You never know when you might have to call an audible in the heat of the moment. Specially when the market looks like it’s lining up for another blitz. Things move so fast on the field that it helps to review them in slo mo from a comfortable perch in the skybox.
Here’s a quick summary:
January – February 2013: Very little inventory. Rising optimism in the market and real estate’s recovery. Pent up demand. Exceptionally low interest rates.
March – April 2013: Rapid escalation into an all-out, over the top, multiple-offer, frenzy. Think 2005-2006 in terms of rabid intensity.
May to June 2013: Energy begins to dissipate. Fewer multiple offers. More days on market. Bid-ups aren’t pushing prices quite so high.
IMPORTANT NOTE: Sold Stats are trailing indicators. When closed sales are published for May and June – it reflects real market activity 30 to 90 days prior. Sales peaked in May, June and July of 2013 – indicating how strong the market was from March to May.
The Median Price jumped from $449,000 to $641,000 in amonth’s time, between March and May – representing the entire price gain for the year. Alot was happening. Very quickly.
July and August 2013: Vocal enthusiasm still reverberates from early spring but the market begins to level out. Compared to March it feels like a disappointing drop off. The number of sales dips and the median settles into the low to mid $600s.
On the ground, it seems like the market has run into an invisible barrier. Despite continuing optimism, even the Feds, pull back on their plan to end Quantitative Easing. Economists keep using the phrase “headwinds in the recovery”.
QUESTION: Are Housing and Real Estate growth supposed to lead the economy out of this recession –like they’ve always done? Or are they waiting for significant increases in jobs, earnings and consumer confidence to lead them out of the downturn this time around? Which is the chicken? Which the egg?
September to October 2013: Significantly fewer new listings come on. Sellers try to push price points higher while Buyers begin to push back. Buyers are becoming more particular and discerning about what they buy and what they are willing to spend. Or can spend. The number of active listings drops further. The inventory of desirable “quality” listings falls even further than that. Buyers dig in, trying to muster patience. Wait for more, better choices to come on.
November to December 2013: Buyer fatigue is in full force. Many are taking self-imposed timeouts. Fewer transactions. Sales prices stay steady due to exceedingly low inventory. Fewer Sellers list during the holidays in traditional fashion.
And we are back to where we started last year. Here are the Important Patterns that have emerged:
– The market is bifurcated. Homes listed between $500 – $800k continue to experience strong demand. Homes listed above that are accruing more days on market. Homes listed above $1mill are accounting for an increasingly large percentage of the unsold inventory.
– The missing piece in a self-sustaining real estate market is Move-up Buyers. Their healthy participation would allow both supply and demand to increase. When more transactions flow easier, more people enter the market and pricescan rise.
– Move-up buyers are absent because: a) Sweeping mortgage reforms inhibit flexible loan options, b) Lack of inventory discourages contingent offers that would allow more Sellers to become Buyers and more Buyers to become Sellers. Lower inventory is self-perpetuating. c) Risk aversion remains strong from the memory of 2008. People are buying beneath their means.