Don’t Get Lost in the Headlines… Here’s the Data
Sales slipping, interest rates rising, prices rising, and a news cycle constantly warning of a recession. What’s the deal? At a cursory glance, the current real estate data may seem contradictory. Why are sales prices continuing to rise while everyone is talking about the market cooling off? The short answer: the market is still historically hot, but cooling compared to the sizzling market we’ve seen over the last 12-24 months.
Here's what we are seeing.
The “Cooling” Indicators:
Sales Dip: Single-Family Home sales are down 25% and condo sales are down 14% compared to this time last year. This is largely attributed to the rise in interest rates which is causing some buyers to be priced out of the market and reconsider their buying decision.
Price Reductions: In June, 30% of single-family homes saw price reductions compared to 20% of homes last June. Similarly, condos saw price reductions in 27% of the active inventory compared to 22% this year. A combination of factors are influencing this metric. First, some sellers are hitting the market with unrealistic list prices that are no longer feasible in a higher interest rate environment. Second, when homes aren’t receiving countless showings and offers in the first week, sellers may become anxious and more quickly move to reduce their prices to get their home off the market.
Cost of Ownership: The combination of increasing interest rates and high home prices means that the cost of home ownership has increased significantly from this time last year. This has caused some buyers to abandon their home search for the time being.
Why the Market is Still “Hot”:
Inventory Historic Lows: It’s easy to get lost in the topline numbers and see that single-family home inventory is up 40% year over year. However, months of supply still hovers at 1.5, which is incredibly low! According to the National Association of Realtors, a “balanced” market has 6 months of supply. So while inventory is up from last year, it’s still incredibly tight.
Selling Over Asking: Despite the “cooling” headlines, 62% of single-family homes sold above asking and 43% of condos sold above asking. So what’s the difference between listings with price reductions and listings that are being sold at or over asking? Having the right pricing strategy coming to market. Set up time with us if you have pricing strategy questions about your home.
Prices Still Up: The last, but certainly not least, indicator that the market is still “hot” is the double digit increases in the median prices for both single-family homes and condos. If supply remains low, prices are not expected to take a big hit in spite of rising interest rates.
We’ve summarized the data below.
Ultimately, it’s still a good time to sell but sellers are beginning to feel to squeeze to get their homes on the market quickly as the market cools. For buyers, the cost of borrowing will remain a challenge but they can breath a sigh of relief knowing that the incredible competition for each listing is waning. Additionally, price reductions indicate that there is more room for buyers to negotiate than we’ve seen since the pandemic spike. Have further questions? Schedule some time with us.