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April 15, 2015
Orange County Market Report: What’s your Strategy?
To be successful in today’s housing market, buyers and sellers must have a comprehensive strategy.
OC Housing Playbook: It doesn’t matter if you are a buyer or a seller. Success is dependent upon your strategy.
The Orange County housing market is currently HOT and favors sellers. That doesn’t mean buyers won’t find homes.
Nor does it guarantee success for sellers. Instead, both buyers and sellers need to sit down, do their homework and
come up with a strategy that enables them to achieve their goals.
The Buyer Strategy: Buyers need to start with patience. Get to know the logistics of the area in which you are looking.
We can help you a great deal with that. The price range, neighborhood, the local inventory, and local demand all
establish how quickly homes are selling. For example, most homes priced above $1 million are taking a bit longer to sell
than homes priced between $500,000 and $750,000 (which are selling like hotcakes). Multiple offers are the norm in this
hot market segment and prices are on the rise.
After identifying a home you’d like to pursue, establish the price you’re willing to pay. Take a look at all of the most recent
comparable and pending sales while carefully considering the condition, location, and upgrades in the home. Do not rely
on old, stale data. Buyers looking at comparable sales from last year are fooling themselves. From August 2014 through
January of this year, sales were flat and homes were not really appreciating. From February on, however, supply
remained flat as demand climbed sharply, tipping Orange County housing into a seller’s market with a return to solid
appreciation.
The hotter the price range and market, the sharper a buyer’s pencil needs to be. Do not be afraid to pay a little bit more
than the most recent comparable sales! That’s what occurs in a seller’s market where multiple offers are the norm.
With many buyers competing for the same property, remember that only one buyer is able to successfully purchase the
home. That means that all of the other buyers have to move on and attempt to purchase something else. This process
can become extremely frustrating quickly.
Advice for a buyer: do not get caught up in having to “win.” This often occurs when frustration sets in and a buyer
gets tired of writing offer after offer to no avail. They end up willing to pay whatever price just so they can acquire a home,
throwing reason out the window. Instead, buyers need to keep their wits about them and pursue homes based upon the
facts: recent comparable sales, the temperature of the local market, condition, location, upgrades, and what they are
willing to pay. What a buyer pays, ultimately, should be in alignment with their budget and monthly payment comfort
level. In the end, one year from now, successful buyers will be making a monthly payment and will not be as concerned
about how much they paid for their home.
The Seller Strategy: This is the time of the year that a lot of homeowners come on the market and add to the
competition. To properly capitalize on the hotter market, sellers must not—under any circumstances—fall into the number
one trap that plagues Orange County real estate even today: grossly overpricing their homes. That’s right, there are way
too many overpriced, overzealous sellers, even in the current market. A staggering 8.5% of all active listings reduced
their asking price last week. That’s a lot of price reductions for a “seller’s market!”
What is at the root of this overzealous thinking? Sellers would not have to reduce their asking price if they did their
homework prior to entering the real estate fray. Carefully arriving at price is fundamental in achieving success. It is
imperative that the price is based upon the cold hard facts... i.e. the most recent comparable and pending sales. This
will establish Fair Market Value for a home. Since we are currently experiencing appreciation, this value for the
typical Orange County home may be a few thousand dollars more than the most recent comparable sale. But, it is
not tens of thousands more.
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Sellers also need to carefully consider their location, condition, and upgrades. Some homes sit on the market for longer
with plenty of showings but no offers. They may be priced close to the recent comps, but there is a reason they are not
having success. There is always an underlying reason for a lack of success. The home may back to a busy road, or there
is a pet odor, or the home needs a lot of work, or there are very few upgrades. Polling the buyers that looked at the home
but opted to purchase elsewhere will reveal why a home is not selling. Sellers can address condition and upgrades in
many cases without compromising the price. However, often it simply boils down to a need to reduce the asking price.
For both buyers and sellers, carefully arriving at the proper game plan in approaching the housing market is the
difference between success and frustration.
Active Inventory: The inventory
increased by 4% in the past two weeks.
The active inventory increased by 195
homes in the past two weeks and now
totals 5,624. This is the largest increase
since mid-January. Now that we are
pushing deeper into the Spring Market,
many more homeowners are coming on
the market. This is typical for this time of
the year and we can expect to see more of
the same for the rest of the Spring and
Summer Markets.
Last year at this time there were 6,115
homes on the active inventory, 491 more
than today.
Demand: Demand increased by 4% in
the past two weeks.
Demand, the number of new pending sales
over the prior month, increased by 132
homes in the past two weeks and now
totals 3,107 homes. That’s the first time
above the 3,000 threshold since June of
2013. From here, we can expect demand
to remain at an elevated level throughout
the rest of the Spring Market. It should
then drop slightly into the Summer Market.
Last year at this time there were 289 fewer
pending sales and the expected market
time was at 65 days compared to 54
today.
Distressed Breakdown: 5% down in the
past two weeks.
Foreclosures and short sales combined,
decreased by 12 homes in two weeks and
now totals 224, the lowest level since July of 2013. Year over year, there are 49 fewer homes today, 18% less. Only 4% of
the active listing inventory and 6% of demand are distressed. Distressed properties have almost no impact on today’s
market and their numbers are continuing to drop.
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