Sluggish Intro to 2023

In contrast to the extraordinary and unprecedentedly high levels of activity seen at the beginning of 2021 and 2022, the start of this year has been characterized by low demand, limited inventory, and market conditions similar to those prior to the pandemic.

2023 Start

With very little demand and a subdued inventory, real estate activity will be suppressed as the year gets underway. Homeowners continue to “hunker down” in their homes, not willing to move due to their current underlying, locked-in, low fixed-rated mortgage. The difference between their low fixed rate and today’s rate is quite large and precludes many homeowners from listing their homes for sale and moving to another home. This will continue until mortgage rates drop.

Orange County Annual Housing Start

With heightened demand and a low supply of available homes, the Expected Market Time, the time between pounding in the FOR-SALE sign to opening escrow, dropped to record low levels, 42 days in 2021 and 25 days in 2022. Today, the inventory might be at the second lowest level to start a year, even beating 2021, but when it is combined with record low demand, the Expected Market Time is no longer at insane levels. Instead, it is like 2016 through 2018 and 2020 with a market time of 84 days. At 84 days the market is not instant.

Demand and Supply

Demand, a snapshot of the number of new escrows over the prior month, decreased from 1,038 to 900 in the past couple of weeks, shedding 138 pending sales, down 13%. Last year, demand was at 1,295, 44% more than today, or an extra 395. The 3-year average prior to COVID (2017 to 2019) was at 1,349 pending sales, 50% more than today, or an extra 449. The active listing inventory decreased by 112 homes in the past couple of weeks, down 4%, and now sits at 2,530 homes. On January 1st there were 2,431 homes, the second lowest level to start the year since tracking began 19 years ago. Only 2022 was lower. Last year, the inventory was at 1,100, 57% lower, or 1,430 fewer. The 3-year average prior to COVID (2017 to 2019) is 4,506, an extra 1,976 homes, or 78% more. There were a lot more choices back then.