The 2020 market is shaping up to be completely different than expected- in the best way. Although COVID-19 has affected the economy, demand for Real Estate has never been higher. Some homeowners aren’t having success. So the question is, why?
The market is currently sizzling hot with an overall Expected Market Time (the time between the signed listing contract to opening escrow) of 46 days, the hottest market since 2013. Yet, many sellers are not finding success. Incredibly, 36% of all currently active listings have been exposed to the market for more than two months. Sitting on the market for over 60 days is to be expected in the luxury ranges, yet there are plenty of sellers having trouble selling in the lower ranges as well. If the market is so hot, how come so many homes are just sitting without success? The logical conclusion must be price. Price a home too high and it simply does not sell. In most cases, that is only part of the problem. There has been an evolution in home buying. Back in the 1970’s, 1980’s, and 1990’s, buyers were able to visualize the potential in a home and were willing to apply a bit of “elbow grease” to fix and update a residence if necessary. That is just not the case anymore. Chip and Joanna Gaines’ popular television show “Fixer Upper” revolutionized the real estate industry, along with the countless other real estate shows from flipping to fixing. As a result, there is an expectation and desire for buyers to purchase a home that looks like a model.
When a home does not have the look and feel of a model home, it must be reflected in arriving at the Fair Market Value. A home’s Fair Market Value is determined by its location, age, condition, and improvements. Homeowners can do nothing to change the location and age of a home, that’s a given; however, they can address the condition and amenities. To fetch top dollar, a homeowner who has lived in their house for years must be willing to make an investment in their home. Updating and taking care of deferred maintenance will afford buyers the ability to visualize moving in right away. They will not have to address cosmetic issues after closing. Buyers are willing to pay a premium for homes that are turnkey and have that model feel. The sellers will net more money by addressing the deferred maintenance and their home will sell more quickly.
The active listing inventory decreased by 65 homes in the past two-weeks, down 1%, and now totals 4,645, its lowest level for July since tracking began in 2004. In the past four-weeks, 12% fewer homes were placed on the market compared to the prior 5-year average. It was a 54% difference at the end of April; thus, COVID-19’s grip on suppressing the inventory is diminishing. Last year, there were 7,561 homes on the market, 2,916 more than today, a 63% difference. Demand, the number of pending sales over the prior month, increased by 75 pending sales in the past two-weeks, up 3%, and now totals 3,050, the highest July level since 2012. COVID-19 currently has no effect on demand. Last year, there were 2,461 pending sales, 19% fewer than today. The Expected Market Time for all of Orange County decreased from 47 days to 46, a Hot Seller’s Market (less than 60 days). It was at 92 days last year, much slower than today.
