Year over year demand is stronger for the first time since May of last year. Investors are a force to reckon with. The listing inventory is not increasing out of control. The distressed inventory is slowly dropping. Overall, the Orange County housing market is starting to heal.
Demand: Demand dropped by 6%, a cyclical phenomena due to the Fourth of July weekend. Demand always drops during the first week of July due entirely to the beginning of the summer and the Fourth of July holiday. This year was no exception; plus, the weather was incredible and much warmer than last year’s unusually cool summer.
Demand, the number of new pending sales over the prior month, dropped by 196 homes in the past two weeks and now totals 2,864. Yet, the 6% drop was the smallest drop for this time of year since 2005. Last year, the drop was 8% and totaled 2,860. That’s correct, 4 fewer pending sales than today. So, for the first time since May 2010, year over year demand is stronger. 4 homes may seem like a very slight difference, but it is a milestone on the road to an eventual recovery in the housing market. The housing market is officially no longer suffering from a post tax-credit hangover.
Many experts are forecasting a stronger year over year second half to the 2011 housing market. With interest rates still extremely attractive and at historical lows (up a bit from last week), many will be looking to purchase a piece of their own Orange County.
In the lower ranges, homes priced below $600,000, we can continue to expect to see a lot of competition from investors. Investors are already sensing a bottom and many are just paying cash. It is not that they are rolling the dice and gambling on whether or not the housing market has hit bottom; instead, rents are on the rise and in many cases net a positive cash flow. They are pocketing money after all expenses are paid.
For investors, purchasing a home for their portfolio is not an emotional decision. It is a decision based upon facts, statistics and patience. They know that purchasing in Orange County, a small county in the golden coastal zone of Southern California, is an excellent long term decision. The market will eventually rebound and then some.
Orange County does not have a lot of build-able land and will eventually succumb to building more and more high rise condominiums. Most families do not aspire to live in a high rise; thus, purchasing a piece of the remaining residential resale will prove to be an excellent long term bet.
The sheer number of investors in the market is a true sign that the Orange County housing market has taken another huge healing step towards an eventual recovery and a return to rational appreciation.
The Active Listing Inventory: The active listing inventory dropped for the first time since March. The active listing inventory has not changed substantially since the beginning of the year, but it has grown by 16% at a slow, methodical rate.
This week marks only the second time this year that the inventory dropped. In the past two weeks the inventory shed 57 homes, a 1% drop, and now totals 11,331. Last year the inventory actually increased by 3% and totaled 10,817, 514 fewer homes than today.
The year over year difference has been narrowing all year. At the beginning of this year, there were 2,694 additional homes on the market compared to the beginning of 2010. The inventory tends to increase a bit during the spring and this year was no exception. But, the 16% increase was a drop in the bucket compared to the 48% increase last year. It will not be long until the current listing inventory will be less than the 2010 mark.
The listing inventory last year peaked in September even though the normal cyclical peak occurs in August. From here, we can expect the active listing inventory to grow slightly and peak next month as more and more homeowners realize that they have missed their opportunity to sell during the best time of the year for sellers.
This year the best month to sell was back in March. Summer is still okay in terms of demand, but it is not nearly as strong as the spring.
Today, in the Too Much Information Age, homeowners get it and approach the market knowing that it is going to take a lot of patience. Those entering the fray really have to sell and are truly motivated. That does not mean they will achieve success, 1,711 homes last month alone were pulled off of the market. It does mean that they are at least approaching the market with the appropriate frame of mind. They will still have to do what it takes and price their homes with extreme care, adjusting when necessary.
The Distressed Market: The active distressed inventory reaches its lowest level of the year. The distressed inventory now totals 3,754, shedding 56 homes in the past two weeks.
Thus far this year, the distressed inventory has dropped by 9%. Currently, 33.1% of the active inventory is distressed, down from 41% at the start of this year.
The expected market time for foreclosures remains incredibly hot at 1.72 months. There are currently only 674 foreclosures within the active listing inventory, an increase of only six homes in the past six weeks and 13% less than the beginning of 2011.
There are currently 3,080 short sales on the active market, shedding 60 homes in the past two weeks and dropping to the lowest level since August 2010. The expected market time is 2.95 months for short sales, also a seller’s market.
For more information please contact Robert Prophet and the Robert Prophet Group. Send us an email or visit our web site: RobertProphet.com
