Supply and Demand:  A Housing Conundrum in Southern Orange County

REAL ESTATE

By Gary A. Miller
Columnist

We can have great emotions about our homes.  They are where we create families, surround ourselves with friends, and make memories.  Of course, they are also one of the largest economic transactions in which we are involved throughout our lives.  And, like all economic transactions, they are subject to the basic tenets of economics, including supply and demand.

In this article, I will examine the supply and demand of housing in the four primary zip codes that make up Southern Orange County* (27510, 27514, 27516, 27517).

It will likely surprise no one to say that demand outpaces supply in our area.  The graphics below show the 10-year trend in both houses for sale and months of inventory.  The latter is used to calculate whether it is a buyer’s or a seller’s market.

As you can see, we have been in a seller’s market, which is defined by the National Association of Realtors as less than six months of inventory, for the past five years in all zip codes and even longer for 27510, 27514, and 27516.

Of course, low inventory is only a problem in relation to the level of demand.  If we had low inventory and little activity, prices would remain stable.  However, as seen on the graphic below, as illustrated by the number of showings per listing, demand over the past few years was considerably higher than the years prior.

We cannot know for certain what trajectory 2023 will bring us with regard to demand.  However, if we examine how the year is beginning, it appears that it will have more in common with the peaks of the last decade rather than the valleys.  As seen on the table below, homes saw an average number of showings in double digits in January 2023 and are closer in activity to January 2021 than to any of the three years in the 2018-2020 period.

Average number of showings per listing

	2023	2022	2021	2020	2019	2018
27510	15.5	23.2	13.6	8.7	8.7	7.9
27514	13.4	26.7	14.5	9.8	7.7	9.2
27516	10.2	21.2	16.0	7.8	7.4	5.7
27517	14.2	23.2	14.8	7.3	6.5	6.9

Anecdotally, I recently spoke with several real estate agents about their experiences so far this year, and they report seeing an increase in multiple offer situations with over-asking prices and high due diligence fees.  This comports with my own experience.

It may be that the simple law of supply and demand looms too large at the moment for the market to behave in any other way.

*Note: Due to limitations of the tool used for this analysis, the data presented here shows all transactions in these zip codes, including those that happened outside of the boundary of southern Orange County.

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Gary A. Miller is co-owner of Red Bloom Realty.  He has lived and worked in Chapel Hill off and on since 1994 and is an avid musician, traveler, and former educator.