If you’re anything like me, you may have found yourself over the last year or so looking around at your house saying something to the effect of, “Wow … I never would have imagined
Nate's Nerd Talk | July 2021 | Frenzy Fading
Dated: July 19 2021
For the last couple of months, we’ve been talking about the cool down we’ve been experiencing. The first part of this year brought us the most extreme seller’s market that we’ve literally ever seen, so we have a ways to go before we could be in anything even slightly resembling a buyer’s market. That said, we’re headed in that direction, so let’s explain what’s happening.
First, to briefly recap where we’ve been so you have some context for where we are now. Our market has been chronically under-supplied for nearly a decade, and that really came to a head in the last 12-14 months during the pandemic. We already had very low supply and then COVID hit, which for a whole host of reasons caused a further deterioration in available homes for sale.
At the same time, demand was spurred quite significantly by historically low interest rates as well as myriad other factors. This severe imbalance is what caused the insane levels of price appreciation that we’ve seen recently and, given that price appreciation follows market activity, it’s unlikely that prices will drop or flatten anytime soon.
Today looks a little bit different than it did a few months ago and that is due to both an increase in supply (active listings for sale) and a fairly significant decrease in demand (homes under contract). Back in March when our market index peaked, demand was nearly 140% of normal levels, and today we’re at a mere 90%.
When the changes first began, it was almost imperceptible to the average buyer or seller. The frenzy was still felt like it was in full swing with multiple offers over list price with full appraisal waivers and their first born child! Now a few months into this change, buyers are beginning to recognize that they don’t have to compete at this level quite so much. We’re actually beginning to see offers accepted UNDER list price, which we simply did not see the first part of the year.
Sellers are seeing significantly fewer showings and offers, and their homes are taking marginally longer to sell. The higher interest rates certainly contributed to the drop in buyer’s excitement, but more than that, the nearly 40% appreciation has made it unaffordable for many buyers and they either can’t or won’t participate in this market. They may believe that waiting for a year or two “for prices to go down” is the right strategy, but they will very likely regret that decision.
The graph below representing our active listing count shows us that we’re at the beginning stages of our supply rebounding. As of this writing, we officially have more homes available for sale than we did at the start of the year. In fact, we’re adding roughly 300 homes net per week. This is not something people should overreact to, and by no means do we have a “surge” in new listings or an utter collapse in demand.
What we are experiencing is precisely what we SHOULD see when a healthy market overheats.
Our market has been so ridiculously lopsided in favor of sellers for many months now; a change that gives buyers a chance to win the deal whilst also retaining their first born is a GOOD thing! So, if you’re considering buying or selling a home anytime in the near future and would like to discuss your specific situation, please give us a call. We’d love to talk nerdy with you :)
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