The Orange County Housing Report: An Astonishing Spike-Especially In The Upper End!
The luxury housing market not only bounced back from the initial shock of the Corona virus, it has reached unprecedented levels.
The Luxury Surge
A record number of luxury homes closed in Orange County in August.
After a hiatus due to the Corona virus, professional baseball, basketball, and hockey returned to empty stadiums and arenas. For sports enthusiasts, it was a welcome distraction to COVID-19 and the daily news. Hockey is in the midst of the Stanley Cup playoffs and down to the conference finals. The high intensity play is reminiscent of the Winter Olympics where hockey players around the world compete for gold. One of the greatest moments in hockey history occurred during the 1980 games, the “Miracle on Ice,” when the United States defeated Russia by scoring two goals in the final period. Despite Russia being heavy favorites, stacked with experienced, professional players, and winning five of the previous six Olympics, they lost to the United States whose roster was filled with amateurs and was the youngest of the 12 competing teams. The game was memorable and completely unexpected.
Life is full of unexpected events. Just like the “Miracle on Ice,” this year’s housing market has surpassed just about everybody’s expectations. Demand has been off the charts, the highest in years. The active listing inventory has remained at unbelievably low levels for this time of the year. Multiple offers are the norm. Home values are on the rise. Homes are quite literally flying off the shelves. Luxury housing has also beat everybody’s expectations and has been surging at a record pace.
In Orange County, luxury closed sales in August, homes above $1.25 million, hit a record high of 561. The prior high occurred in July at 464 sales. Luxury closed sales has only topped 400 in May and June of 2017 as well as May and June of 2018. August’s 561 closed sales was 21% higher than July, and 54% higher than August 2019’s 364 sales.
For all price ranges in Orange County, closed sales in August were up by 12% over last year, 3,153 closed sales in 2020 compared to 2,824 in 2019. It is the highest level since June 2017. A deeper look reveals that the higher ranges are performing stronger than the entry level. For homes priced below $750,000, year over year there were 189 fewer closed sales, 12% less. For homes priced between $750,000 and $1.25 million, there were 321 additional closed sales compared to last year, 37% higher. And for the luxury range, over $1.25 million, year over year there were 197 additional closed sales, an unbelievable 54% more.
Quite simply, there are more closed sales in the luxury range than ever before. The high end is firing on all cylinders and it is most likely a combination of Wall Street’s return to record high levels, private banking relationships, and record low interest rates. It does not appear to be slowing, either. In looking at demand (the last 30-days of pending sales), there are 812 more pending sales than last year at this time, 32% extra. Luxury demand is up by an incredible 74%.
Not only is luxury outperforming any other time in terms of closed sales, it appears as if that trend will continue given the current velocity of demand. The Expected Market Time (the amount of time between hammering in the FOR-SALE sign to opening escrow) for homes priced between $1.25 million and $2 million is less than 60-days, a Hot Seller’s Market, a super-sonic pace for this price range. It is at 97 days for homes priced between $2 million and $4 million. For homes priced above $4 million, the Expected Market Time is 222 days. Yes, that is a lot slower than all other price ranges; however, it is far better than last year’s level at 527 days.
A warning to luxury sellers: luxury may be hotter than ever, but it still is not as hot as the lower price ranges. Homes below $1 million are experiencing the hottest activity with a mass number of showings, multiple offers, and very quick sales; however, it takes a bit longer to find success in the upper ranges with not as many showings and fewer multiple offer situations. Expecting instantaneous purchase offers is just not realistic.
The current active inventory decreased by 2% in the last two weeks.
The active listing inventory shed 68 homes in the past two-weeks, down 2%, and now sits at 4,252, the lowest level for September since tracking began in 2004. The pace of the market has everything to do with that old economics 101 principle of supply and demand. When there is limited supply and plenty of demand, like today, the market favors sellers and home values appreciate rapidly. The current ultra-low active inventory levels are here to stay for the remainder of 2020, and it will continue to be the trend going into 2021.
COVID-19 is no longer suppressing homeowners from coming on the market. In August, there were 364 more homes compared to 2019, 11% extra. Yet, from May through June there were 27% fewer FOR-SALE signs compared to 2019, meaning 4,318 missing sellers. While August’s 364 home helps make up the difference, there are still far fewer homeowners that have entered the fray in 2020 compared to last year, 13% fewer through August.
Last year at this time, there were 6,997 homes on the market, 2,745 additional homes, or 65% more. There were a lot more choices for buyers last year.
Demand increased by 17 pending sales in the past two weeks.
Demand, the number of new pending sales over the prior month, increased from 3,323 to 3,340, an additional 17 pending sales, up 0.5% in two weeks. This is the highest demand reading since August 2012, eight years ago. When the kids go back to school, housing transitions to the Autumn Market. Typically, both the inventory and demand slowly drop. While the inventory has started to decline, demand has not yet softened. The low mortgage rate environment is continuing to instigate plenty of demand. It will eventually slow as housing moves deeper into the Autumn Market.
Last year, demand was at 2,528, that is 812 fewer pending sales compared to today, or 24% less.
In the past two-weeks the Expected Market Time dropped from 39 to 38 days, a Hot Seller’s Market (less than 60 days), where sellers get to call the shots during the negotiating process and home values are on the rise. This is the strongest level since May 2013. Last year the Expected Market Time was at 83 days, much slower than today.
The luxury market continued to improve as the supply falls and demand rises.
In the past two-weeks, demand for homes above $1.25 million increased by 27 pending sales, up 5%, and now totals 618. Luxury demand has improved unabated since April when it was at 140 pending sales, 77% less than today. The luxury home inventory shed 20 homes, a 1% drop, and now totals 1,637. With a rise in demand coupled with a slight drop in the supply, the overall Expected Market Time for homes priced above $1.25 million decreased from 84 to 79 days in the past couple of weeks. The luxury market is getting hotter and hotter.
Year over year, luxury demand is up by 262 pending sales, or 74%, and the active luxury listing inventory is down by 719 homes, or 31%. The Expected Market Time last year was at 199 days, exceptionally slower than today.
For homes priced between $1.25 million and $1.5 million, in the past two-weeks, the Expected Market Time decreased from 52 to 49 days. For homes priced between $1.5 million and $2 million, the Expected Market Time decreased from 62 to 58 days. For homes priced between $2 million and $4 million, the Expected Market Time decreased from 107 to 97 days. For homes priced above $4 million, the Expected Market Time increased from 193 to 222 days. At 222 days, a seller would be looking at placing their home into escrow around April 2021.
Orange County Housing Summary