When you’re a great big nerd like me, it’s fun to read data, chart & graphs. Data tells a story and the graphs provide the illustration. Another great thing about
Nate's Nerd Talk | May 2021 | The Market is Still Hot, But Nothing Lasts Forever
Dated: May 4 2021
When you’re a great big nerd like me, it’s fun to read data, chart & graphs. Data tells a story and the graphs provide the illustration. Another great thing about data is that it allows us to forecast the future… not to be confused with predicting, by the way. There are metrics that are considered “leading indicators” that signal a change ahead, and those that are considered “lagging indicators” that follow that change. Sales price is a great example of one of these lagging indicators. The Market Index, which we talk about every month, is one of the best forecasting tools we have, and is a prime leading indicator.
The Market Index is that little gauge at the bottom right, and it represents the balance of the market. It’s been a while since I last explained it, so here we go. This metric is derived from the trends in pending, active & sold listings, as well as the current supply (homes for sale) in the market. Anything greater than 100 is a seller’s market, less than 100 is a buyer’s market, and 100 is balance. Make sense? Good! As this number goes up or down, we can, at least in the short-term, forecast whether our market is heating up or cooling down. Well, if you take a look at the graph below, you can pretty clearly see that we’re beginning a cool-down. We talked last month about a softening in demand, and that trend is continuing. In fact, our demand is actually below average for this time of year now. At the same time, our supply is beginning to finally climb ever-so-slightly. It’s barely perceptible, especially if you find yourself struggling to find anything decent for sale, but the data doesn’t lie.
So, what does all of this mean? Should you be scared that our market is going to crash? Absolutely not! All that this means is that we’re seeing a cooling in the market, which is something we actually NEED to happen. Prices have been rising more quickly than at any time since 2005 and it’s rapidly becoming unaffordable for the typical buyer. We desperately need more homes for sale, and in order for many sellers to be willing to list their home, they need to know that they’ll be able to find a suitable home to buy. So, if you’ve been considering selling, now might be a good time to start putting some things in place to make that happen. Prices will continue to rise for some time, and we’re still seeing multiple offers going well over asking, but this, too, is not quite as rampant as it was even a month ago. Do not be mistaken, though, our historic seller’s market is still red-hot, but it’s likely going to continue to cool for a bit. So, if you wait to sell, which is perfectly okay, you’ll still likely sell for more money, but it may just not be as exciting. Offers may come in at a slower pace and there may be less of them. If you’d like to discuss your specific situation in further detail, please don’t hesitate to reach out.
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Demand is dropping!But, who would know?For the last several months, it seems that the only side of the supply & demand balance we’ve focused on has been the supply side (homes for sale),