Market Talk with Vickie: September 2018
The Federal Reserve raised the federal funds rate by 25 basis points in March and then again in June. Fearing higher interest rates later, Buyers reacted by locking in at the current rates, willing to pay unprecedented prices during the spring and summer months and causing further strain on affordability. While GDP growth is the highest since 2014 and median household wages are up, home prices are outpacing both. The focus on lack of inventory has shifted to lack of affordability, and people are starting to look for recessionary signs like fewer sales and dropping prices. The September 2018 numbers show that the attached market reached unprecedented price heights even though sales are down, and while the days on market are slowly extending as we enter fall, there is very little change from the same month a year ago.
Is it a buyer’s or seller’s market?
Orange County moved from a seller’s market to a balanced market back in May 2018, and has since been heading towards a buyer’s market. The third quarter of 2018 ended with 3.7 Months Supply of Inventory (MSI). This is a 37% year-over-year change from September 2017. Once the MSI reaches 4 months, Orange County is considered to be in a buyer’s market. The MSI for detached and attached properties separately are 3.8 months and 3.4 months, respectively.
Are prices continuing to increase?
The overall Orange County Median Sales Price (MSP) in September is $730,000, a 2% increase from last month’s MSP of $715,000 and a 6% increase from September 2017’s MSP of $689,000. The MSP for detached houses is $833,000, a small decline from August’s MSP of $840,000. The record high MSP was $850,000 in May 2018. While prices for detached homes have experienced a gradual slowdown over the summer months, the year-over-year change is still a 4.1% increase from last September’s MSP of $800,000. On the contrary, attached homes closed Q3 2018 as the most expensive month to date with a MSP of $520,000, which is 2.4% over last month’s MSP of $508,000 and 6.1% higher than the September 2017 MSP of $490,000.
How long will it take for my home to sell?
The September Days on Market (DOM) is 43 days, which is 6 days longer than the prior month and 2 days longer than September a year ago. While some of the upward shift is from seasonal change, there is only a small upswing compared to last year. The DOM for detached and attached properties follow the same trend. The detached DOM is 46 days, up from 38 days in August 2018 and 45 days in September 2017. The attached DOM is 38 days, up from 34 days in both August 2018 and September 2017.
How much of my asking price will I get?
In September, detached homes in Orange County sold for 96.2% of their original listing price while attached homes sold 1% closer to the original listing price at 97.2%. For detached properties, May 2018 transactions sold closest to the original listing price at 98.4%, which corresponds to May also having the highest median sales price (MSP). For attached properties, April 2018 sales closed nearest to the original sales price at 99.2%, while the MSP was highest in September. This shows that attached properties are more aggressively priced as sellers still expect prices to increase. In both markets, September 2018 shows the lowest percentages in Orange County since January 2017.
How affordable is the market?
The Orange County Housing Affordability Index (HAI) in September 2018 is 57, which means that the median household income in Orange County is 57% of what is necessary to qualify for the median priced home under prevailing interest rates. Not surprisingly, affordability has continued to decline month over month and year over year as the both the median sales price and interest rates persist higher. The current overall HAI is 16.2% lower compared to September 2017. The detached HAI has remained in the mid 40s since spring, while the attached HAI dipped into the 70s for the first time since 2007.
How many homes are for currently for sale?
In 2017 and early 2018, the most pressing issue facing real estate was the lack of available housing. The inventory shortage took a positive turn in April 2018, when the number of active homes on the market surpassed the active listings from the same month of the prior year, which was the first time in 4 years. The number of homes for sale continued to grow during the spring and summer months. At the end of September 2018, there are 9,007 total homes with active status, +25% change from September 2017 and the largest inventory in over 2 years. Of the 9,007 homes in Orange County, 61.5% are detached and 38.5% are attached. There has been a gradual shift of more attached properties coming on the market - the attached percentage of the total was 32% a year ago. Whether detached or attached, more active listings will accumulate with homes sitting on the market longer during the fall and winter months.
If you are interested in learning more about a particular city in Orange County or neighborhood in Irvine, send me a message and I’d be happy to share more information with you. All the statistics I mentioned are important to understand as part of your buying or selling strategy. Let me help you get the competitive edge!
Source: Current as of October 10, 2018. Report provided by Orange County REALTORS®. Data © 2018 and provided by CRMLS, Inc as reported by the Orange County REALTORS®. The accuracy of all information is deemed reliable but not guaranteed and should be personally verified through personal inspection by and/or with the appropriate professionals.