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Real Estate: Market Time Report for 9/8


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  • Real Estate: Market Time Report for 9/8

    The latest Market Time Report is out. Definitely not a good time to try and sell your home, but between now and New Years, especially once the Fed cuts rates, it's looking to be a great time to buy!

    If you're ready to find that great deal on a home you've been waiting for, I can help! Send me a PM or email me to set up a custom MLS search page for you!


    Market Time Report: The Squeeze on Demand

    September 6, 2007

    Good Afternoon!
    Demand for Orange County has taken a hard hit because of the current financial market crisis, dropping to its lowest level in years. Demand, the number of new escrows within the prior 30 days, dropped to 1,206at least a quarter percent and they may be looking at as much as a half percent cut. This should help spark demand as the Fed looks to jump start not only the housing market, but the overall economy. The economy is beginning to feel the effects of the housing market. Many loan programs have all but evaporated. So, in the interim, demand in Orange County is taking a hit. After reaching a record height two weeks ago, the active inventory dropped by 121 homes to 17,760. Because of the drop in demand, the current market time jumped to 14.73 months from 12.12 months two weeks ago and 9.76 months four weeks ago.

    Currently short sales and foreclosures in Orange County account for 7%ofthe active inventory, which has grown from 5% four weeks ago. Of all the short sales and foreclosures currently on the market, 54% are below $500,000 and 92% are below $750,000. Short sales and foreclosures continue to impact areas with a higher proportion of subprime loans funded within the last few years. For example, Santa Ana has a market time of 45.88 months, almost four years, and Anaheim has a market time of 21.59 months, almost two years.

    The latest hurdle in the market has spilled over into the disparity between the condominium market and the detached home market. For the first time since April, the detached home market is actually slower than the condominium market. For condominiums, market time has increased from 12.66 months two weeks ago to 14.39 months today. The market time for detached homes has increased from 11.79 months to 14.94 months today. 32.2% of the current active condominium inventory is vacant versus 24.8% of the current active detached home inventory. Overall 27.7% of the active inventory is vacant. Because of the long market times, many homeowners will opt to lease out their homes in anticipation of a stronger future market.

    It looks as if Bernanke and the Federal Reserve will be cutting rates when they meet on September 18th between a quarter to a half percent. This should give a moderate boost to housing demand depending upon how large of a cut is made. Depending upon future economic indicators, this could be the beginning of rate cuts. Current demand is 45% less than last year and 63% less than two years ago. Demand will continue to plod along at these anemic levels until the Department of Treasury, the Federal Reserve, congress, Wall Street, etc., repair the secondary financial marketplace. This is just the beginning of the Autumn market when demand drops from the Summer market (just not typically as much as it did over the prior month) and the inventory drops as more and more unsuccessful sellers pull their homes off of the market. However, with demand at such low levels, the inventory will most likely not drop as swiftly as it did last year. The Holiday market, Halloween through the first couple of weeks of the New Year, will be marked be low demand, typically the lowest levels of the year (we may be experiencing the lowest levels right now), and a further drop in the active inventory as even more sellers opt to pull their homes off of the market.

    How should a seller approach the market? Now that we are officially in the Autumn market, ONLY SELLERS WHO MUST SELL SHOULD SELL AT THIS TIME. With demand at historical lows, the pressure on pricing is tremendous and those sellers willing to price accordingly will be successful. There are 17,760 homes on the market and 1,206 new escrows within the prior month. Given current demand, 16,554 homeowners, or 93% of the inventory, will NOT be successful over the course of the next month. Excellent showing condition is still very important in positioning a home for success. Cosmetic repairs should be addressed, clutter should be boxed up and a home should be spic and span from top to bottom, ready at a moments notice for a buyer to be escorted through the home. Anything less should be reflected in the price. With so much competition, many homeowners with inferior locations will be competing with homes with views or large lots. A seller cannot change their location, so this too must be reflected in the price. The bottom line is that sellers must approach price extremely carefully, poring over only the most recent comparable sales and escrows and establishing the real fair market value, which may be slightly less. It is better to be the first that sells by pricing a home correctly the first time rather than chasing the market down in price reduction after price reduction. It is time for a real gut check for sellers: if you are not willing to price according to the market value, pull your home off the market.

    How should a buyer approach the market?historically Southern California and Orange County is a fantastic long term investment. With the weather, the beaches and plenty to do, it is also an enviable place to live with a real lack of buildable land.

    The following areas have inventories of less than twelve months: Anaheim Hills, Canyon Areas, Coto de Caza, Cypress, Foothill Ranch, Fountain Valley, Huntington Beach, Laguna Woods, Mission Viejo and Seal Beach.

    The following areas have inventories of seventeen months or greater: Anaheim, Brea, Corona Del Mar, Dove Canyon, Fullerton, Garden Grove, Laguna Beach, La Habra, Newport Coast, Portola Hills, San Clemente, San Juan, Santa Ana, Talega, Tustin, Villa Park, the range between $1 million to $1.5 million and all ranges above $2 million.

    Unusually and exceedingly peculiar and altogether quite impossible to describe...

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