“So,” people ask me, “if we crossed in to a buyer’s market in most places in November, why are prices still going up and why are people continuing to list?”
Okay. Nobody actually asks me that specific question. At least not in your average public setting, like in line at the store or while ordering a latte at Lux. But it’s instructive and I’m going somewhere with this. So, please, humor me.
The answer is that the perception of what the market is doing lags the data by 3 to 6 months. So, look at this chart. The market crossed to the buyer’s favor in November according to the data (the purple line crossing 100), but the people listing and buying homes did not start behaving that way until 3-6 months after that.
So, really, that time when we just crossed that 100-line of the index represents market equilibrium. Unlike the orange line from 2009, which was a severe buyer’s market.
Even though the data shows that sellers are losing advantage, the sellers set their prices based on what they saw in the market last year –because they hear from their friends and the newspaper that the market is really hoppin’.
This year buyers have not been coming out, so the prices drop after the homes sit on the market for a while. That is why the listing success rate took a header at the end of last year, and is just starting to recover. See Chart.
So, does this mean that prices are going to start tanking soon? “No”, says our friend Tina Tamboer of the Cromford Report. “Prices will level out.” How does she know this? She doesn’t for sure. But, she says, we are not seeing signs of economic distress, job losses, etc. This indicates that there will still be a strong enough demand to prevent price drops. She sees two causes: (1) people are still clearing out past bad credit and (2) younger folks are just getting employed long enough to buy a home.
That is one reason why homes under $200,000 are dropping in price, but homes above that are increasing in price.
So, what does this mean for you? It means if you are waiting for prices to drop for houses over $200,000, you are not likely to see it. If you are waiting for prices to drop under, $200,000, you may see that for a little longer, but buyers are likely to start entering the market soon.
I can help you see the forest through the data and buy or sell the right home. Call me at 602-456-9388.