Supply Dilemma
In the past few years, there has been a severe inventory crisis initially instigated by the pandemic and now due to the high mortgage rate environment.
Lack of FOR-SALE Signs
Since the pandemic, there have not been enough homes available, and 2023 is no different.
The pandemic lockdowns began three years ago, in March 2020. Life came to an abrupt halt. Instantly, grocery shelves were ransacked as everyone prepared for an indefinite time in their homes. Many aisles were empty, most notably the toilet paper aisle. There was a run on toilet paper, and it lasted throughout 2020. In desperation, people resorted to shopping for rolls on eBay or Amazon and were willing to pay whatever price. It was simple supply and demand.
Similarly, the housing shelves have been seemingly empty since entering the pandemic, with very few homes available compared to pre-COVID inventory levels. In 2020 and 2021, fewer homeowners opted to sell their homes amid the pandemic. Orange County had 5% fewer sellers in 2020 compared to the 3-year average before COVID-19 (2017 to 2019), or 1,800 less. In 2021, it rose to 6%, or 2,300 missing sellers. Surging demand had an even more significant impact on shrinking the supply of available homes. From March 2020 to January 2021, rates reached 17 record lows. As rates plummeted, demand surged. As a result, the inventory reached record lows in 2020 and 2021.
The inventory finally began to rise in 2022 as rates soared from 3.25% at the start of the year to the mid-5s in June and July. Yet, rates rose further, surpassing 6% in September and 7% in October. Since 89% of all Californians have rates at or below 5% and 71% have rates at or below 4%, only some homeowners have been willing to give up their incredibly low fixed-rate mortgages and sell their homes. This “hunkering down” effect has resulted in a growing number of homeowners staying put. In 2022, there were 8,500 fewer sellers, 22% less.
Active Listings
The active listing inventory in the past couple of weeks decreased by 87 homes, down 4%, and now sits at 2,218, the second-lowest March level since tracking began in 2004 behind last year. In February, 45% fewer homes came on the market compared to the 3-year average before COVID (2017 to 2019), 1,413 less. Last year, there were 1,406 homes on the market, 812 fewer homes, or 37% less. The 3-year average before COVID (2017 to 2019) was 5,119, or 131% more.
Demand
Demand, the number of pending sales over the prior month, decreased by 32 pending sales in the past two weeks, down 2%, and now totals 1,505. Last year, there were 2,195 pending sales, 46% more than today. The 3-year average before COVID (2017 to 2019) was 2,422, or 61% more.
Orange County Housing Summary
- The active listing inventory in the past couple of weeks decreased by 87 homes, down 4%, and now sits at 2,218, the second-lowest March level since tracking began in 2004 behind last year. In February, 45% fewer homes came on the market compared to the 3-year average before COVID (2017 to 2019), 1,413 less. Last year, there were 1,406 homes on the market, 812 fewer homes, or 37% less. The 3-year average before COVID (2017 to 2019) was 5,119, or 131% more.
- Demand, the number of pending sales over the prior month, decreased by 32 pending sales in the past two weeks, down 2%, and now totals 1,505. Last year, there were 2,195 pending sales, 46% more than today. The 3-year average before COVID (2017 to 2019) was 2,422, or 61% more.
- With the supply falling faster than the drop in demand, the Expected Market Time, the number of days to sell all Orange County listings at the current buying pace, decreased from 45 to 44 days in the past couple of weeks. It was 19 days last year, much stronger than today.
- For homes priced below $750,000, the Expected Market Time increased from 38 to 39 days. This range represents 24% of the active inventory and 27% of demand.
- For homes priced between $750,000 and $1 million, the Expected Market Time decreased from 32 to 29 days. This range represents 18% of the active inventory and 27% of demand.
- For homes priced between $1 million to $1.25 million, the Expected Market Time increased from 33 to 36 days. This range represents 10% of the active inventory and 12% of demand.
- For homes priced between $1.25 million to $1.5 million, the Expected Market Time decreased from 45 to 38 days. This range represents 10% of the active inventory and 11% of demand.
- For homes priced between $1.5 million to $2 million, the Expected Market Time increased from 44 to 48 days. This range represents 11% of the active inventory and 10% of demand.
- For homes priced between $2 million and $4 million, the Expected Market Time in the past two weeks decreased from 82 to 73 days. For homes priced between $4 million and $6 million, the Expected Market Time decreased from 216 to 128 days. For homes priced above $6 million, the Expected Market Time decreased from 347 to 312 days.
- The luxury end, all homes above $2 million, account for 28% of the inventory and 12% of demand.
- Distressed homes, both short sales and foreclosures combined, comprised only 0.5% of all listings and 0.1% of demand. There are only four foreclosures and six short sales available to purchase today in all of Orange County, with ten total distressed homes on the active market, up two from two weeks ago. Last year there were two total distressed homes on the market, similar to today.
- There were 1,137 closed residential resales in January, 37% less than January 2022’s 1,809 closed sales. January marked an 18% decrease compared to December 2022. The sales-to-list price ratio was 98.6% for all of Orange County. Foreclosures accounted for 0.4% of all closed sales, and short sales accounted for 0.1%. That means that 99.5% of all sales were good ol’ fashioned sellers with equity.
