Housing Starting to Flex

After a very sluggish finish to 2022, buyers are starting to return to the home market, demand has already increased significantly, and market times are decreasing quickly.

Buyer Demand Coming Back

As housing recovers from historically low levels, pending sales are rocketing upward.

There are times when it looks like very few people will turn up, such as when you arrive early to a movie theater, sit in the seats of an unoccupied church with a lot of time before the service starts, or get seated right away at a famous restaurant before the busy hours. Then all of a sudden, the cinema is jam-packed, the church seats are full, and your favorite restaurant has an hour-long waitlist. In the housing industry, that is exactly what is happening right now. A month ago, there was minimal real estate activity since everyone's minds were still clouded by the Christmas season. There were no visitors to open houses and few showings. Buyers have suddenly started to purchase again, demand has skyrocketed, and market times have decreased.

The present trend is one of steadily rising demand versus a shortage of properties for sale. The market times are decreasing as a result. The Expected Market Time, or the period of time between going on the market and switching to pending status, fell from 108 to 76 days over the previous two weeks alone, losing 32 days, and reaching its lowest point since September of last year. The difference is obvious to purchasers who are really in the market. Homes are moving a lot faster all of a sudden. When a house is priced fairly based on its Fair Market Value, taking into account location, condition, improvements, features, and age, it attracts a lot of initial interest and sells quickly. Buyers are losing a bit of the momentum they had built up over the previous six months as market times decline. It does not imply, however, that purchasers will go above and above the asking price. The housing market has not yet returned to its peak during the pandemic from 2020 until the first half of 2022. It does imply that the impact on declining property values will be lessened by the increasing competition.

Supply and Demand

The number of active listings dropped by 287 houses in the last two weeks, or 4%, to 7,902 houses. An unchanged or declining inventory at the beginning of the year brings to mind 2021, when COVID still had a significant impact on the housing market. Normally, the inventory progressively increases from January to mid-March during the Winter Market, but not this year. The number is now painfully low and won't be able to rise unless more homes opt to sell. Homeowners decide to remain in their houses because of the "golden shackles" of fixed low mortgage rates. A startling 89% of all borrowers with mortgages have rates at or below 5%, and 71% have rates at or below 4%. Until the difference between current rates and their underlying fixed rates is closed, there won't be many sellers until mortgage rates go to the mid-5s or below. The best time for families to put their houses on the market so that they can sell during the summer months when the kids are out of school is during the spring market, which runs from mid-March to mid-June. Expect to see more homeowners list their properties during this period.

The inventory was 2,808 less, or 5,094, 36%, less than the previous year.

In the last several weeks, demand, a snapshot of the number of new escrows over the previous month, rose from 2,269 to 3,131, gaining 862 pending sales, up 38%. Since February 2021, the demand had increased at its greatest rate. 2022's market for steadily rising mortgage rates is now in the past. Rates have fluctuated between 6% and 6.5% since December, bringing greater stability and encouraging many buyers who had been put on hold to pick up the hunt for a property. The pattern of progressively declining inflation makes it seem as though the days of interest rates above 7% are now a distant memory. Expect the demand to increase quickly over the entire month of February. It will result in more demand if mortgage rates decline over time to below 6%.

Demand was 4,714, which is 1,583 higher than it is now, up 51% from last year. Before COVID, the 3-year average (2017 to 2019) had 4,442 pending sales, which is 42% more than today.

Luxury End

There has been a noticeable improvement across the luxury market for the past few weeks.

The Expected Market Time for properties with prices ranging from $2 million to $3 million has reduced from 223 days to 117 days over the course of the last few weeks. For houses valued between $3 million and $4 million, it fell from 289 days to 156 days over this time period. The Expected Market Time dropped from 434 to 367 days for properties with prices ranging from $4 million to $8 million. The number of days on the market that is anticipated for properties with prices higher than $8 million rose from 766 to 1,033. If a seller waits 1,033 days, they won't be able to put their house up for sale until December 2025 at the earliest.