Kristin Devlin's Orange County Real Estate Blog

Orange County Housing Report: The Market is Cooling

2016-06-22T15:56:00.003-07:00

Orange County Housing Report: The Market is Cooling

Market time is growing due to an increasing inventory and a

decline in demand as housing transitions to summer.

Expected Market Time: It’s still a seller’s market, but there is a dramatic cooling trend.

REALTORS® on the streets of Orange County are describing a housing market that is obviously in transition. Some homes fly off the market in seconds, while others sit with very few showings. Some buyers are starting to take their time as summer distractions set in, yet others are chomping at the bit and are ready to jump at a moment’s notice. What is going on? This is the time of the year where the market seems a bit like Dr. Jekyll and Mr. Hyde.

An ominous sign of a market in flux are the growing number of open house directional arrows sprouting up at busy intersections. Typically, more open house signs mean that homes are not flying off the market as quickly as they once did. This is due to a combination of reasons.

The number one reason that homes are sitting a bit longer right now (and they will sit even longer as the Summer Market evolves) is that sellers are not getting away with overpricing and stretching the asking price. Demand falls at the end of the Spring Market during the graduation season, and it falls further as all of summer’s distractions set in. With demand falling, buyers start to bump into each other less and their mindset changes as well. They are no longer willing to overpay for their home; instead, they pursue the Fair Market Value for a home.

Many ask how the Fair Market Value is determined for a home. Quite simply, it can be determined by carefully analyzing all of the comparable pending and most recent closed sales. Many sellers fall into the trap that their home is better than all the comps, which is why it is important to lien on a professional REALTOR®. As humans, it is very difficult to separate the emotions of a home from the real factors that determine the true value.

In the past month, the expected market time has increased from 60 days to 69 days and that trend does not look like it will slow anytime soon. It is a seller’s market, but it is weakening and evolving into a slight seller’s market where appreciation slows. The number of showings drops as does the potential for multiple offers. This is precisely why pricing is so crucial at this stage of the market. Overprice and a seller can sit on the sidelines all summer. And, the Autumn Market is even slower. The expected market time is going to push its way to a “Balanced Market,” one that does not favor a buyer or seller, in August. That occurs when the expected market time is between three and four months. For those buyers holding out for a buyer’s market, it does not look like that is going to occur in 2016. The expected market time needs to push past four months to tilt in the buyer’s favor. That would require an enormous increase in the inventory, which will not occur this year.

In the past month, the active listing inventory, “supply,” has risen from 6,267 homes to 6,868, a 10% increase. “Demand,” the number of new pending sales over the prior month, decreased from 3,144 to 2,989 in the past month, a 5% drop. Basic Econ 101 tells us that when supply increases by 10% and demand drops by 5%, the pace at which homes sell cools. As a result, homes are not selling like hot cakes like they were a month ago.

Luxury End: The luxury ranges are slowing right now as well.

For homes priced between $1 million to $1.5 million, demand dropped by 10% in the past two weeks and the inventory increased by 5%. As a result, the expected market time grew from 102 days to 119. Many sellers are wondering why they are not getting as many showings right now; it’s because their market is cooling.

For homes priced between $1.5 million to $2 million, demand dropped by 6% in two weeks and the inventory increased by 6%. As a result, the expected market time swelled from 137 days to 152 days. For homes priced above $2 million, demand fell by 8% and the inventory increased by 1%, so the expected market time moved from 231 days to 249 days. For proper perspective, 249 days from now is the end of February 2017.

Active Inventory: The inventory increased by 4% in the past two weeks.

The active inventory increased by 265 homes in the past two weeks and now total 6,868, its highest level since September of last year. The inventory will continue to climb during the Summer Market and will peak in mid-August, much higher than last year’s peak of 7,167. The inventory could stretch all the way to 8,000 homes if the current accelerated trend of new homes hitting the market continues.

Last year there were 334 fewer homes on the market, 5% less.

Demand: In the past two-weeks dipped below 3,000 for the first time since the start of April.

Demand peaked at the beginning of May and has dropped by 6% since. In the past two weeks, demand, the number of new pending sales over the prior month, decreased by 33 homes and now totals 2,989, dropping to below the 3,000 pending sale mark for the first time since the beginning of April. The last time demand dropped during this time of the year was in 2011. This is a trend that has lasted a month now and is part of the reason the market has been rapidly shifting away from a deep seller’s market.

Last year at this time demand was at 3,094 pending sales, 105 more than today.

Orange County Housing Report: Entry Level Housing Sizzles

2016-05-09T15:17:00.000-07:00

Orange County Housing Report: Entry Level Housing Sizzles

There just are not enough condominiums and houses in the

lower ranges to keep up with the red hot demand.

Entry Level Housing: Starter homes are flying off the market with an expected market time around one month.

An important segment of the housing market is the starter home, buyers looking to purchase a home for the first time. In Orange County, the detached starter home starts around a half a million dollars. There are only 174 available today below $500,000. For many college graduates and young families who cannot afford a detached home, they turn to townhomes and condominiums. With interest rates below 4% and the Federal Reserve talking about eventually raising rates, buyers are tripping over themselves to purchase and the market is sizzling.

For detached homes below $750,000, the market is scorching hot with an expected market time (the time it would take for the average home to enter escrow) of only 29 days. For sellers who price their homes close to the most recent comparable pending and closed sales, and are in good condition, they generate immediate interest with multiple offers within days of hitting the market. If a home is on the market for a few weeks within this range and no offers to show for it, there is something wrong with the home and it is typically price.

The market is still really hot from $750,000 to $1 million with an expected market time of less than two months. Above $1 million and the market starts slowing considerably.

Many entry level buyers turn to townhomes and condominiums for affordability reasons. There are only 212 available in all of Orange County below $250,000, and they are typically small one to two bedrooms and less than 1,000 square feet. The expected market time is 44 days. For condominiums between $250,000 and $500,000 the expected market time is 35 days. Once again, when sellers price their homes carefully and are in great condition, they too are generating multiple offers within moments of coming on the market.

With an expected market time of less than 60 days for attached homes between $500,000 and $750,000, the market is still very hot. It starts to slow above $750,000 and comes to a crawl above $1 million.

The bottom line: it is the Spring Market and Orange County housing is heavily stacked in favor of the seller. Demand is so hot for starter homes that many buyers will not be able to purchase. There are currently far more buyers than sellers. It’s a supply and demand issue. It won’t start to slow until the Summer and Autumn Markets. Buyers need to be on their “A” game in order to be successful and secure a home within these ranges today.

Luxury End: Through April, there have been more luxury home sales above $1.25 million than ever before.

The word from the Orange County real estate trenches is that the luxury market is really slow; yet, demand for homes above $1 million is up compared to 2015. How can that be? It is quite simply a supply issue.

For homes priced between $1 million and $1.5 million, demand is up an incredible 21% compared to last year. The number of active listings is also way up, 19% higher. Although activity is up, the increase is almost totally offset by the number of competing listings. The expected market time is 95 days compared to 97 days last year.

For luxury homes priced above $1.5 million, demand is up 6% compared to last year. In real numbers, it is only 14 additional pending sales. The inventory is a different story; it is up 24%, an additional 285 homes on the market competing against each other. There are more sellers competing for a very similar number of buyers; thus, the market feels a lot slower.

There are many definitions for luxury housing, but if we take a closer look at one definition, the top 10% of all closed sales, Orange County’s luxury end would be $1.25 million and up. Through April, there have been more closed sales above that threshold than ever before. Keep in mind, that’s four months of cumulative sales. There are currently 1,932 homes on the market above $1.25 million.

Demand: In the past two-weeks demand increased only slightly, but to a new record height for the year.

Demand, the number of new pending sales over the prior month, increased by only 13 homes in the past two-weeks, now totaling 3,196, the highest level since October 2012 and the height thus far in 2016. It appears as if demand is peaking right now. From here we can expect demand to remain at these levels through mid-June when we transition to the Summer Market. With the distractions of summer, the beach, family trips, the pool, hiking, picnicking, and every other outdoor recreation you can think of, Orange County housing demand experiences a cyclical slowdown.

Last year at this time demand was at 3,138 pending sales, 58 fewer than today. The expected market time was 56 days, identical to today.

Active Inventory: The inventory increased by 2% in the past two weeks.

The active inventory increased by 138 homes in the past two weeks and reached 6,000 homes for the first time since the start of November of last year. With scorching hot demand, the inventory is having a difficult time growing; many homes are coming off of the active inventory every day as they successfully enter escrow. The numbers will not really climb until the Summer Market when demand starts to slow. The inventory looks a lot like 2015. It reached a peak of only 7,178 homes at the end of August, well off the 10-year average peak of 10,375 homes. There just are not enough homes coming on the market compared to a decade ago.

Last year there were 175 fewer homes on the market, 3% less.

Summary:

Orange County Housing Report: Crazy Good Market… For Sellers

2016-05-02T14:05:00.000-07:00

Orange County Housing Report: Crazy Good Market… For Sellers

The Orange County housing market is hot with the strongest demand

in three-and-a-half years.

HOT Seller’s Market: Homes priced below $1 million are flying off the market.

The Orange County housing market is firing on all cylinders and sellers are in the driver’s seat. Multiple offers are back, values are on the rise, and the appraisal is quickly becoming the biggest obstacle in closing. Demand is stronger than one year ago and it appears as if this will be the best Spring Market since 2005.

The Spring Market runs from March through mid-June. This is when more real estate activity takes place than any other time of the year. More buyers are bumping into each other in their quest to secure a home, and they are currently flooding the housing market. The historically low interest rates are adding fuel to the fire, allowing buyers to afford even more home.

Mistakenly, many believe that the Summer Market is the best time of the year to sell. It’s just not true. In mid-June, summer distractions creep into the housing market starting with graduation. Graduation, family vacations, the beach, the pool, hiking, and picnics slows the home buying process down a bit. Instead, that is when many of the pending transactions that were put together in the Spring Market close. As a result of all of the summer distractions, there is a cyclical downshift in buyer activity and demand.

For now, buyers below $1 million are experiencing an extremely challenging time securing a home. Below $750,000 is nothing short of crazy. There are homes that have the look and feel of an auction type of atmosphere. These new homes that hit the market cannot be shown until Saturday at a specific time that coincides with the REALTOR’s “mega open house.” Buyers are quite literally bumping into each other and everybody gets the sense that the bidding process is about to begin. The bids come in the form of multiple offers, the more offers secured, the better the price and terms for the seller. During the negotiating process, offers are pit against each other to drive prices even higher. The end result, only one buyer gets to purchase the home and often at a premium.

In order to find success, many buyers are getting creative. Family pictures combined with personal notes detailing why a house is the perfect place for them to call “home” are included with many offers to purchase. Hand delivered offers to the listing agent at their office, or even the open house, is another strategy. Finding out what the sellers want prior to writing an offer is very important. From a quick closing to renting back, getting the seller what they are looking for can really help secure the deal and enable a buyer to achieve success.

When the housing market tilts heavily in favor of the seller, it is an invitation for new sellers to overprice. Many sellers initially hit the market overconfident and overzealous and price their home off the radar screen. What sellers need to understand is that rapid appreciation is a thing of the past, dating back to when Orange County was underpriced and extremely affordable. In March 2012 the median sales price was $400,000. In March 2016, the median was $625,000, that’s a 56% increase in four years. Since homes are not rapidly appreciating today, the best strategy to employ for a seller is to price their home close to its Fair Market Value. As a result, the realistic value will generate multiple offers, which will ultimately allow them to get their price, and often even more. Values are slowly rising and continue to push the envelope, making the appraisal process a major hurdle to closing the sale.

Is the luxury market hot too? In terms of demand, yes, it is stronger this year than one year ago today. In terms of supply, there’s a lot more homes in the luxury end compared to last year. The end result, it has a more sluggish feel to the market. From $1 million to $1.5 million, demand is up 19% and the inventory is up 22% compared to 2015. From $1.5 million to $2 million, demand is up only 2% and the inventory is up 24%. Above $2 million, demand is up 7% and the inventory is up 22%. So, above $1.5 million, demand may be up, but the extra inventory means many home sellers are having a tough time achieving success due to the increased competition. For these sellers it all boils down to price, condition, amenities, and location, and sellers only have control over price and condition.

Active Inventory: The inventory increased by only 2% in the past two weeks.

The active inventory increased by 130 homes in the past two weeks and now sits at 5,862. Every price range, except for homes priced below $500,000, experienced a slight increase. The inventory was growing at a much more rapid rate at the beginning of the year when the worldwide stock and financial markets were taking a beating, but as soon as stability was restored, so was Orange County housing demand. Higher demand means more pending sales. More pending sales means fewer active listings on the market. Now that demand is sizzling hot again, homes are not staying on the market and the inventory is not rising as fast. We can expect this trend to continue through mid-June, the start of the Summer Market. From there, the inventory will rise and peak in mid-August and reach levels similar to 2015.

Last year there were 169 fewer homes on the market, 3% less. So far this year, the same number of homes have come on the market compared to one year ago today. Historically speaking, the inventory is well below the long term average of 9,238, an incredible 37% less. There just are not enough homes coming on the market compared to a decade ago.

Demand: In the past two-weeks demand increased by 6%.

Demand, the number of new pending sales over the prior month, increased by 184 homes in the past two-weeks, and now totals 3,183, the highest level since October 2012 when there were a lot more short sales embedded in demand. Back then, many short sales never closed.

This Spring Market has the potential of being the strongest since 2005, prior to the Great Recession. High demand will equate to higher closed sales. The expected market time for all of Orange County is 55 days, identical to one year ago today.

Last year at this time, demand was at 3,121 pending sales, 62 fewer than today.

Summary:

Orange County Housing Report: Q12016 – OC Housing is Resilient

2016-04-12T10:50:00.000-07:00

Orange County Housing Report: Q12016 – OC Housing is Resilient

After a shaky start, Orange County housing is proving to be

durable and strong.

A 1^st Quarter Overview: The housing market continues to lean in favor of the seller.

Due to worldwide stock market and economic turbulence, the Orange County housing market had a very sluggish start to the year. It seemed as if housing was lying face down in the dirt of the economic arena. The four-year hot seller’s market appeared to be bruised and battered and ready to begin tilting slowly to the buyer’s favor. In spite of very little supply, buyers were unilaterally balking at higher prices and were unwilling to stretch and pay a little bit more than the most recent sale. As a result, demand was off.

This is where the resilience of housing stepped in. The Orange County housing market got up from the dirt of the economic arena, brushed itself off, flexed its massive muscles, displaying its incredible strength and endurance, and surged forward. The hot market came back with a vengeance. Here’s a breakdown of the current OC housing trends:

After a slow start, the active listing inventory is rising, but will remain well below the long term average. After starting the year with the second lowest inventory behind the extremely anemic 2013 housing market, it seemed as if there would not be enough homes to satiate buyers’ demand leftover from 2015. There were 7% fewer homes coming on the market through mid-February compared to the prior year. As the worldwide financial volatility found its footing, more homes started coming on the market. By the end of the first quarter, the exact same number of homes had come on the market as 2015. The slow start was replaced with an eagerness for homeowners to sell again, and they made up for lost time. The inventory had grown by 30% since ringing in the New Year. There are 2% more homes on the market today compared to last year due to the fact that demand is off a bit. Fewer new pending sales mean a higher inventory. The long term average inventory since 2005 is 9,238. The current active listing inventory is at 5,732, nearly 38% off the average. The trend is for the inventory to continue to grow at a slow methodical pace, peaking in mid-August right above the 7,000 home mark.

Demand has regained its strength and looks a lot more like 2015. After an initial strong start, demand was 10% higher than the start to 2015, buyers quickly adjusted to the continuously streaming news of the stock market turbulence and demand slowed. It actually took an unprecedented drop after the first two weeks of January. As a result, after the first two months, demand was off by 11%. By the end of the first quarter, demand was only 3% less than 2015, and the Orange County housing market was humming along on all cylinders. The trend is for demand to remain strong through the second quarter, the hottest time of the year in terms of activity. It will then decelerate in July, like it cyclically does during every Summer Market.

Every seller and buyer MUST understand that the lower the price range, the hotter the market; AND, the higher the price range, the slower the market. Not all price ranges behave the same. There are four vastly different market in Orange County. Below $750,000 is red hot. Price a home in good condition close to the Fair Market Value and it will generate multiple offers and will often sell at or above the asking price. With an expected market time of only 37 days, home values are climbing and it is a deep seller’s market. This range represents 44% of the active inventory and 68% of all demand. The second hottest price range, homes priced between $750,000 and $1 million has an expected market time of 75 days. This is a slight seller’s market, meaning that they are able to call the shots in negotiating a sale with a buyer, but values are not appreciating. Overprice in this range and sellers will sit. The third range, homes priced between $1 million and $2 million, is slow at 115 days, but will eventually move when priced accurately. The final price range, homes priced above $2 million, is extremely sluggish with an expected market time of 269 days. It accounts for 16% of the entire inventory, yet only 3% of demand. There just are too many sellers competing for a very small pool of buyers.

Closed sales are slightly up compared to 2015, but that trend changed in March. For the residential resale market, closed sales were up by 10% for January, up 5% in February, and down 5% in March. Overall, the first quarter saw closed sales up 3.3%. Demand has been less than 2015 levels since mid-January. In turn, that means that sales will be less as well. That trend will continue as long as demand trails the prior year. It is also important to note that distressed sales are way down. Foreclosures are down 14% and short sales are down 38% compared to 2015. Distressed seemingly vanished in 2014, and every year its impact has become less and less. This year is no exception. There were only 239 total distressed closed sales in the first quarter. Compare that to 336 last year, 416 in 2014, a staggering 1,573 in 2013, and a mind blowing 2,779 in 2012. Distressed has gone from 55% of the market in 2012 to just 5% today.

Conclusion: from here, we can expect a market very similar to 2015 with slightly less demand, resulting in slightly fewer closed sales.

Active Inventory: The inventory increased by 5% in the past two weeks.

The active inventory increased by 267 homes in the past two weeks and now sits at 5,732. Every price range, except for homes priced below $500,000, experienced an increase.

The trend does not look like it is going to methodically increased like it did in 2014; instead, it looks like it will be a lot more sporadic like 2015. Ultimately, it will peak somewhere between 7,200 and 8,000 homes in mid-August. The eventual height depends upon future evolutions in the housing market.

Last year there were 108 fewer homes on the market, 2% less.

Demand: In the past two-weeks demand increased by 4%.

Demand, the number of new pending sales over the prior month, increased by 103 homes in the past two-weeks, and now totals 2,999, the highest level since June of last year. After an initial slow start to the year in terms of demand, it has recovered nicely and is beginning to follow closer to last year’s path. The expected market time for all of Orange County is 57 days.

Last year at this time demand was at 3,107 pending sales, 108 more than today, with an expected market time of 54 days.

Summary:

Orange County Housing Report: Housing is Springing Forward

2016-03-15T12:04:00.000-07:00

The Spring Market has officially arrived and demand is poised to

continue its spring surge.

Spring Market: Over the next month, demand will rise to its highest levels of the year, where it will remain through the end of Spring.

The Orange County housing market did not look at all like 2015 after the first couple of months of the year. Instead, it looked a lot like it was going to be 2014, a year with a bit less demand and an inventory that continuously grew on the backs of overpriced homes. After ringing in the New Year, stocks were diving, prices at the gas pump were dropping to levels not seen in many years, and there was quite a bit of uncertainty in the air. All of these factors were a drag on the county’s housing market and there was a delay in the start to the Spring Market. Typically, the local market revs its monstrous engine right after the Super Bowl. Instead, demand was off by 11% throughout February. Where was housing heading? Would there be a correction in pricing? Is it still a good time to buy? Are we moving towards an economic slowdown?

The trend for this year is that housing is NOT headed for a correction; not anytime soon. Nationally, and especially locally, there has been a real supply issue that dates back to 2012. For this time of year, the average active inventory for Orange County since 2005 is 8,766 homes. Currently, we are at 5,444 homes. That means it is off by 38%. Since 2012, the average inventory for this time of year has been 5,349 homes. REALTORS® are not exaggerating when they state that there are not enough homes on the market. It is an absolute fact. With extremely favorable interest rates, there is tremendous demand. Strong demand coupled with a low supply means that the real estate market favors sellers, not buyers. The expected market time, the time it would take, on average, to list a home and place it under contract, is 61 days. The year started with an expected market time of 81 days and has been dropping ever since. In order for the market to shift in favor of buyers, the inventory would have to rise and demand would have to drop. The expected market time would have to exceed 120 days, double from where we are today. That is just not going to happen, not anytime soon.

Now that the stock market has turned around, along with a rise in oil prices, it looks as if it is now business as usual for our economy and the local housing market. The anxious start to housing has shifted back to the fact that it is a good time to buy and buyers want to take advantage of the very low interest rate environment. Everybody gets it, as soon as the economy starts rolling along again, the Federal Reserve is ready to raise the short term interest rate again. Long term rates may not rise by much over the course of this year, but everybody knows that the low rates today cannot stick around forever. Naturally, buyers want to buy now while they know for certain that they will be able to cash in on a great rate. If interest rates were to jump from 4% to 5% (and, someday they will), the payment for January’s median priced home, $618,500, at 20% down would climb from $2,362 to $2,656, an increase of $294 per month, or $3,528 per year.

So, we are not headed for an economic disaster, no slowdown, no correction in housing, and interest rates remain low. As a result, housing is springing forward and demand is back. However, prices are not surging. Home prices are much higher than they were back in the beginning to 2012, the real start to the housing turnaround. Buyers do not have the stomach to pay much more than the last comparable sale. They want to pay the Fair Market Value for a home, which can be determined by carefully considering the most recent pending and closed sales. Prices may rise a bit during the first half of 2016 in the lower price ranges, below $750,000, but they are not going to surge.

Active Inventory: The inventory increased by 3% in the past two weeks.

The active inventory increased by 173 homes, or 3%, in the past two weeks and now sits at 5,444. After a very slow start to the year, when far fewer homes were coming on the market compared to 2015, the trend has reversed course. To date, there are only 45 fewer homes that have come on the market compared to last year. As a matter of fact, over the last month, 3% more homes came on the market. On January 1^st, there were only 4,396 homes on the market. Since then, the inventory has added an additional 1,048 homes.

In order for the active inventory to grow, more homes have to come on the market than go off the market. The only way for a home to come off the market is for a home to move to pending status or for a seller to pull their home off the market and throw in the towel. With the beginning of the Spring Market, we know that sellers are not throwing in the towel. So, the increase in the inventory is indicative of an accumulation of homes that stay on the market without being able to procure an acceptable offer to purchase. The biggest culprit during the spring to successfully selling are the sheer number of overpriced homes. Most homeowners start off a bit overzealous and unrealistically price their homes. In time, the market illustrates that a reduction in price is necessary in order to find success.

Last year at this time the inventory totaled 5,560 homes, 116 more than today, with an expected market time of 1.98 months, or 59 days, a slight seller’s market. Today’s expected market time is at 2.04 months, or 61 days, still a slight seller’s market. A slight seller’s market means that there is not much price appreciation but sellers get to call more of the shots in terms of negotiating the finer details of a contract.

Demand: In the past two-weeks demand increased by 3%.

Demand, the number of new pending sales over the prior month, increased by 87 homes in the past two-weeks, and now totals 2,671, the highest level since August of last year. Today’s demand is not as good as 2015, currently 5% less, but much better than 2014, 15% higher. The disparity from last year is growing smaller and is poised to continue to surge over the course of the next month.

Last year at this time demand was at 2,813, that’s 142 additional pending sales. Two weeks ago the disparity was 307.

Summary:

Orange County Housing Report: Seller Drought

2016-03-01T08:33:00.000-08:00

Orange County Housing Report: Seller Drought

For the past seven years there have been significantly fewer sellers

coming on the market.

Not Enough Sellers: since 2009, fewer homeowners have been diving into real estate in spite of massive appreciation.

Home values have risen tremendously since the beginning of 2012. With a return of equity, logically you would think that there would also be a return of the number of homeowners opting to sale. However, that has not been the case. It makes sense that fewer homeowners decided not to sell from 2008 through 2011. Those were the years that values took a pounding and homeowners witnessed the equity in their homes vanish. Since 2012, those same homeowners have watched their equity return; yet, 2012 through 2015 all posted the lowest number of homes to come on the market since the turn of this century. As a matter of fact, from 2000 through 2007, there were an average of 1,500 additional homes that popped on the market every single month compared to the past four years. That’s an additional 18,000 homes.

Based upon 2015 closed sales, the turnover rate for the Orange County housing stock is once every 23 years. That’s an improvement over 2014, once every 24 years, but not by much. The lowest turnover rates in the county can be found in Cypress, Fountain Valley, La Palma, and Westminster. These cities’ homes are turning over at a rate of once every 30 years or longer. There are a few exceptions; Aliso Viejo, Ladera Ranch, Laguna Woods, Los Alamitos, and Mission Viejo all have turnover rates of 15 years or less. But, based upon current trends, gone are the days of homeowners moving every 7 years.

So, why aren’t homeowners moving like they did a decade ago? There are a number of factors that illustrate why they are staying put. The homeownership rate for 18 to 34 year olds has been dropping since reaching a height in 2005, and about a third of all millennials live with their parents. Ultimately, that delays would-be empty nesters from downsizing. Also, there aren’t as many new homes being built in Orange County, especially below the $1-million mark. This used to create a lot more real estate activity as many locals bought new, but had to sell their existing homes first. With the county running out of vacant land, this will be an ongoing issue.

Another factor that helps explain why homeowners are not moving as often as they used to is that owning a home long term and paying off the mortgage is now in vogue. The severity of the Great Recession rattled our collective psyche and people now look at home ownership a bit differently. As is typical in the Midwest, people want to hang onto their homes and dig in their roots.

One of the biggest factors, that is talked about in the real estate trenches on a daily basis, is that homeowners are afraid to sell their home only to turn around and find nothing available to buy. Essentially, the low inventory is preventing would be sellers from coming on the market, which only exasperates the problem. Yet, there are ways around this dilemma. A double move is a solution, where a homeowner sells their home, moves into a monthly rental, and then takes their time to isolate the most ideal home for their family. Moving companies work with the double move scenario often and can crate and store whatever will not be used at the short term rental. Another solution is for a seller to accept an offer to purchase with the condition that they are able to find a replacement property within a specific time period, 30-days being most common. If they are unable to find a replacement home within the given time period, then the contract is cancelled or additional time may be negotiated.

The current trend of an underwhelming annual inventory and a low housing turnover rate is not going to change anytime soon. With that knowledge, buyers and move-up (or move-down) sellers need to approach the market with realistic expectations and plan accordingly, utilizing the expertise of a professional REALTOR®.

Active Inventory: the inventory increased by 6% in the past two weeks.

The active inventory increased by 298 homes, or 6%, in the past two weeks and now sits at 5,271, the largest increase since May 2014. More homes are finally coming on the market after a lackluster start to 2016. 9% fewer homes entered the fray in January compared to 2015. More homes are coming on the market in February, so the annual difference to date is now only 3% fewer.

Last year at this time the inventory totaled 5,433 homes, 162 more than today, with an expected market time of 1.88 months, or 56 days, a seller’s market. Today’s expected market time is at 2.04 months, or 61 days, still a slight seller’s market. A slight seller’s market means that there is not much price appreciation but sellers get to call more of the shots in terms of negotiating the finer details of a contract.

Demand: in the past two-weeks demand increased by 10%.

Demand, the number of new pending sales over the prior month, increased by 242 homes in the past two-weeks, and now totals 2,584, the highest level since September of last year. Demand had looked a lot like 2014 for the first 6-weeks of the year, but broke away in the past couple of weeks. Demand is now 5% higher than two years ago, 126 additional pending sales.

However, today’s demand is nowhere close to 2015, 11% less than the 2,891 pending sales posted a year ago. That’s 307 fewer and has resulted in a noticeably different housing market. In spite of the low expected market time (the amount of time it takes to place a home listed today into escrow), buyers are not willing to budge much higher in price than the most recent comparable pending and closed sales, also known as the Fair Market Value. Thus far in 2016, homes that are not priced well are still realizing plenty of showing activity, but are not receiving any offers to purchase. Pricing is currently crucial in order to find success.

Expect demand to continue to increase methodically through March and then remain elevated through the end of Spring, mid-June.

Summary: