A Balanced Real Estate Market
This year has been another year of shifting real estate markets. In the last quarter of this year we have seen a dramatic change in the demand for real estate in the Valley. According to The Cromford Report, demand has been falling dramatically for the past three months. This is not just due to seasonal slowing, according to Michael Orr, of the Cromford Report, “The market is already in a balanced zone and may become a true buyer’s market in December. The cooling market is turning positively chilly for sellers, many of whom will find it hard to believe.”
With the decrease in buyer demand, the inventory of active homes on the market, the supply, has increased, due to the fact that homes are not getting bought up and are lingering on the market longer. The inventory of new homes going onto the market in October was the most since April of 2011. Supply is increasing while the number of transactions is decreasing. Sellers no longer have the advantage of buyers competing for a few homes available on the market like they experienced in the beginning of the year. This shift happened during the summer. Some of the reasons for this shift are that interest rates went up at the end of spring which motivated buyers to buy immediately, to avoid rates increasing even more. The government shutdown caused many buyers to “wait and see,” delaying purchasing a home.
The number of homes listed for sale is up 37.7 percent from last year at this time and up 15.4 percent from last month. The pending sales are down by 38 percent from last year and are 8 percent less than last month. The closed sales are down 16 percent from last year and almost 7 percent less than last month. While the sales price per square foot is up 19 percent from last November and up 3 percent from last month.
We have seen yet another dramatic shift in our real estate market in 2013. The year began with low inventory and high demand. Sellers were listing their homes and receiving multiple offers as soon as their home went on to the market. Buyers were willing to pay over market value to in order to purchase a home. Sellers were in the driver’s seat and prices continued to rise due to the brisk competition for the limited homes available. Interest rates jumped up in the early summer, and many would-be buyers for the remaining months of this year got off the fence and bought before the rates increased further. Going into the last quarter of the year demand slowed and the number of transactions decreased. At the same time inventory increased slightly and the average days a home was on the market increased as well.
What does this all mean for buyers and for sellers? The good news is that we are in a balanced market where supply and demand are about equal. Buyers have a great advantage, especially during the holiday season when there is not as much competition, to negotiate a great deal and at the same time have a good selection of inventory to choose from. Buyers also have the great current interest rates to take advantage of. Since spring when they jumped, rates have gone back down to historically low rates once again. Sellers need to be aggressive with pricing. Prices continue to rise but are expected to level out in the next year so now is the time to take advantage of the appreciation we have experienced this year. Sellers also need to be much more aggressive in making sure their home stands out in terms of condition. Having the home in good repair and detailed to shine will improve the odds that their home will be the one that sells among the now crowded market of homes available.
This balanced market it is a great time to buy and to sell. When the real estate market shifts buyers and sellers need to shift their strategies to succeed. After the past several years of crazy shifting markets, a balanced market is a welcome change.