If you are considering buying an Orange County home, now might not be the best time. The three key factors we track – demand, supply, and distressed homes – all continue to move in the direction of transitioning from what was a sellers market, into what could become a buyer’s market. The number of homes on the market continues to increase, demand keeps falling, and, despite our improving job market, the number of distressed homes on the market increases steadily – we run the numbers for the two weeks ending July, 8, 2010.

An improving or deteriorating housing market depends on whether you are a buyer, seller, or both. If you are both, as long as the supply/demand market conditions are the same for the home you are selling and the home you want to buy, these market conditions should not have a significant impact on the transaction.

Most reporting we read on the housing market is from the seller’s perspective, i.e. a “good”, or “strong” housing market means good for sellers, not buyers. At www.OC180NEWS.com, we try to avoid that bias.

Based on our review of OC biweekly countywide residential real estate data, it is pretty hard to come to any conclusion other than OC is moving toward a buyer’s market. All of the numbers we track are going in the opposite direction from what was happening last year at this time.

“The overall market is still a “seller’s market,” but it is moving in the wrong direction,” reports Steven Thomas of Altera Real Estate. “Remember, this seller’s market is different. There may be a lot of buyers and a lot of competition, but spreadsheet buyers are unwilling to pay much of a premium over the last comparable sale.”

The number of homes on the market, aka active inventory, aka supply, continued its relentless increase and as of July 8, 2010, totaled 10,817, up 355 units, or 3.4% from two weeks earlier.

Last year, inventory peaked in June and declined steadily until the end of the year. This year inventory has increased without interruption from January and now is 1,871 units, or 21% above last year’s level. This is the highest inventory level since April 2009.

Thomas indicated “Every {price} range has experienced growth, but the most substantial growth can be found between $250,000 and $1 million with a 71% increase.”

Demand for this expanding inventory of homes on the market just isn’t there. As the inventory has been increasing, demand has been moving in the other direction. Demand, new pending sales in the last 30 days, peaked back in April, probably due to expiring tax credits, and has been contracting ever since.

Demand for the two weeks ending July 8, 2010 was 2,860, down 247 units, or 7.9% from two weeks earlier. Last year at this time, demand was 3,359, and there were 21% more homes on the market.

The combined affect of more inventory and less demand equates to a market time of 3.8 months, the highest since March 2009. Last year at this time it was only 2.7 months.

While the market time for distressed properties – both foreclosures and short sales – is lower than the overall market, just like the total market, the supply of these properties has been growing steadily.

In fact, the number of distressed properties on the market now is more than the number of total sales in one month. Distressed properties crossed that threshold for the two weeks ending June 24, the first time since January. The recent low in the ratio of distressed properties in inventory to demand was back in September 2009 when for each new pending sale, there was .7 distressed homes on the market. Now, with the distressed inventory increasing to 3,307 units, for each new sale, there is 1.16 distressed homes on the market.

In this article series we report on the numbers for Orange County in total. Real estate is very local and any buying or selling decisions should be based on circumstances of specific neighborhoods. This series is intended to provide information about general countywide trends in supply and demand.

All real estate data in this article is from a report published by Steven Thomas of Altera Real Estate.

This report appears on www.OC180NEWS.com every other Monday.