ORANGE COUNTY HOUSING REPORT: It is the Summer Market yet there are fewer new FOR SALE signs this year. Not as many homeowners are placing their homes on the market than what is typical for this time of the year.
The lazy days of summer are here. Sitting in the back yard under the umbrella drinking a tall cold glass of lemonade, nothing beats it. Time seems to stand still. The pressures of the rat race of life fade for a moment while basking in the warm summer air. It is a welcome break from the fast pace of working so hard. The summer of 2019 is shaping up to be quite the same way for housing, many homeowners are kicking back in their homes and enjoying the warmer weather rather than placing their homes on the market.
In Orange County, there were 11% fewer homes that came on the market in June of this year compared to June of 2018. That equates to 439 FOR SALE signs. So far in July, there are 6% fewer, or 159 missing FOR SALE signs year-over-year. For buyers monitoring local housing closely, they have witnessed this recent phenomenon. There simply are not as many new homes coming on for buyers to tour.
With not as many homes entering the fray, the active listing inventory is not growing as fast as is typical for the Summer Market. In June and July, the inventory has only grown by 122 homes, or 2%. From 2013 through 2018, on average, it has grown by 819 homes, or 15%. The limited number of homes coming on the market this year has had an impact on the overall choices for buyers.
For sellers desiring an even hotter housing market, that is not what is going on here. Instead, the Expected Market Time (the time it would take for a home that comes on the market today to enter escrow down the road) is not slowing as much as it normally does during the summer time. At the end of May, it was at 85 days. Today, it is at 91 days. That is only an increase of 6 days compared to the average from 2013 through 2018 of 15 days. At 91 days, Orange County is experiencing a Balanced Market (from 90 to 120 days), one that does not favor sellers or buyers. Nobody is in the driver’s seat in a market that is balanced, home values do not change, and there are fewer multiple offer situations.
Had the typical number of homes come on the market, it would be a deeper Balanced Market. This is more than just a blip on the housing radar. It is a trend that will ultimately impact the overall feel and trajectory of the market for the remainder of 2019. Fewer FOR SALE signs translates to fewer choices and a stronger Expected Market Time. Summer is a time when demand softens a bit as the supply of homes increases. That continues until housing transitions to the Autumn Market, where the Expected Market Time remains relatively the same for the rest of the year. With the growth in the supply of homes slowing early, it means the Expected Market Time will not change much from the summer through the end of the year. When the kids go back to school, even fewer homes come on the market while buyer demand diminishes. With both supply and demand falling at nearly the same rate, not much changes in the overall feel of housing.
Last year, the big story was a giant drop in demand (the number of pending sales in the last month), especially noticeable from mid-July through the end of the year. The drop in demand was exasperated by rising interest rates, climbing from 4.5% to 5% from July through November. That translated to an increasing Expected Market Time through the end of the year. That is not going to occur this year while interest rates remain at a three-year low, around 3.75%.
Why are there fewer FOR SALE signs popping up in neighborhoods across Southern California? It could be the deluge of negative housing stories swirling across the nation. It could be all the talk of a pending recession. It is anybody’s guess at this point. Collectively, more homeowners are sitting in their back yards, sipping an ice-cold glass of lemonade, and enjoying the summer warmth, instead of coming on the market and participating in the game of real estate.