CHART: The Real Estate Market Shift Begins
Published On: November 16, 2018 Posted by: Jeremy Peterson
The real estate market moves in cycles. For the last several years, many of us in the industry have been waiting for the market to reach its top and then move in a different direction. The ebb and flow of the market is as natural the sun rising and setting, although, it is much less predictable. But, despite the difficulty in predicting timing, we can spot signs along the way that tell us what is happening and where we are in the cycle.
Today’s chart shows us that we may have just reached the top of this cycle in pricing and speed of sale. For the past several years the number of homes actively listed on the market for sale at any given time has been less the same time the year before. This shrinking inventory of available homes has been a function of increasing population amidst a stagnant growth in housing supply.
However, after a long run of shortages, inventory seems to have recently taken an abrupt change in a new direction. On September 10th, 2018 the number of homes for sale exceeded the number for sale on the same day last year. Since then, that divergence has increased dramatically. Listings are up almost 13% over last November. This is remarkable especially in light of the fact that listing growth hasn’t been this big since MLS records began tracking this statistic in 2011.
So what does this mean? For starters, the market is driven by supply and demand. More homes for sale means more competition and less pricing power by sellers. Price growth has stalled for the past several months and many sellers are feeling that we are at a top of a market. Yet, at the same time interest rates continue to increase making existing house prices even less affordable as time moves forward. As affordability becomes farther from the reach of buyers, more of them are sitting out and waiting for something to change.
So, make note. While these changes may sound exciting to prospective buyers who are eagerly waiting for a bargain to purchase, the real estate market moves very slowly. Sellers on the market right now are motivated more by greed than fear right now. They recognize an opportunity to cash out and may be able to realize their gains. So, don’t expect prices to drop anytime soon. However, as we continue to move into the next leg of the market cycle, underlying conditions will work to change the mood. A soft job market will create motivated sellers who need to liquidate quickly due to job losses. These will often turn into short sale and bank owned situations which will drive the overall price of housing down. To the degree that it does so depends on the softness of the jobs market at the time. We won’t know that until its actually happening which is still probably 18 months away or more.
But, don’t be discouraged. The market is a great rewarder of those who do their homework. If you are in the market to sell or to buy, CONTACT ME, and let’s get to work doing the smart thing for you.