As we stated in a previous article several weeks ago ( Orange County market is Alive Again ), it is our opinion that the downward pricing is coming to an end here in south Orange County. If we haven’t already reached the bottom of the downward pricing cycle, then we are very close to the bottom. How can I be so confident you may ask ? Well as they say, it’s all in the numbers. The internal market statistics that best reveals the constant tug of war between buyers ans sellers is called the Months of Inventory. The Months of Inventory is basically a ratio of the Inventory of homes for sale by the number of homes that have sold over a period of time. The higher the months of Inventory, the slower the market and visa versa. Traditionally, major banks and Title companies (and others) will quote this statistic on a quarterly basis, based upon long term averages of actual homes sold. The problem with this method of calculating this Stat is, it is ‘old news’ if you are working in the industry on a daily basis like we are. So we derived our own proprietary indicator back in July of 2002′ based upon Inventory of homes for sale, and the number of Homes sold in Escrow, which gives us a much more timely measurement of market conditions. And our proprietary Months of Inventory calculation has been very accurate as well.
Above is the graph of the Months of Inventory, and below is the graph of simply the Number of homes for sale as compared to the number of homes in escrow. As can be seen above, the Months of Inventory has dropped dramatically from a high of around 8.5 months down to the current 5.2 months today. Another way of looking at the same facts, is to look at the below graph which shows the Inventory of homes for sale has dropped from a high of 4,500 homes in August of last year, down to about 3,300 homes today, while of the rate of sales has increased by 100% in the past 5 weeks, for south Orange County real estate. At these numbers, price reductions will stop, for more and more buyers are snapping up the lowest priced homes for sale in most neighborhoods.
Certainly, if makes a more exciting news story to dwell on the negative., but for smart consumers it is definitely more economically advantageous to seize opportunities as they present themselves. And this market currently does indeed offer some great opportunities. Mortgage interest rates are still hovering around all time 40 year lows, prices have now stabilized and are about 10% less then they were 14 months ago, and employment is still strong here in the OC.
If you are first time buyer who has been patiently sitting on the sidelines for the past 1 to 2 years, this may be the best time we have seen in years to get into the game and buy a property. Because the pendulum has swung in favor of the buyers in the past 12 months, we’re seeing many sellers offer generous concessions to buyers that we haven’t seen in many years. But if the above trends continue, some of these concessions may dry up as well.
For move up home buyers the picture is even a bit better. The higher priced home market is a bit softer then the lower priced home/condo market. So even though sellers today may get a little less then they were hoping for in this market, but the good news is that they can More then make up for in on the move-up home purchase.
If the facts and charts above aren’t convincing enough, then consider this… Since 1968, only five years has the median price of a single family home dropped in California, according the California Association of Realtors. That’s only five out of 38 years, and the average annual price appreciation during those 38 years has been 9 percent. So while much of the news coverage in the past 12 months has been dark and gloomy, there are actually a lot of bright spots now for opportunistic buyers. The real estate market will always go in cycles. But by understanding the big picture, smart consumers can capitalize on this rare window of opportunity to realize their real estate dreams.
If you would like more information about the real estate market here in south Orange County, please fell free to visit our website at: Orange County Real Estate, or drop us an email at: Info@SearchOCHomes.com
