Yes, you read that correctly, in the price ranges of $650,000 and below, most of Orange County is now in a Hot Sellers Market.  In the price range of $450,000 and below, the Months of Inventory is a hot 1.1 Months for south Orange County… 2 to 4 months is considered to be a Sellers market, and below that is a hot Sellers market.   In contrast, the Months of Inventory for this price range was at 19 months in October of 2007′.  The number of  homes now in escrow is at 916 properties in the price range of Below $450,000… this Pending Homes total has not been this high since August of 2003′ .  Below is a graph of the Months of Inventory for all of the price ranges we track, since July of 2002′.

In the price range of $450,000 to $650,000, the Months of Inventory is at 1.8 months, which is also a hot sellers market.  Albeit, about 60% of these sales are either bank owned REO properties or short sales, but these are real sales with real buyers none-the-less.  This is resulting in  multiple purchase offers within days of listing properties on the market for sale for well priced Bank Owned REO’s and Short Sales.

Where is all of  the demand coming from you may ask?  Well, it is a combination of investors and first time homebuyers who have been sitting on the fence for the past 4 to 5 years. Investors with cash are buying for they can now get a decent yield with a down payment of 30%. Many investors feel that most, if not all, of the downside risk in the local real estate market is behind us. And many are leery of the stock market, and CD yields are now very low… First time home buyers are also now buying.  Fixed interest rates are now at all time historic low, and there is pent up demand from the low rate of sales in the past 2 years.  My hats off to their discipline and timing…

The Months of Inventory is a leading indicator, which has been dropping to today’s lows for many months now.  Another one of the proprietary indicators that we gather are moving averages of the Price per Square foot for both Condos and Detached homes.  This is a lagging indicator, although much more accurate then the Average or Median prices that are quoted in the press.  This Price per Square foot indicator has been holding steady now for the past 5 weeks, which is another indication that we have approached the bottom.

The Million Dollar Question is . . . is this the bottom of the Orange County real estate market ?  My sense is, if this is not the bottom, then we are very close to the bottom… but, I believe it will be a long drawn out bottom, with no noticeable price appreciation for several years… The reason being -  I believe  over heated inflation will return in a year or so, due to the recent government policies of flooding the US economy with billions of dollars cash.  When this happens, the Feds will raise interest rates to curb inflation, which will put a damper on real estate price appreciation.