April 2014 Irvine Housing Market Trends
At the Crossroads or A Tale of Two Irvine Markets?
As we are looking back at the Irvine Market statistics for the month of April 2014, we are already seeing signs of two very different Irvine housing market trends. The luxury market in Irvine is still experiencing an upward trend both in the increased inventory as well as the increased optimism of Sellers who are pricing their homes in what looks like 2006 price points.
On the other hand, the Irvine housing market for less expensive and smaller homes are showing some signs of a weakening trend. The Irvine housing inventory has increased dramatically since our February 2014 Irvine Housing Market Trends report. While the Buyer aggregate demand is still increasing, it is at a slower rate than the number of homes coming on the market. Consequently, while we see higher prices of homes being listed, they are staying on the market longer, and more homes are experiencing price reductions in order to go into escrow. This can be a troubling sign for Sellers in the next sixty days.
Sellers are Optimistic ~ Buyers are Cautious
It is clear that the month-over-month comparisons from calendar year 2013 will not look as optimistic as we have experienced over a 20% gain in Irvine and cannot expect more than a 6 to 8% price appreciation in calendar year 2014. As the inventory increases, and the interest rates creep up, the days on market of existing homes for sale are extending out, and Buyers are becoming more cautious in jumping in to purchase a home.
The new home builders that ring Irvine have become more optimistic and are releasing more homes onto the market with each phase and with each succeeding phase being brought to market more frequently. The aggregate supply of new homes each month has more than tripled than it was a year ago and is predicted to multiply. The previous cautious posture of the builders has been replaced by a more aggressive stance and is looking more and more like the height of the market that we experienced in 2005-2006.
Homeowners who experienced years of price declines have been capitalizing on the healthy market. The aggregate demand of Buyers each month is more constant than the potential supply of homeowners who choose to put their homes on the market.
Inventory is Increasing While Demand is Remaining Constant
The inventory is outpacing the demand and the prices are flattening out here in Irvine. The inventory has increased by 30% in the last sixty days, while the homes in escrow have increased by 7%. On March 2nd, there were 438 homes available for sale in Irvine, and 284 homes in escrow. On April 27th, there were 571 homes available for sale in Irvine, with 306 homes in escrow.
What can we expect?
We expect that most of the gain will be in the early part of the year and a flattening of prices as we approach the summer months.
We expect interest rates to move up by a half of a percent by the end of 2014, and with the interest rate over 5% for 30 year fixed, we believe that will have an influence on the rate of appreciation. As the prices of homes increase, the percentage of all cash buyers will continue to go down.
Prices are stable currently. Orange County real estate prices were up over 15% year over year. Irvine real estate prices are up over 18% year over year. However, the Case-Schiller Index started to show change in its most recent survey of 20 cities. It indicates a slowing of macro demand nationwide.
While we see Sellers putting their home on the market at higher prices, we are seeing price resistance from Buyers.
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Take a look at the current charts below to get a picture of what have outlined for you.
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