Orange County housing inventory very low, prices down slightly
According to Dataquick, Orange County housing prices were down about 2% year over year (flat month over month) in December 2011. This is nothing new. We have been advising our clients about the relatively flat prices for a while now. Sales are down about 6% year over year (increased month over month) in December 2011. On its face, this seems more significant, but sales are in the same general range they have been in since the recession, so this is also nothing too new.
Here's the shocker: Inventory is down over 30% year over year. That's right, not 3%, 30% percent. I did a little digging and found that inventory is down about 50% since August 2010. In less than 18 months, half the homes on the market are gone. Vanished. The reason is even stranger. There weren't a flood of sales, there was no mass auction on the courthouse steps. Instead, every month last year fewer sellers decided to sell than the year before. In fact, going through our database we couldn't find a single year in the last 10 years (as far back as it goes) that had fewer sellers decide to sell their homes.
What does it all mean? Why is this happening? And what does it mean for buyers and sellers in 2012? Here are some of our educated guesses.
Fewer equity sellers lead to a fast moving equity market
According to CoreLogic, the vast majority (over 80%) of homeowners in Orange County have equity in their homes. Yet, most people are not willing to sell into the current market unless they "have to". Finances, job relocation, family changes all lead to sellers listing their homes, but few and far between are the homeowners who sell to upgrade because they just want something better.
In 2012, this could mean less competition for equity sellers. It could also mean that buyers will need to act more quickly on equity homes than they have in the past. Because of the overall state of the economy, however, we have tempered expectations on this leading to significant price increases.
Short sales continue to be a significant part of the market
The number of foreclosures in Orange County has decreased to the point that when we show homes for buyers, we don't spend a lot of time talking about preparing to buy one. However, we do spend a good deal of time talking about short sales. Pending sales are up dramatically as buyers have been willing to buy the short sales that are on the market and as sellers and banks use best practices to get short sales accepted in a reasonable amount of time. We had a lot more successes in 2011 with short sales on both the buying and listing sides than ever before.
In 2012, I would expect short sales to continue to come on and off the market. With fewer short sales on the market, the trend of multiple offers on every short sale will probably continue. Again, our expectations on price are tempered by bigger issues like consumer confidence, unemployment, etc.
Appraisal issues become more prevalent
Assuming sellers don't come on the market in droves to see if they can get a high price in a low inventory market, appraisal issues will be a challenge for both equity and short sales. Fewer homes, means fewer sales, which makes appraising a property less predictable. Buyers and sellers both will need help navigating the tricky waters of not only negotiating a price that is acceptable, but negotiating appraisals that don't come in at value, because of a lack of comparables.
Call us if you need help leveraging the current market for your home buying or selling this year.