Explosive Housing Market!
As we enter July, we are starting to see signs of a temporary topping trend. The Buyers are acting in a panic mode. As interest rates have gone up by a full percentage point in six weeks, Buyers are being forced to throw discretion to the wind in their attempt to purchase a home. They are offering to buy at prices that a month ago would have seemed unrealistic.
Simultaneously, the “New on Market” Sellers are pricing their homes at extremely optimistic price points with more and more potential Sellers surveying the market with an eye toward offering their home for sale. The rate of acceleration at higher prices is reaching a frenzy and, with the new inventory exceeding demand, the upward momentum in prices should slow in the next six to eight weeks.
New Homes Sales Offices are increasingly optimistic, pushing up their start up dates and adding more homes to sell in each phase that they bring to market. The dominant builder, Irvine Pacific, which had previously been bringing four houses per phase, are now starting to bring eight per phase. Further, Cypress Village, a new homes development south of Trabuco Road, west of Sand Canyon, has had sales beyond their expectations. Other builders are attempting to speed up their plans and accommodate Buyers appetites. The previous expectation of the builders is upwards of 1% price appreciation per month for the next several months has now been superceded by an expectation of 1 1/2% per month.
The local Real Estate Market is already up 15% year-to-date in many neighborhoods which translates into over a 25% 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 unpredictable, unexpected and match 2004-2005 run up in prices.
What can we expect?
The real estate market is strong and getting stronger. Prices are pricey and getting pricier. 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. As of July 1st there were 444 active listings in Irvine with 334 in escrow. The active inventory continues to increase by over 5% per week and, surprisingly, the demand has remained stationary between 340 and 370 for the last three 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 an equilibrium point, as inventory has gone up by almost 30% in the last month.
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 reached 2005-2006 levels in many neighborhoods of Irvine and some areas have even exceeded the all time sales prices!
We expect the current mayhem to start to change over the next few months as potential Sellers attempt to get their “house in order,” and determine where they might move if they offered their home for sale. In addition, as interest rates have spiked up, the momentum and motivation of Buyers to buy now seems to be peaking. It has created an added sense of urgency.
As the new homes market gears up to accommodate the demand, plus as the resale market adds additional inventory, we expect the supply to start to satisfy the potential pool of Buyers, we would expect the appreciation of prices to slow as we enter the summer months.
We are including our FREE market report, so that you may keep abreast of the conditions impacting your local neighborhood as we enter into a new cyclical upswing of prices 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 4% growth year-over-year, according to the Case-Schiller Index, we had 20% 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.
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