Although the changes were relatively modest, the supply of Orange County residential real estate continues to grow, while demand slips again. The number of distressed homes on the market also continues to expand. We run the numbers for the two weeks ending June 24, 2010.

With real estate activity now nearly two months past the expiration of the first time home buyers credit at the end of April, whether or not supply and demand have resumed their normal seasonal trends is unclear. According to Steven Thomas of Altera Real Estate, “Over the last 5 years the average drop in demand {during this two week period} was 3.2%, this year it was only 2%.”

But, this year demand has been falling since the peek at the end of April. In 2009, demand peeked on June 11 at 3,652 homes. This year’s peek of 3,979 is well above last year’s high point, but the fall off is even greater.

Thus Thomas reports, “For the second {biweekly} report in a row, demand is less than the prior year with 522 fewer pending sales compared to 2009.”

Meanwhile, as demand is pulling back, there are more homes on the market each biweekly period. Last year, the supply of active listings started to decline in mid-March. It continued to shrink through the Spring/Summer buying season, all the way through the beginning of this year.

A normal seasonal trend would suggest inventory would have reached a yearly high point by now. But that just has not happened. “In the past two weeks, the inventory has grown by 345 homes, a 3% increase, and now totals 10,469,” reports Thomas. “This is also the second report in a row where the inventory is higher than last year. Last year the inventory was at 9,188 homes, 1,274 fewer than today.”

With demand down and supply up, the market time (an average time a home might remain on the market) has increased in every one of the last four biweekly reports and now exceeds last year’s market time. For the two weeks ending June 24, 2010, the countywide market time was 3.37 months, up nearly a month from the market time of 2.53 from one year ago.

“All ranges have experienced an increase in inventory, especially homes between $250,000 and $1 million,” said Thomas. “For homes priced between $500,000 and $750,000, the inventory has increased by 60%. The reason for the increase in inventory is because there are many homeowners who have held off on selling their home, pent up sellers, who have been waiting for the market to turn so that they could take advantage of the market and sell their home. Homeowners have heard about the hot market in the lower ranges with a lot of activity, multiple offers and homes selling for very close to their asking prices, and in many cases, above their asking prices. The problem is that many of these pent up homeowners are placing their homes on the market at unrealistic levels, thousands above the most recent comparable and pending sales.”

Not only are buyers not willing to bet on future price inflation by offering more than comparable sales, the supply of distressed homes (foreclosures and short sales) keeps on increasing. Orange County employment has improved each month this year, and now stands at the highest level since April of 2009 (see related article below), but the number of distressed homes continues its relentless increase.

As of June 24, 2010, there were 3,217 distressed homes in the active inventory. This is the first time since January of this year when there is more than one month’s demand in distressed properties on the market. “The distressed inventory now represents 31% of the current active inventory. Last year at this time, there were 2,919 distressed homes on the market, representing 32% of the active inventory,” reports Thomas.

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.