Market Talk with Vickie: December 2018

The last quarter of 2018 has shown us that Orange County buyers possess more negotiating power. Overall, home prices were still higher than they were in 2017, but the appreciation is starting to slow down. Despite an inventory dip in the last two months of 2018, there were still more active listings on the market compared to the past several years. Buyers were presented with more choices, and sellers responded with more competitive pricing and multiple price reductions after extended days on the market. A fourth Federal Reserve interest rate hike in 2018 means that reduced affordability will carry over into 2019.

Is it a buyer’s or seller’s market?
While Orange County ended the third quarter of 2018 in a balanced state, December 2018 moved the needle back into a seller’s market. The fourth quarter of 2018 closed with 2.9 Months Supply of Inventory (MSI) for both attached and detached properties. Looking back, September 2018 was the closest Orange County came to becoming a buyer’s market, but then over the next 3 months settled back into a slight seller’s market. Compared to a year ago, Orange County experienced a +58% increase in MSI, which is good news for buyers who are hoping for some price relief.

Are prices continuing to increase?
The Median Sales Price (MSP) in Orange County was $685,000 in December 2018. While this represents of the lowest months in 2018, which was not surprising because of the Holiday season, it was still a +2.4% growth from the same month last year. This shows that home prices are still increasing, but the pace of growth is much slower. The December 2018 MSP for detached houses was $790,000, a 5% dip from the end of the third quarter, and the second lowest month of 2018 after January 2018 at $779,000. May 2018 was the peak MSP for the year at $850,000. The December 2018 MSP for attached properties was $499,000, which was the lowest month in 2018 and also the only month to dip under $500,000 MSP. While this may indicate that prices are dropping, the lowest MSP month of 2018 was still 5% higher than the end of 2017.

How long will it take for my home to sell?
The December 2018 Orange County Days on Market (DOM) was 50 days, which was 8 days or +19% longer than the end of 2017. Similar to the downward shift in home prices, the upward shift for DOM can be explained partly by the seasonal change, but clearly sellers should anticipate a longer period before an offer is accepted. The DOM for detached and attached properties follow the same trend. The detached DOM in December was 50 days, up from 46 days in Q3 and very similar to the 51 days in January 2018. The attached DOM was 48 days, up from 38 days at the end of Q3 and significantly longer than the 29 days in July 2018.

How much of my asking price will I get?
On average, homes in Orange County sold for 95.7% of their original listing price in December 2018, which was 1.6% lower than the end of 2017. Detached homes sold for 95.6% of their original listing price while attached homes sold half a percent closer to the original listing price at 96.1%. For detached properties, May 2018 transactions sold closest to the original listing price at 98.4%, which corresponded to May also having the highest median sales price. For attached properties, April 2018 sales closed nearest to the original sales price at 99.2%, while the MSP was highest in September. This reveals that attached properties were more aggressively priced as sellers may still be hoping for higher prices into the winter months. In both markets, November 2018 had the lowest percentages in Orange County.

How affordable is the market?
The Orange County Housing Affordability Index (HAI) in December 2018 was 64, which means that the median household income in Orange County was 64% of what was necessary to qualify for the median priced home under prevailing interest rates. The HAI has continued to decline month over month in 2018 as both the median sales price and interest rates persisted higher. However, Orange County experienced a sudden surge in December 2018. The detached HAI, which has remained in the mid 40s since spring, jumped to 49 at the end of Q4. Similarly, the attached HAI landed at 86 after 3 straight months of staying in the 70s.

How many homes are for currently for sale?
The Orange County inventory has been slowly stacking up each month in 2018. April 2018 was the first month when the inventory exceeded that of the same month of the prior year, and in November, the number of active listings started to drop again. The inventory at the end of December 2018 was 7,034, almost 2,000 less than the end of Q3. However, the year end figure was still +41% higher than the end of 2017, when the inventory was just shy of 5,000. There has been a gradual but continual shift of more attached properties coming on the market: 40% were attached in December 2018 compared to 32% in December 2017. This is good news for buyers who are looking for condos!

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 January 10, 2019. 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.