11/02/2024
This is a great real estTe blurl by Russ and Wendy Shaw...just some real estate gurus here in the valley. They always write with eloquence and honesty, I'd be hard pressed to write it better myself.
๐ฆ๐ฒ๐น๐น๐ฒ๐ฟ๐ ๐๐. ๐๐๐๐ฒ๐ฟ๐ - ๐๐ต๐ผ ๐ถ๐ ๐๐ถ๐ป๐ป๐ถ๐ป๐ด ๐๐ต๐ฒ ๐ฟ๐ฒ๐ฎ๐น ๐ฒ๐๐๐ฎ๐๐ฒ ๐ฏ๐ฎ๐๐๐น๐ฒ?
The real estate market rarely moves fast enough to garner headlines โ despite what YouTube or internet clickbait would have you believe. Instead, trends tend to be slow moving and yet discernable with time. This year saw a steady erosion of sellerโs strength ending with a market that now favors buyers in most segments. That slow moving erosion seemed to undergo a temporary shift in September, when rates dropped and both buyers and sellers responded. Demand was up approximately 14% compared to the same time last year. Given that it was over 3 years since we had seen any improvement in year over year numbers, this was good news indeed. The caveat? Supply also was up - 52% over last year. Further, even though most people incorrectly thought mortgage rates would drop after the Federal Reserve cut their base rate โ a stronger than expected economy and jobs report delivered the opposite with higher rates. Therefore, what seemed to be a fast moving demand trend in favor of the sellers quickly reverted to buyers when rates jumped back up. Add to that the fact that supply tends to rise seasonally, rising throughout October and November โ only to decrease as sellers come off the market in December for the holidays. Likely we will enter the new year at a bit of a stalemate with buyers largely in control โ waiting to see where interest rates will take the market.
๐ฃ๐ฟ๐ถ๐ฐ๐ฒ๐
Pricing is a key concern whether buyer or seller. There is a little known statistic that is a very reliable pricing indicator which we pay close attention to called the โlisting success rateโ. That is the percentage of homes on the market selling. When that rate is over 90% (meaning that 90% of all listings on MLS are selling, 10% are not) we have a very hot seller market with prices rising. Conversely, when that number is low, prices fall. As of the writing of this article, the listing success rate is 70.7%. That means that almost a third of homes are not selling. This is just slightly above the normal rate of 68%. But normal does not mean it feels balanced. For a historical perspective of why, the Cromford Report shares the following:
โOur month-to-date listing success rate is 71% which is nothing special, but at least it is above the long-term average of 68%. But It is also below last year at this time when we measured 75%. This tells us that the market is close to normal and not improving much. However we may not feel like it as close to normal, because between 2011 and 2022 the market stayed above normal for almost the entire period. Normal feels much worse than 2011-2022. Also we have not had much experience of normal in the last 24 years. It has mostly been better or worse than normal.
Those who were active between 2006 and 2011 will realize how much worse it was back then, when the listing success rate stayed below 61% and often fell below 40%. Far more listings failed than succeeded for a full 5 year period.
We can also see how unusually strong the market was from 2020 to 2022 when the listing success rate exceeded 90% for long periods.โ
So what does all this mean for pricing? We have not seen prices decline when the success rates are above 65%. However different market segments may have lower than average success rates. To get significantly lower prices you need excess supply and desperate sellers. Is that what is on the near horizon?
"๐ฃ๐ฟ๐ฒ๐ฑ๐ถ๐ฐ๐๐ถ๐ผ๐ป ๐ถ๐ ๐๐ฒ๐ฟ๐ ๐ฑ๐ถ๐ณ๐ณ๐ถ๐ฐ๐๐น๐ - ๐ฒ๐๐ฝ๐ฒ๐ฐ๐ถ๐ฎ๐น๐น๐ ๐ฎ๐ฏ๐ผ๐๐ ๐๐ต๐ฒ ๐ณ๐๐๐๐ฟ๐ฒ."
- ๐ก๐ถ๐ฒ๐น๐ ๐๐ผ๐ต๐ฟ
Predication of interest rates and the market beyond a month or two are difficult, speculative, and mostly wrong. Demand will largely be determined by interest rates โ and who knows where those will land. At the moment the Cromford Report points out: โBuyers are still gaining negotiation power as supply risesโฆ The general picture is of low volumes but stable pricing. The outlook is for volume to improve a bit and for prices to remain stable with a slight downward tendency due to the slight excess of supply over demandโฆ Unless the trend changes direction we are headed toward a buyer's market.โ
Buyer markets typically result in downward pressure on prices.That is what we have seen in the later part of 2024 โ sellers adjusting their numbers and pricing expectations as the market has moved to a buyerโs advantage. But again, โslight downward tendencyโ is not a pricing implosion.
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The best strategy for sellers is hire well (choose the right agent)and get pricing and marketing right from the beginning. For buyers, recognize you have a window of opportunity to buy with more negotiation strength and choices. If rates drop, expect demand to jump quickly and that window can close. Both sides need to know their strengths and weaknesses and act accordingly.
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As 2024 comes to a close we want to thank our clients for theirloyalty and trust. We truly are grateful and it is an honor to serve you. We look forward to helping you in 2025.
With our thanks ~
Russell & Wendy Shaw
(Mostly Wendy)
