Last week the Orange County register published an article about OC home sales still sliding using homes sales data from DataQuick. This article included a graph (shown at right) that showed the number of homes sold and closed per month for the past 20 years. This graph shows that last month (July 2007’) was the lowest level of sales in DataQuicks 20 year recording history. And last months rate of sales was a bit lower then the lowest monthly total in 1995, which was the lowest years total during the real estate crunch in the early and mid 1990’s. I see some good news in these numbers though, and it’s not just because I’m an internal optimist. Here’s why.
First, there are many more people living in Orange County CA. today then there were in 1995.. by about 300,000 to 400,000 people I estimate (See below graph) … California actually had a net negative population growth for several years during the mid 1990’s, but not today. Also there are more homes in existence today then in 1995. Not a whole lot more though, since available buildable land has been scarce for several decades. (By the way, the number of homes built during these years has not kept pace with population growth.) We now have a stronger job market today then in 1995. The overall economy in Orange County was much worse in 1995, and Orange County, CA actually went bankrupt in 1995, which happens to be the very same year containing the second lowest rate of sales month in the past 20 years. 
Another interesting observation. Back in 1995, (the lowest rate of sales for the past 20 years) was the very same year when prices hit bottom in Orange County, and prices started to slowly rise in 1996 and beyond. Am I going out on a limb and claiming that this year will also be the bottom of the pricing cycle (many areas throughout Orange County have already seen price decreases by 10% to 15%). No, I’m not ready to go that far out on the limb, but if we haven’t yet hit bottom in this pricing correction, then my hunch is that we are very close to the bottom.
On the contrary side, the availability of easy Mortgage money over the last 3 years (zero down, with Stated Income with not so good FICO scores) no doubt artificially swelled the number of available buyers which drove up demand for homes which helped to move home prices even higher. Since the Mortgage industry has/is now correcting for this past error, and those loans no longer exist, there will be a period of time when the number of potential Buyers are down below historic averages during this Mortgage finance correction.
Another factor keeping the Sales numbers down to there lowest level in the past 20 years, is there is a lot of ‘Doom and Gloom’ in the press on TV, Newspapers and the Web, which to a certain degree becomes a self fulfilling prophecy. All things considered, I just don’t think this low sales volume can last much longer, and I would expect the rate of sales to return to the 3,000 to 4,000 per month level in Orange County (or even higher) in the not to distant future (3 to 6 months).
