There will come a time when I look back and reflect on the past four years as the halcyon days of my real estate career. I will miss the thrill of being hoisted upon the shoulders of my sellers, parading me through the streets, showering me with champagne, while thanking me for securing sixteen offers and selling their home for $125,000 over asking price. But, as a client told me not more than two hours ago, “All good things must come to an end.” Indeed, the sellers’ market that has defined local real estate since 2020 may be changing.
However, like those who falsely reported Mark Twain’s passing, leading to his famous quip, ‘The reports of my death have been greatly exaggerated,’ I don’t want to prematurely declare the demise of real estate’s long-running bull market. Both anecdotally and statistically, we’re starting to see the first signs of what could be either a momentary blip or the start of a new trend. The data we parse over the next few weeks will provide a clearer picture. Until then, here’s what’s transpiring…
Market Change
In the days leading up to Memorial Day, my team and I noticed a sudden, uncharacteristic reduction in requests to show our listings. Open House attendance diminished, the number of offers tendered on our listings dropped, as did the price above which these homes were selling. At the same time, we saw similar concerns being posted by colleagues in a Facebook group for local real estate agents. Post-holiday, activity remains constrained in some price points and among certain property types. Until things become clearer, I’ll refrain from rash speculation, but one thing seems very obvious—buyers appear reluctant to purchase homes that need major renovation. With the Affordability Index at record lows, buyers are unwilling to finance the purchase of an expensive house tied to an inflated mortgage rate, especially when the property also needs an $85,000 facelift.
Over the weekend, I came across the first empirical data related to sellers and their listings. While the data is national in scope, it seems to reflect what has been happening locally.
- The number of homes listed for sale and then delisted – taken off the market without selling – is rocketing to all-time highs. Rising delistings are a sign of a pricing imbalance, with asking prices higher than what buyers are willing to pay. National delistings, as a percentage of total listings, are roughly double the normal rate, bucking seasonal trends, and accelerating rapidly.
- Another sign of a pricing imbalance are price reductions, the number of which are also rising. The percentage of active listings with price reductions is higher than it’s been for years, and is also increasing.
- Nationally, inventory levels are rising. Last week, there were 595,000 homes available for sale across the country. The same week last year, there were only 437,000 homes on the market.*
In short, buyers seem to be setting aside their hunt just as sellers are finally entering the market.
Buyer & Seller Impact
Of course, as supply increases and demand wanes, there are going to be concerns about a price correction. Currently, I’m not forecasting such a shift because we’re still about nine hundred homes shy of what would normally constitute a balanced market. It’s unlikely that nine hundred homeowners will suddenly list their homes for sale. Instead, I believe that the gains- approximately 60%, on average- that homeowners have enjoyed over the past few years, are locked in. If you’re lucky enough to have benefited from this surge, congratulations! While you might not enjoy such large returns in the years to come, you have a lot to celebrate right now!
Meanwhile, a less competitive market means that buyers may finally be catching a break. More inventory, less competition, and the strong possibility of being able to refinance at more favorable mortgage rates next year collectively signal a more promising environment for homebuyers.
Word to the Wise
During times of uncertainty, it’s common to become confused and, perhaps, even emotional. My best advice is to choose your advisors carefully. It’s easy to fall prey to less-than-professional practitioners willing to tell you that everything is fine. Indeed, it may be but it’s probably best to rely on data rather than hollow affirmations.
Whether you’re a buyer or a seller, if you’d like to talk about the current state of the market, feel free to give me a call at 330-8750. Meanwhile, Happy Summer!
*Data sourced from Redfin’s Data Center and Mikedp.com