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Demand for O.C. million-dollar homes falls 32%
October 20th, 2008, 12:31 am · 12 Comments · posted by Jon Lansner
Thought it was time to take a slightly different look at biweekly housing data from Steve Thomas at the renamed Altera Real Estate: How does the market look today vs. back in the supposedly big spring selling season? (You remember, back six months ago when the Dow Jones Industrial average was near 13,000!)
So, I compared Thomas’ most recent report, as of last Thursday, to six months ago (mid-May) for demand (new purchase escrows opened in past 30 days); supply (homes listed in brokers’ MLS system); and his “market time” — the interaction of demand and supply, or the theoretical time it would take to sell all properties at the current buying pace …
What we see a tale of two towns. Lower-priced neighborhoods see homes selling briskly — largely properties owned by distressed sellers or lenders. At the more expensive end of the spectrum, the market is far harsher.
Here’s what we found changing in the last six months …
- Residences listed for under a million bucks have seen demand grow 16% while the supply has shrunk by 20%. Thus, thanks to that imbalance, Thomas’ market time for this “affordable” niche — and that’s a loose definition — has fallen 31%. Or, it would now take 4 months to sell everything at the current pace vs. 5.8 months in mid-May.
- Quite different in pricier locales. Homes listed for more than a million bucks have suffered a 32 drop in demand, likely reflecting a difficult financing climate. Meanwhile, supply has grown just 13%, probably because there are far less desperate sellers in this upscale category. As a result, though, Thomas’ market time for the 7-figure house has jumped 28% in 6 months to 16.7 months from 13.1 months.
- Just so you know: For the county as a whole, demand is up 13% since mid-May while supply has dropped 18%. O.C. market time fell 27% in 6 months to 4.8 months from 6.55 months.
- One bit of mathematical fallout: the million-dollar-plus niche is now 6% of total demand vs. 10% six months ago. While Thomas’ average asking price has grown 7% to $933,000 in six months, the shrinking demand for upscale housing is one reason the median selling price from DataQuick — tracking closed deals including builders’ new-home sales, not pending resales that Thomas watches — is down 11% to $430,000.
Here’s how the market breaks down, by Thomas’ math, for last week and the 6 months change …
| Slice | Supply | 6 mo. chg. | Demand | 6 mo. Chg. | Time (mo.) | 6 mo. chg. |
|---|---|---|---|---|---|---|
| Under $500k | 6,322 | -13% | 1,843 | 43% | 3.4 | -39% |
| $500k-$750k | 2,470 | -33% | 511 | -22% | 4.8 | -14% |
| $750k-$1mil | 1,397 | -21% | 169 | -25% | 8.3 | 5% |
| All: $1mil or less |
10,189 | -20% | 2,523 | 16% | 4.0 | -31% |
| $1mil-$1.5mil | 1,000 | -22% | 90 | -23% | 11.1 | 2% |
| $1.5mil-$2mil | 613 | -15% | 28 | -49% | 21.9 | 67% |
| $2mil-4mil | 740 | -8% | 33 | -35% | 22.4 | 42% |
| $4il-plus | 343 | 20% | 10 | -23% | 34.3 | 56% |
| All: $1mil-plus | 2,696 | -13% | 161 | -32% | 16.7 | 28% |
| All:Orange Co. |
12,722 | -18% | 2,673 | 13% | 4.8 | -27% |
Other recent real estate reports …
- Double-digit rent increases coming to O.C.?
- O.C.’s late Sept. home price at 5-year low
- Wells Fargo uses varied approach to selling O.C. foreclosures
- Real estate slump holds ‘tremendous opportunities’
- Huntington Beach’s late Sept. homes sales up 19%
- North O.C. draws largest rent hikes
- Late Sept. homebuying up 29% in Irvine
Check out these O.C. trends…
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blogger, i think it’s time…
you need to start looking for sources that break down the under $500K market….
more and more homes are falling into that segment…
homes that sold for $700K at peak are back in that segment
as we progress over the next several years…
the under $500K market will continue to grow…
not because the low end is selling…
it’s because house prices are declining rapidly…
the under $500K market, will be the LARGEST market…
… for a LONG time…
mav,
I agree. When 2/3 of all homes sold fall into that category shouldn’t that catagory be broken up.
these are recessionary numbers, no question about it and unfortunately, things are going to get much worse.
OH NO what will the poor millionaires do, they can’t sell their McMansions and are going to lose them to the forclosure demon
OH the huge manatee. . .
Seriously though, did anyone NOT see this coming?
Bubble-
These are not recessionary numbers. The fact that a VAST majority of people cannot afford a 700k home let alone a $1M+ home has nothing to do with the recession.
Without exotic loans, we’re going back to the ‘old’ way of lending (where its profitable): 30yr fixed, 20% down, verified income. There just arent that many people making $250k to afford a $1M home ($175k/yr for $700k). There never have been.
I’m not saying the recession isnt gonna get worse, just that those numbers are primarily due to returning to known, profitable lending standards.
I call foul..
There is demand for 1 million dollar homes. However, a 1brm, 1bath in a high rise, for 1mil will not fly in this market.
Buyers for 1mil homes have always been far and few. Unless you had a Coupon for zero down/arm/teaser rate. Those days are long gone. You actually have to prove that you can afford it, a strange concept for some.
Good point mav.
And with housing prices having fallen off 30%, that means a $1MM house is now a $750K house. And, as you pointed out, a whole ton of $600K homes are now below the $500K range.
So that factor needs to be addressed.
The way to factor out the “noise” would be to categorize how many of the now under $500K were above $500K.
Of course that requires someone to be able to connect more than one dot…not something Steve Thomas hasn’t been willing to do, or maybe not capable of doing.
Total inventory…
6875
+4167
+1750
+1184
+654
+761
+253
______
= 15,644
That is a difference of 2,922 more than the total Steve shows of 12,722, or a margin of error of 23%.
Distressed inventory…
4269
+867
+258
+103
+27
+13
+1
_______
= 5518
That is a difference of 65 more than the total Steve shows of 5453, or a margin of error of 1%.
These types of errors in Steve’s numbers happen every time his data gets posted. How no one in the press has held him accountable is beyond me. I could maybe let it slide if the margin of error was typically around 1%, but 23% is just ridiculous. It is time to find out why his numbers never add up month after month.
Steve Thomas…
RE Cheerleader: Pass
Statistics: FAIL
graphrix-
I believe Steve Thomas removes foreclosures from his listings. For some reason he believes these are not a true increase in inventory. In normal markets, I can see why that philosophy might make sense. But when 50% of all sales are foreclosures, how he can justify excluding them from inventory is beyond me.
What I find more amazing is that Jon Lansner continues to use Thomas as an “expert” when Thomas clearly is only pushing a very narrow agenda, instead of true facts about the total marketplace. So quit hammering on Thomas and look to those who are giving him the microphone instead.
Marcia,
Thomas has the microphone, but does anybody hear him — other than reatlors?
He’s harmless……I hope.
Steve Thomas is a realtor with an agenda but Graphprick isn’t a greedy housing speculator and he has no agenda.
Great analysis Jon.
It goes to show that no area of the market is immune. High end houses will probably start moving too once they get off their high horse and lower prices. The argument is that these houses don’t really need to sell because the sellers are richer; while this may be true to some extent, there will always be those who need to sell due to divorce, loss of job, change location in employment, as well as your average stupid investor who got in over their head. And these houses will lead the way down in prices even in the $1 million plus range.
The sales I believe do seem to confirm that the pending sales figures Steve Thomas had back in april or may did follow through with the actual sales. I don’t really question his data that much even though he most likely has his own agenda. But he gets his data somewhere, so I’ll give him the benefit of the doubt.
However, what they basically also confirm is that when sellers lower prices, the houses will move.
Any surprise? Not really. It confirms that housing is overpriced and continues to be.
One thing to keep in mind is that all of these buyers right now are most likely either 1) people with outstanding credit who have saved a significant downpayment, a.k.a. a very small minority in our population or 2) investors with some extra cash looking to cash in on “a bargain” a.k.a your classic knifecatcher.
Those investors are still out there, believe it or not, and they are there with a vengence. I still see houses attempting to be flipped as if people are dumb enough to still believe that housing automatically goes up because it is naturally an appreciating asset. This is the same asinine reason we got into this mess and if the bubble bursting is not enough to teach them a lesson, then they really deserve to burn.
Sure they’ll rent out their property…until housing eventually gets so cheap that people will want to buy and not rent their lousy property for what will likely be excessive rent…at which time they’ll want to sell as they start to lose cash…but their property will have DECLINED IN VALUE! And then it will finally sink in… In every bear market, both in stocks, commodities and housing, there are always knife catchers. It is the nature of our inherent greed.
Getting back to the point, now that we have our 1) people with good credit and cash (the ‘cream of the crop’) and 2) the last of the investors sifted out of the population, guess who’s left??? That’s right! A bunch of people who are still priced out of the market!
By the way, this spike in demand is very very likely to taper off soon.
http://latimesblogs.latimes.com/laland/2008/10/layoffs-at-redf.html
Redfin has seen a dramatic decline in deals in the past month, likely due to people not having downpayments due to the recent economic downturn and stock market crash.