Trends in Orange County residential real estate favored buyers for another biweekly period. Supply and the number of distressed properties on the market, both continue to increase, while the number of new pending sales during the last 30 days (demand) fell again. We run the numbers for the two weeks ending June 10, 2010.

The inventory of active Orange County residential real estate on the market continued its relentless expansion for the two weeks ending June 10, 2010. Increasing by another 278 homes, or 2.8%, inventory was 10,117 as of June 10. As we have been reporting, inventory has steadily increased since the beginning of the year, when it hit a low of 7,293 units.

Demand, on the other hand, stopped keeping pace with the expanding inventory back in mid-April. Last year, movement in the supply/demand relationship favored sellers until it swung around in favor of buyers in mid-November.

We measure this supply/demand ratio by “market time”, which is the demand divided into supply. This produces a rough average in months of how long a property might be on the market. But, more importantly, changes in the market time measure the trend in the supply/demand relationship. If market time increases, it means an average home will take longer to sell, thus favoring buyers. Conversely, when market time is falling, it means the market is heating up and this favors sellers.

Market time hit a near term low last November after which the holiday buying slowdown outpaced inventory reductions, sending market time up through the beginning of this year. With the 2010 spring buying season gathering steam, many homes came on the market. But, there was enough demand to handle the supply increase. That is, until the end of April.

For the two weeks ending April 29, inventory had increased from 7,293 homes at the beginning of the year, all the way up to 9,351 units. While this is a pretty staggering supply increase, demand was a red hot 3,979 homes. Thus, market time hit a recent term low of 2.35 months.

According to Steven Thomas of Altera Real Estate, “the end of the Federal tax credit definitely had an impact on Orange County housing demand. It is also safe to say that demand prompted many first time home buyers to purchase sooner than originally anticipated. Had the credit not been in place, demand would have been curtailed in both March and especially April. Demand in May and June would have been stronger as well. March and April’s surge due to the housing credit robbed May and June of normal activity. There is nothing cyclical about the recent swings in demand, but it is making its way back to normal. It should be back on track by July.”

Since the end of April, demand has fallen steadily, while the inventory of homes on the market continues to increase. Thus, rather than the spring buying season serving to clear out inventory, as was the case last year during this time, the exact opposite has happened so far this year. For the two weeks ending June 10, market time was 3.19 months. While this could still be considered a seller’s market, that characterization is slipping away.

“The expected market time for all homes priced below $1 million is still a very hot 2.71 months. Five months is equilibrium. Anything less than five months is a seller’s market,” reported Thomas. “You may ask, “How can we have a seller’s market without rampant appreciation?” The answer is quite simple: with so many distressed homes on the market, they are keeping a lid on any real, significant appreciation. Anything higher than five months is considered a buyer’s market. For homes priced above $1 million, the upper end, the expected market time is 8.89 months, the higher the price range, the slower the market.”

Thus, favoring buyers is the continuous increase of distressed properties in the active listings. Rather than showing any sign of contraction as more and more people find jobs in Orange County—which has been the situation since the beginning of the year—more distressed properties, with only minor exceptions, have come on the market during each biweekly reporting period since last October.

As of June 10 there were 3,080 distressed properties) short sales and foreclosures) on the market in Orange County. This is an increase of only 89 homes from two weeks ago. This small increase is not significant if viewed independently, but as part of a trend, it clearly is favoring buyers. The most recent increase is yet another step in a trend which began back in the beginning of last October. At that time, there were only 2,346 distressed homes on the market in Orange County. With only a few small exceptions, the number of distressed homes for sale has increased every period since then.

In this biweekly 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 biweekly series is intended to provide information about general countywide trends in supply and demand. See related articles below for more detailed stories about specific West Orange County neighborhoods.

All real estate data in our biweekly countywide real estate trend articles are from reports published by Steven Thomas of Altera Real Estate. Our countywide trend articles appear on www.OC180NEWS.com every other Monday.