Still no sign of the impending flood of new foreclosures in Orange County residential real estate. The total inventory of active listings fell 4%, but the distressed listings fell by even more. Thus, for the first time in two months, the percentage of active listings which are distressed properties fell slightly. Defying seasonal expectations, the demand increased modestly. With job losses also continuing, but at a fraction of previous months, we maintain our by-weekly foreclosure flood watch. In this article, we consider the data for the two weeks ended 9/17/09, the most recent report.
Your Editors believe in the basics and when that comes to any market driven item, it means supply and demand. when demand goes up, relative to supply, it is generally good for sellers. Supply is the inventory of active residential real estate listings in Orange County. Demand is measured by the number of new pending sales in the last 30 days. The relationship between the two, called market time, is the demand divided into the supply. The answer, expressed in months, represents an estimate of the average time a property might be on the market, given the current inventory and demand levels. The higher the market time, the more of a buyer's market, the lower, the more of a seller's market.
First, we look at the supply. As it has done consistently since March of this year, the inventory of homes for sale in Orange County continues to drop. AS of 9/17/09, the total number of homes in the Orange County active residential real estate inventory fell by 298 units, to a total of 8,064. That represents a 4% drop in two weeks, double the drop for the previous two weeks. This is the lowest inventory level since the beginning of 2006. Last year at this time, the inventory was at 13,174 and two years ago, there were more than twice as many homes on the market. According to Steven Thomas of Altera Real Estate, "In the lower price ranges there is not a lot of new inventory coming on the market."
On the demand side, we thought the end of the summer buying season was showing up in the numbers. For the 2 weeks ending 9/3/09, demand did in fact shrink from the previous levels. But, for the most recent two weeks, demand actually increased. We would not suggest The 2% gain is by itself significant, but we were expecting another seasonal decrease. Perhaps the safest conclusion which can be drawn from the most recent demand numbers is that they are holding steady. For the two weeks ending 9/17/09, demand was up by 61 units, to a total of 3,464. Demand has been fluctuating, without any discernable trends, between 3,300 and 3,650 units since mid-April. Since demand increased while supply fell, market time broke out of the narrow range it had maintained since mid-July and dropped to 2.33 months. Two weeks ago it was at 2.46 months. This decrease is, of course, small, but at least it does not suggest a new flood of distressed properties.
The number of distressed properties in the active inventory fell by 132 units, to a total of 2,384. This is a decrease of 5%, compared to a 4% drop in total inventory. Thus, the percentage of distressed homes to the total active listings pulled back to less than 30%. AT 29.6%, the distressed inventory reversed the increases of the last several weeks and is back to the level of August 6, 2009.
According to Thomas, homes priced "below $750,000 is technically a seller’s market with an expected market time of approximately two months or less. The activity below $500,000 is incredibly hot. However, this is not a conventional seller’s market as values are not appreciating. The sheer numbers of distressed properties, mainly short sales, is keeping a lid on any appreciation. Buyers can expect multiple offers, a tremendous amount of competition, and the need to write offers to purchase on more than one property (often times several). Cash is king and so are buyers with larger down payments. With so much competition in the lower ranges, buyers with very little down are having a hard time purchasing. They are losing out to buyers that can afford larger down payments. Many first time home buyers who are relying on the low down payments allowed by FHA financing simply cannot compete with more qualified buyers and investors. That’s right. Investors are back and taking away the ability for a lot of buyers to purchase.
The rumors of a foreclosure moratorium have been rampant all year long. There is truth to the moratorium, but it does not look like there will be a substantial increase in the number of foreclosures to hit the market until the first quarter of 2010. Also, there is a tremendous amount of pent up demand where just about every agent has pockets filled with buyers who are actively looking, but, surprisingly, there just is not a lot of fresh inventory. Any increase in foreclosures will most likely be offset by pent up demand."
Your Editors will maintain our foreclosure flood watch, stayed tuned.
All of the data in this article is from a report published by Steven Thomas of Altera Real Estate
