Orange County Housing Report: When Pricing, IGNORE Active Listings

By Scot Campbell – 8/31/2014 – Source: Reports on Housing

In 2012 & 2013 the Orange County real estate market saw significant year-over-year appreciation. Home sellers were well advised to price their home above the most recent closed sales… pricing against active listings was the appropriate pricing strategy.

But as the market reached its current plateau which is the appropriate price level considering employment, interest rate, levels and overall demand… the appropriate pricing strategy has changed.

In 2014, too many sellers fell into the trap of pricing their homes based upon active listings as they did in 2012… this has been the wrong approach and overpriced homes have now become the norm. Multiple Offers have been replaced by Price Reductions.

About 10% of all active listings reduce their asking prices every week, a trend that has not changed throughout the year.

Ask any REALTOR® to search on the Multiple Listing Service and pull up the “1 Line” report and you will see evidence of all of the reductions. Punctuating the list of listed homes are a series of small red arrows pointing down adjacent to their asking prices, indicating that the home has had at least one price reduction. More than half of the homes have the little red arrow prominently displayed. These marks demonstrate that most sellers are pricing their homes out of bounds, outside of their Fair Market Values.

There are a myriad of contributing factors to so many sellers arriving at these unrealistic asking prices: focusing on the desire to net a certain dollar amount; testing the market; leaving negotiating room; expecting massive appreciation similar to 2012 and 2013. Some sellers are adding tens of thousands of dollars to the Fair Market Value “to leave room to negotiate”, but this is one of the quickest routes to not accomplishing the goal in selling.

Properties are no longer rapidly appreciating like the past couple of years; as a result, pricing in anticipation of rising values is causing many homes to just “sit” until the seller reduces the price.

Today, many overpriced homes never sale. In meeting with REALTORS® to list their homes, sellers go over all neighborhood active listings and recent pending and closed sales. Many often ignore the reality of pending and closed sales and choose to place way too much weight on active listings. It is quite common today where an entire neighborhood is filled with overpriced listed homes that are just sitting. Even pricing below the lowest priced home may be higher than the pending and closed sales

In today’s market of very little appreciation, the best approach is to carefully consider the most recent pending and comparable sales and apply very little weight to active listings.

OChousingInv AugActive Inventory: The active inventory reached the 2014 peak a couple of weeks ago.

The 2014 active inventory peak of 8,084 homes was reached a couple of weeks ago, part of a normal, housing cycle. In the past two weeks, the inventory shed 198 homes, 2%, and now sits at 7,886 homes. The drop ends the trend of continuous appreciation all year, and is a welcome relief to an inventory built on the backs of unrealistic, overpriced sellers. The inventory cyclically peaks towards the end of August, but last year it did not peak until October, an unwelcome sign that sellers were ignoring a simple market fundamental: the Autumn Market downshifts, in terms of demand, from the Summer Market. This year, sellers are quickly coming to the realization that the most active time of the year to sell is behind us, deterring many homeowners from even placing their homes on the market. Many overpriced listings are opting to not reduce their asking prices; instead, they are simply throwing in the towel.

Last year at this time there were 5,965 homes on the market, 1,921 fewer than today.

OCHousing demand AugDemand: Demand decreased by 3% in the past two weeks.

Demand, the number of new pending sales over the past two, decreased by 86 and now totals 2,499, a 3% drop. Over the past 10 years, the average drop at the end of August is 6%, so a 3% drop beats expectations. Last year at this time demand was at 2,613, 114 additional pending sales compared to today. From here we can expect demand to continue to drop a bit as we enter the Autumn Market. With kids back in school, many buyers will wait until next spring to continue their quest for their new home.

The expected market time for all of Orange County is 3.2 months, or 96 days, a slight seller’s market.

Distressed Breakdown: The distressed inventory decreased by 4% in the past two weeks.

The distressed inventory, foreclosures and short sales combined, decreased by 13 homes, 4%, and now totals 277. The distressed inventory has not changed much this year after starting the year at 271. The long term trend is for it to remain at a very low level.

In the past two weeks, the number of active foreclosures decreased by 7 homes and now totals 75. 1% of the active inventory is a foreclosure. The expected market time for foreclosures is 58 days. The short sale inventory decreased by 6 homes in the past two weeks and now totals 202. The expected market time is 43 days and remains one of the hottest segments of the Orange County market. Short sales represent 2.6% of the total active inventory.

Thanks for Reading! And, keep the homebuyer & home seller referrals coming… those people you send allow me to have the time and resources to publish this Market Update each month! Please share this information via: word of mouth, email link, and/or social media. I really appreciate it!

Scot Campbell Huntington Beach RealtorFor questions about buying and selling real estate in Huntington Beach and Coastal Orange County, contact Scot Campbell. He is the President of The Scot Campbell TEAM at Coldwell Banker-Campbell Realtors in Huntington Beach, CA.

Scot is a Previews Property Specialist, has been a licensed for 28 years, and has brokered over 1000 homes… including just about every type of transaction imaginable.

Want to search for homes on your iPhone/iPad or Droid Mobile Device?

Try the FREE “Huntington Beach Real Estate App”… it has 100% of the Active Listings in the MLS (Zillow & Trulia have 80% according to Inman News).

To download goto: www.AppleRealEstateApp.com or www.DroidRealEstateApp.com on your mobile browser.

To see recent sales in your neighborhood and a FREE Instant Home Value Report, go to www.ScotCampbell.SmartHomePrice.com

Read his profile and client reviews at www.ScotCampbell.com

Mobile Phone/Text: 714-336-0394 or Email: Scot.Campbell@ColdwellBanker.com

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