A Look at Orange County Supply and Demand

Let’s take a look at the big picture of supply (residential listings on the market at month-end) and demand (closed home sales). Having an idea of what is going on with supply and demand can be an excellent way to measure the general “strength” or “hotness” of a real estate market, and often will provide a hint of the future direction of home price changes.

Here’s a brief market summary, based on the lates data I have available:

November 2008
Active Listings: down 18.2% YOY
Closed Sales: up 55.7% YOY

Our first chart displays the raw supply and demand data back through mid-2007 (as far as I have data available):

oc-supply-demand_2008-11.jpg

Unfortunately the data that I have available on inventory and sales for Orange County only goes back 18 months, so we can’t really get a good picture of what this year looks like compared to the real boom years of 2004 and 2005, but we can see what things look like compared to this time last year.

Here’s a look at the year-over-year (YOY) change in the previous chart. YOY is the best way to interpret the direction of the market, due to the highly cyclical nature of real estate.

oc-supply-demand-pct_2008-11.jpg

Sales levels have been way up since July in Orange as well as LA County, probably due to the rather severe price drops we have seen (down 33% from the peak as of September, according to Case-Shiller). With home prices coming back down out of the stratosphere here in SoCal, it would appear that at least some buyers are moving into the market.

Although improved sales volumes and decreasing inventory are two of the primary incredients in increasing prices, they appear to be having little effect right now. I could see this trend (rising sales, falling inventory and prices) continuing for another year or two, but eventually one of the three will have to swap directions. Personally I expect sales to reach a plateau within a year or so, with price declines finally slowing as well.

  • Ron

    Better hurry up and buy now.

  • http://www.rpmcoast.com Orange County Property Management

    yes the inventory is coming down however the number of reo and short sells are increasing. This should translate to even lower prices. Many homeowners that are unwilling to sell at REO prices will end up renting their properties out. Orange County property management is growing because of this fact.

  • OCbuyer

    These charts really don’t seem to give out to much relevant information. It seems with lower interest rates and lower prices that it may be a good time to consider buying a house.