Even as many economists are starting to say the recession is over, the California unemployment numbers for September were disappointing. Jobs were lost at a greater rate in September than in August, reversing an improving trend. This could mean more foreclosures are coming. But, despite a small increase in distressed properties, the inventory of residential real estate for sale in Orange County barely changed during the last two weeks. We maintain our by-weekly foreclosure flood watch. In this article, we consider the data for the two weeks ended10/15/09, 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.

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 the circumstances of the specific neighborhood involved. This series is intended to provide information about the general countywide trends,.

First, we look at the supply. The inventory of active residential real estate listings in Orange County increased by 6 units to a total of 7,923. While a negligible change, it ended the remarkable unbroken string of inventory decreases which began in mid march of this year. The current inventory level remains far below the 12,722
Homes which were on the market at this time last year. The current level is also well les than half the number on the market two years ago.

On the demand side the numbers also changed very little. For the two weeks ending 10/15/09, demand was at 3,197, down by 73 units from the previous two week period. The drop in demand and the slight increase in inventory produced a market time of 2.48 months, compared to a market time for the previous period of 2.42 months.

But, as noted by Steven Thomas, of Altera Real Estate, there are really two different markets operating in Orange County—homes above $1 million and those below $750,000. According to Thomas, the market time for homes under $1 million is 1.88 months. “That translates to an incredibly HOT seller’s market. That range represents 71% of the current active listing inventory. The upper range, homes priced above $1 million, represents 29% of the active listing inventory, but has an expected market time of 10.37 months. Anything over 10 months is basically an almost frozen market, a deep buyer’s market. So, today’s Orange County buyers need to know that the lower the range, the hotter the market. From $750,000 to $1 million, the expected market time is 3.76 months, not incredibly hot, but not incredibly slow either. The word on the street is that there is not that much new, fresh inventory hitting the market, so if a great property comes on the market that is priced right, don’t expect it to last very long. Below $750,000 is crazy, and below $500,000 is just NUTS. That’s right, N-U-T-S!!! Tremendous competition, multiple offers, and selling prices close to or above the asking prices are the norm.”

Thomas continues “the lower ranges are experiencing a seller’s market, but are not experiencing appreciation. Prices have stabilized because there is just too much demand. But, with so many distressed properties still in the mix and many appraisal issues, prices are not going up.”

In fact, for the most recent two week report, the number of distressed properties in the active inventory crept up by 52 units, to a total of 2,398. This brings the percent of distressed properties back up to 30.3%. The portion of the active inventory which is distressed properties has hovered around 30% since mid July, when the trend of decreases ended. This suggests that the balance between new foreclosures—threatened or actual—and the market’s willingness to absorb them, has reached a degree of equilibrium.

So, no flood of new foreclosures yet, but perhaps a slight change in the direction of the tide. The flood watch continues, stay tuned.