Over the past year, we have seen some significant changes in the real estate market. Make sure you read this entire article for the “rest of the story” as Paul Harvey used to say.
Five years from now, we will not even consider the statistical data from 2021 as it was a once in a lifetime event. Prices rose by over 20% and home buyers had to come to the table with ridiculous amounts of cash, waive inspections and take more risk than ever before. While that was great for sellers, it was bad for the real estate market in general. Thankfully, we are past that point and the market is starting to become more “normal” at this point.
Let’s take a moment to see where we were a year ago, where we are now and what that means.
One year ago today (December 2, 2021, there were 2,384 active listings on the market in the 16 county area I have tracked for years. That number would drop to a low of 1,280 on March 15, 2022, the lowest point I have ever seen in active listings in my 30 year career.
At that same time, there were 8,478 pending listings (under contract but haven’t closed yet). For Realtors reading this, that includes “pending” and “contingent” status.
Today, December 2, 2022, there are 6,238 active listings and only 4,948 pending listings. If you like big percentages, that is a 261% increase year over year in active listings and a 42% decline in the number of pending listings. My friend and financial advisor, Jim Staples, always says, “If there is a huge percentage number you hear on the news, you have to look at the raw data because there is more to the story.” Let’s take a deeper dive shall we?
Every year, we see “seasonality” in the real estate business. Many people speak of the “Spring Market” where the number of listings and the number of buyers increase. In addition, many sellers do not want their home on the market between Thanksgiving and Christmas/New Year because they don’t want people coming through their house with family heirloom decorations sitting out tempting visitors to the home.
Because of this seasonality, we generally see more homes closed between April and September than the rest of the year combined. However, buyers are still looking for homes in the other times of the year, especially in December. Many job transfers take place at the end of the year and families move during this time. Therefore, if a home is on the market and a potential buyer sets an appointment, it is likely a well qualified, serious buyer. Generally, it means fewer showings to get to the contract.
Seasonality is a real thing in real estate. There is no denying that. Waiting to list until the spring market is not always the best decision. Consult with your Realtor as to the different strategies of listing at different times of the year.
Where are we headed? It is hard to have a crystal ball. Supply and demand will continue to drive the market. How will further steps by the Fed to raise short term interest rates affect consumers looking to buy a home? Some will speed up their process and others will make the mistake of waiting.
Waiting to buy a home because of interest rates is a bad idea. During the six month period you may wait to buy, the house value could increase by 3-4% and eat up the savings of a 1/2% rate drop. If you are a buyer, you have choices and opportunities if you can afford to buy a home. The hyperlocal market you are shopping in may determine your ability to buy.
It has always been said that the best time to buy a house is 5 years ago. The second best time is now. It is a long term asset that will grow in value over time, Most people have a significant amount of their net worth tied to the home they own. That hasn’t changed in the last 75 years.