Orange County Housing Report:
Luxury Soars
October 2021
Luxury housing emerged from the lockdowns of COVID-19 with unbelievable strength and has reached unprecedented levels.
A Hot Luxury Market
In 2021, one in six closed sales were luxury.
In June of last year, housing climbed out of the COVID lockdowns and resurfaced firing on all cylinders. It was as if someone had flipped a switch. Then in 2021, the real estate marked evolved further, from red hot to white hot. Overnight, the real estate industry had become accustomed to throngs of showings, multiple offers, and homes selling for more than their asking prices. A surprising twist was that the luxury housing market surged right along with the lower price ranges and at a record pace.
What sparked the wave of luxury sales? The run-up on Wall Street has certainly helped. After the S&P plunged 32% at the beginning of the pandemic in March 2020, it nearly doubled since, swelling by 94%. It surpassed the prior, pre-COVID, record height in August 2020. The record low interest rate environment is a key factor in luxury’s elevated demand as well. And, the inventory crisis does not only include the lower ranges, luxury buyers have been confronted with an extremely limited supply of available homes to purchase.
The luxury home market in Orange County, defined as the top 10% of all closed sales, moved from $1.25 million in 2020 to $1.5 million at the start of 2021. In September, there were 524 luxury closed sales. That would be a record level in any other year, but not this year. April through August were all higher, with a 672-peak reached in June. Last year’s record, 420 luxury sales, was achieved in September and surpassed the prior annual record set in June 2017 by 39%. Even with September’s slight seasonal dip in home sales above $1.5 million, it is still 25% higher than last September.
There are more closed sales in the luxury range than ever before. The torrid pace does not look like it going to abate anytime soon based upon current luxury supply and demand. The supply is down by 45% year-over-year, demand is up by 8%, and the Expected Market Time is down from 101 days last year to 51 days today. Last year’s low, 95 days, was achieved in September and, at the time, was the lowest market time level ever for homes priced above $1.5 million in Orange County, extremely hot for luxury. That puts today’s 51-day level into proper perspective. The pace of luxury is mind-blowing.
The housing market has been nothing short of insane, and luxury is no exception. With home values surging, the top 10% of the market is rapidly changing. Starting in 2022, in looking back at all 2021 closed sales, luxury will become all homes priced above $2 million in Orange County.
A warning to luxury sellers: luxury may be hotter than ever before, but it still is not as hot as the lower price ranges. It takes a little bit longer to sell homes priced above $2 million. It is not an “instant market” like everything priced below $2 million. There are not as many multiple offer situations, there are fewer showing, and fewer homes sell above their asking prices.
There are more closed sales in the luxury range than ever before. The torrid pace does not look like it going to abate anytime soon based upon current luxury supply and demand. The supply is down by 45% year-over-year, demand is up by 8%, and the Expected Market Time is down from 101 days last year to 51 days today. Last year’s low, 95 days, was achieved in September and, at the time, was the lowest market time level ever for homes priced above $1.5 million in Orange County, extremely hot for luxury. That puts today’s 51-day level into proper perspective. The pace of luxury is mind-blowing.
The housing market has been nothing short of insane, and luxury is no exception. With home values surging, the top 10% of the market is rapidly changing. Starting in 2022, in looking back at all 2021 closed sales, luxury will become all homes priced above $2 million in Orange County.
A warning to luxury sellers: luxury may be hotter than ever before, but it still is not as hot as the lower price ranges. It takes a little bit longer to sell homes priced above $2 million. It is not an “instant market” like everything priced below $2 million. There are not as many multiple offer situations, there are fewer showing, and fewer homes sell above their asking prices.
Luxury End
The luxury market slowed slightly with a drop in demand in the past couple of weeks.
In the past two weeks the luxury inventory of homes priced above $1.5 million increased by 8 homes, up 1%, and now sits at 701. Luxury demand decreased by 23 pending sales, down 5%, and now sits at 432, its lowest level since February. With a large drop in demand, the overall Expected Market Time for luxury homes priced above $1.5 million increased from 48 to 51 days, still a very Hot Seller’s Market for luxury.
Expect the luxury market to slightly cool as housing transitions further into the Autumn Market. Year over year, luxury demand is up by 233 pending sales or 132%, and the active luxury listing inventory is down by 31 homes or 8%. The Expected Market Time last year was at 101 days, extremely hot for luxury, but double where it is right now, indicating just how hot the luxury market is today.
For homes priced between $1.5 million and $2 million, the Expected Market remained unchanged at 29 days. For homes priced between $2 million and $4 million, the Expected Market Time increased from 41 to 49 days. For homes priced above $4 million, the Expected Market Time decreased from 135 to 129 days. At 129 days, a seller would be looking at placing their home into escrow around February 2022.
