Housing inventory is up nearly 30% year to date, with active listings at the end of June sitting just at 9,500, which is the highest it has been since October 2013. A jump of 30% may sound devastating, however in the scheme of things, we are still at relatively low levels. For instance, in July of 2006 inventory was near 30,000 units. For a normal operating market we need to get to 15,000
homes in inventory to reach 6 months of inventory (see Sept 2011). That would be considered an even powered market between buyers and sellers.
However, this spike in inventory is not without consequences, and we can see it in the numbers. Increased inventory has allowed buyers more time and the resources to be pickier. If there used to be 15 houses that fit their criteria, now there are close to 20. This is having a direct effect on Days-on-market, which is up from 6 to 10 days, a 66% increase. Buyers are aware of their increased leverage, which is good news for them.
Now more that ever it is important to price your home right the first time. The market isn’t what is used to be and listings that are over-priced or not in move-in condition are going to get left by the wayside. Also, expecting multiple offers the first weekend is becoming more and more rare.
On an interesting note, the Luxury market of single family homes over 1M has become an even market. With just over 5 months of inventory, this market segment is experiencing much turn over. While there is more volume of sales in this price range, there is also more inventory. Buyers are skipping over the 800-900k range and entering the Luxury market to purchase what they want. On the other side of the coin, there are a lot of homes that used to be in the 900k range that are able to sell with list prices in the 1M segment. Even with the competition, homes that are priced right will sell, with average days on market down at 58 days, down 13% from last year, and average price psf up 6% to $298 for single family homes.
What does this all mean? It feels like we are going slow, but this is starting to resemble a more “normal” market- something we haven’t seen since the early 2000’s. Much like if you are speeding down the road and see a cop up ahead, putting on the breaks and going the speed limit. It seems slow, but it’s normal. It’s a needed correction to keep the market moving forward without over inflating. With interest rates still low, the possibility of the Fed lowering the rates again and the balanced market, now is a good time to make a change if you have ever thought about doing so. I am keeping an eye on the Fed as well as trade negotiations with China. I expect that if a trade deal is reached, money will be coming out of the treasury market and into stocks, which will increase interest rates. Mortgage rates tend to follow the 10 year treasury note.