The Orange County residential property market is the hottest on record, even surpassing the go-go days of 2006.
The expected market time for a property is 26 days—the lowest level since tracking began in 2004, real estate broker Stephen Thomas reported in his most recent Orange County property report.
In other words, in comparing the number of homes available for sale (market supply), versus homes recently entering escrow (market demand), demand is outstripping supply.
As of Feb. 24, there were 2,863 Orange County homes in escrow and just 2,438 homes for sale in the region.
A property being in escrow or pending sale is an excellent measure for how many buyers have recently agreed to purchase a particular home at a particular price. Thus, this is a reasonable proxy for market demand.
Local real estate agents believe this sort of imbalance is likely for the foreseeable future. They attribute the trend to low mortgage rates, continued demand in Orange County and a limited inventory.
My own economic analysis is more cautious.
Real estate brokers have a very difficult time seeing shifts in demand or supply before they occur. Brokers almost always believe the “current” state of the real estate market will last much longer than is likely.
I do think the upcoming traditional home-buying season will likely continue to be very strong both in Orange County and the Inland Empire.
The traditional home-buying season typically lasts from about kids’ spring break until the Labor Day holiday.
Parents don’t like to move their children during the school year. They prefer to look for homes during spring break and relocate during the summer recess.
This has been less of a concern during the pandemic, since students were learning from home.
Families could look for homes and even move without having to change schools.
That’s one of the key reasons this winter has seen a much stronger home-buying market than is normally possible.
However, I would argue, by the time the 2021 traditional home-buying season ends on Labor Day, most people will likely have been inoculated, schools will likely be open for fall 2021 classes and parents will be in a more traditional frame of mind regarding not changing schools nor moving after schools reopen.
Even though current demand is high, current supply is low, and the Orange County home buying market is the hottest on record, there may only be another six-to-nine months of this feverish level of market activity.
Thereafter, we’ll have to see whether schools plan to reopen, how the political landscape looks, the expectations for changes in taxes, the state of mortgage interest rates, and whether people are still moving from the more urban areas to the suburbs.
There are a lot factors at play that contribute to the current market, and only time will tell whether it’s here to stay.
