real estate matters. They have always been cooperative, willing to go out of their way to provide service, and very helpful.I am pleased to recommend The Weir Team as being reputable and first class real esate brokers in our area. 
Peter C Bradford _ Attorney at Law
I recently sold my house in Newport Coast and purchased a house in Newport Beach using The Weir Team as our realtors for both transactions.  They could not have done a better job with both deals and I would highly recommend them for anyone in need of a residential realtor.  They excelled in both transactions.  On the sale side, they were very professional, created an excellent brochure and were constantly available for showings and questions.  Ultimately, we sold our house in a timely manner for the highest price ever in the neighborhood.  On the purchase side, The Weir Team was extremely well-connected, knew Newport Beach and the surrounding areas extremely well and was willing to show us endless houses as we tried to turn over every stone looking for a dream house.  At the end of this process, we were able to buy the perfect house that never even made it to a “pocket listing” because of his connections.    It is impossible to express in this short letter how valuable The Weir Team was during this very important and personal process of selling and buying a house.  They are incredible realtors and even better people and I cannot recommend them highly enough if you are thinking of buying or selling a house.  
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