Crossroads or Pause?
As we reach the eighteen month point in the housing rebound, we are amused that the same real estate agents that were slow or blind to the recovery are now screaming that “the bubble has arrived” and the market is going to fall.
On the contrary, the real estate market is exhibiting the health, breadth, and vitality that is symptomatic of better things to come–albeit at a slower rate of acceleration–but still at higher prices.
The large builders are just beginning to respond in a in a big way to the improved fundamentals, and builders do not drop prices but rather increase macro demand for houses with their major marketing skills, techniques and large advertising budgets.
The new home builders give the resale market a cushion in which to sell. The builders will not cannibalize in pricing.
Simultaneously, the “New on Market” Sellers continue to price their homes at optimistic price points. Consequently, we have arrived at a new equilibrium point where new on market housing is being balanced by continued buyer demand. The stability that we have reached should continue for the next six weeks.
The local Real Estate Market is already up 25% year-to-date in many neighborhoods which translates into over a 30% annual growth projection. We recall that at the beginning of the year, the Irvine Company expected 4.5% to 6% growth for the entire year.
The price appreciation would double what was predicted, and, with the 20+% growth in prices in calendar year 2012 locally, the 30% appreciation would be completely unpredicted, unexpected and match 2004-2005 run up in prices.
What can we expect?
The real estate market is strong and remains strong. Prices are stable currently. Orange County real estate prices were up over 20% year over year. Irvine real estate prices are up over 25% year over year.
All twenty cities in the Case-Shiller Index were up three months in a row for the first time in eight years and the Nationwide gain was 12% year over year.
However, the Real Estate Market here in Irvine is starting to see subtle changes in the inventory this last month and has outpaced the sales. On May 2nd, there were 274 active listings in Irvine with 362 homes in escrow. On June 2nd, the active inventory increased to 353 homes available for sale in Irvine, and 349 in escrow. On July 1st there were 444 active listings in Irvine with 334 in escrow.
As of August 4th, there were 531 houses available in Irvine, with 331 in escrow. The active inventory has ceased increasing by 5% per week these last two weeks, and seems to have reached an equilibrium point, while the demand has remained stationary between 330 and 370 for the last four months.
The prices of homes entering the market is still increasing, but the speed in which they are selling is starting to slow down. We are starting to see a new equilibrium point, as inventory had gone up by almost 30% in the last month but now seems to be flattening out (the rate of new homes entering the marketplace).
Even with an increasing number of homes coming on the market, at what appears to be overly optimistic prices, homes are still receiving offers and prices are still being bid up. The selling prices have surpassed 2005-2006 levels in many neighborhoods of Irvine.
We expect the “new normal” to continue these next few months. In addition, as interest rates have spiked up, the momentum and motivation of Buyers to buy now seems to have peaked. It had created an added sense of urgency but now that is diminishing.
As the new homes market gears up to accommodate the demand, plus as the resale market has added additional inventory, we expect the supply to start to satisfy the potential pool of Buyers, and we would expect the appreciation of prices to slow as we enter the fall.
We are including our FREE market report, so that you may keep abreast of the conditions impacting your local neighborhood in Irvine. We believe our city is a unique real estate environment. While macro economic conditions impact our local housing market, we cannot and should not rely solely on National and Countywide news sources for our local housing trends. These broader housing statistics do not accurately reflect what is happening in your local neighborhood. While the nation had 12% growth year-over-year, according to the Case-Shiller Index, we had 25% growth.
Our monthly reports track your neighborhood’s inventory, median price, price per square foot, median sales price, average days on market and more. Our market reports are updated regularly, and are FREE to you, so that you can stay “ahead of the curve” as to the direction in which the housing market is heading throughout the year and at absolutely no risk.
Take a look at the current charts below to get a picture of what have outlined for you.
We hope you find this market summary useful. If you do not wish to receive these reports, feel free to unsubscribe. Our intention is not to “spam” you–only to provide you with informative, helpful market data.
If you are interested in specific communities, zip codes, neighborhoods, you can subscribe to local reports here: