Orange County Housing Report: Last call to get in on the game before inventory and demand drop during the Holiday Market
The following article includes views from Reports on Housing by Steven Thomas, economics expert and experienced real estate executive, and is not a reflection of the opinions, views, or predictions of Nuvision and its representatives.
In four weeks, we’ll be gathering around the dinner table for a Thanksgiving meal with loved ones we haven’t seen all year, putting up decorations, and stopping by friends’ houses for holiday parties. Seven weeks will also mark the start of the slowest season in the housing market: The Holiday Market.
The Holiday Market is associated with a reduction in the buyers and sellers willing to engage. It's hard to make house hunting a priority amid the festivities, and many people simply put their plans on hold until after New Year's.
Inventory will steadily decrease until the end of the year.
Few homeowners put homes up for sale during November and December. Looking back on the five-year average from 2015-2019, new homes listed drop from the annual peak to 46% in November and 63% in December. At the peak in May, there are typically 4,177 homes on the market. By December, only 1,533 new homes are listed.
Inventory is already stunningly low—down 5% from just a few weeks ago and sitting at 2,179 homes. It’s the lowest it’s been since tracking started in 2004, with fewer 1,974 homes on the market than last October.
By the end of the year, inventory will drop even more as unsuccessful sellers give up for the season and resolve to try again after the holidays are over. Today, despite the insanely hot market, 24% of the active inventory, which equates to 513 sellers, has been exposed to the market for more than two months. These sellers will likely be the first to withdraw for the year, leaving the market at new record lows.
Demand will also follow the holiday trend, decreasing through December.
Dropping inventory means buyers have fewer options. But that’s not the main reason buyers put the home search on hold this time of year. The holiday season just gets busy, and people naturally want to enjoy it without the stress of visiting open houses.
Demand is currently dropping as expected, down 4% over the past few weeks. It usually drops by 4% at this time of year. The cycle has become more regular, after demand rose to 3,254 last year, 29% higher than now, because of a delayed Spring Market caused by COVID.
The holiday market doesn’t officially start until mid-November. Expect demand and inventory to slightly decrease until then. By the New Year, you can expect today’s 26 day Expected Market Time to lengthen beyond 30 days.
Advice for buyers and sellers entering the Holiday Market
If you are one of the buyers or sellers who plans to remain in the market during the holidays, you can expect it to continue at a fast pace. Mortgage rates hovering at 3%--remarkably low—will continue to prompt buyers to enter the market even as demand decreases.
- For Buyers: Know that the Hot Seller’s Market isn’t going away. Demand will drop, but inventory is dropping too. That means the overall feeling of the market will remain the same—multiple offers per home and sales above the asking price. You’re not going to get a deal by waiting until the end of the year.
- For Sellers: Don’t miss out on your last chance to sell. The 2021 market has been hot beyond belief. But this year’s market is drawing to a close in December. Overpriced homes will run the risk of losing buyers as demand slows during the holidays. Take advantage of your opportunities now by ensuring your home is priced correctly.