Finally, the change in the data we have been waiting for.  Measured by the number of homes on the market, Orange County residential real estate hit bottom back in August 2007.  While the demand for homes has been going up, and the supply has been going down, prices have not shot up because of the volume of distressed homes on the market.  We run the Orange County residential real estate numbers for the two weeks ending April 15, 2010.

According to Steven Thomas, President, Altera Real Estate, “The only thing that is keeping values from taking off like they did before is the distressed inventory.”  As long as supply and demand remain in a stable relationship, the number of distressed homes on the market (foreclosures  and short sales), becomes a primary factor affecting values.

Thus, the trend in distressed homes on the market is of first importance.  Numbers suggesting a recovery in Orange County housing market began to emerge in  early 2009.  As buyers began to reappear, the number of distressed properties on the market in Orange County began a steaddy decrease.  From March 2009 to October 2009, the number of distressed homes on the market in OC decreased during every biweekly reporting period.  The number of distressed homes on the market hit a low of 2,346 on October 1, 2009, when these homes represented only 29.6% of all homes on the market.

With the arrival of the Fall/winter/holiday home buying slowdown, the number of distressed homes on the market started to increase again in mid-October 2009.  With only two minor exceptions, the number of distressed homes on the market expanded steadily until April 15, 2010, when it fell by 33 to 2,781 homes.

Of course, one data point does not make any kind of a trend, and the current reduction is pretty small.  Nevertheless, a small reduction is better than the relentless biweekly increases experienced since last fall.  Also, the current decrease in distressed homes on the market is consistent with the recent three months of back-to-back gains in Orange County employment.  In our related article listede below, we reported on employment gains in January and Feburary.  The California Employment Development Department reported the March numbers this past Friday and Orange County experienced a third consequtive month of job gains.  Total Orange County employment increased another 7,300 in March, so the positive trend continues.

For the two weeks ending April 15, 2010, the percentage of homes in the active inventory which are distressed properties fell to 30.3% and is approaching the low of 29.4% reached in July of last year.  This means that 7 out of every 10 homes on the market are being sold by owners with at least some equity in their properties.  We will anxiously await the next jobs and real estate reports to see if a trend is developing.

The supply and demand numbers for the two weeks ending April 15,2010 did not change significantly from our last report.  The inventory of active listings increased by 266 units, to 9,177 homes.  The supply of homes on the market has expanded steadily since the beginning of this year when it bottomed out at only 7,293 units.  But demand has also increased during the same time period.

For the two weeks ending April 15, 2010, demand (new pending sales during the last 30 days) increased  by 126 homes, to 3,748.  This increase was consistent with the higher inventory, so the market time (the estimated average time a home might remain on the market) was unchanged at 2.4 months.  While a market time this low indicates a strong seller’s market, the residential real estate market in Orange County is more complicated than that.

In fact, there are two distinctly different real estate markets in OC.  Thomas reports “Let’s first establish that there are two different markets, below $1 million, HOT, and above $1 million, COLD.  The below $1 million market accounts for 77% of the total active inventory and 94% of demand.  The lower the range, the hotter the market.  Most buyers new to the market have already formed an incorrect idea of the real estate market.  They think that the market is plagued with desperate sellers waiting for a buyer to finally write an offer to purchase at a major discount and an incredible “deal” for the buyer.  Instead, new, fresh inventory is scarce and buyers find that they are competing for anything half way decent that hits the market .

Properties that are priced well and are in good condition garner tremendous attention and procure multple offers.  Writing a purchase offer at the list price only to lose to three other buyers that brought in offers above the list price is common.  Sales prices above list prices are common.  First time home buyers losing out on properties to investors with larger down payments is common.  The reality is that if a buyer is looking to bargain and negotiate, they are better off attending the local weekend swap meet.”  That is unless you are in the market for a $4 million home.  In this case, sellers greatly out number buyers.  Homes above this price level can expect to lanquesh  on the market for more than 3 years, compared to homes valued at under $1 million, which can expect a sell within 3 months.

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.