Ellen Pitts NC Realtor
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market shift

4 REAL Signs of a Housing Market Shift

Alright friends, I got a little nerdy with my spreadsheets. So much fun! But don’t worry, if you are not as nerdy as me and spreadsheets aren’t your love language, I’m going to simplify it all for you so you can understand what is happening in the market AND you will be part of the inside crowd that will know exactly when this real estate market starts to shift, at least here in the Raleigh area. I have said before that nobody has a crystal ball, so predictions about what will happen are subjective, BUT, today I am talking about real hard evidence of a real estate market shift. I am going to tell you how you can KNOW for sure, when it is happening. And again, I can only run these numbers for the Triangle area MLS because that is the only one I am a part of. Zillow doesn’t give me this kind of information in a way that I can access it to get the data I need for other parts of the country. But given that the real estate economy has become more interconnected nationally than it ever has been due to work from home employment, if we start to see a shift in Raleigh, Raleigh will not be the only place we see it.  

There are a lot of different things that are indicators of whether the real estate market is currently in an active shift. We are going to talk about 4 of them today and I am going to explain what each one means and we will talk about what these numbers look like in a seller’s market and what will change first when the shift to a buyers market begins. And later in the video, I will share the data that I pulled in the Raleigh market. And we will see….are we starting to see a shift here? 

  1. Expiring Listings

A HUGE indicator that we are in a market shift from a sellers market to a buyers market is that the number of expired listings will increase. An expired listing is a home that has been listed in the MLS and didn’t sell during the term of the listing agreement between the seller and the listing agent. Believe it or not, even in this crazy sellers market, there are properties that get listed but never sell. Even in this market, there is a price that the market will not bear. And if a seller doesn’t want to decrease the price to match the market, it won’t sell. There really are expired listing in every single market, even now and we will look at those numbers in a bit. But before we get increases in expired listings, something else happens. 

  1. Absorption rate

The absorption rate is what usually catches people way off guard and it’s like a smack in the face, when people suddenly realize that homes are taking longer to sell than they had been in the past. Which is exactly what the absorption rate is. It’s the number of months it takes for buyers to absorb the current inventory. Or you can think of it as the number of months it takes for the current homes listed on the market to sell. This can be such a scary time for sellers because it seems to happen quickly, Last week, your neighbor put their home on the market and it sold that weekend. You do the same, maybe even use the same agent expecting the same results, and the first weekend comes and goes and …. No offers. There are other things leading up to it, before the absorption rate increases. But what usually happens, is that sellers and unfortunately sometimes real estate agents, don’t necessarily pay attention to these less noticeable markers. 

Just so you know, A balanced market is somewhere in between 4 to 6 months of inventory. More than 6 months or so is a buyers market and less is a sellers market. 

So I said that when the absorption rate increases that homes take longer to sell. But something else also happens simultaneously. think about it… homes are taking longer to sell, because there are more homes for buyers to choose from. Again, hard to imagine in our current market, but it’s important to understand the reasoning behind it so you’ll know it when you see it. So stick with me. When there are more homes for buyers to choose from…what kind of offers do they make? Not full priced ones and certainly not over list priced offers. But hold tight because before the absorption rate rises and buyers start negotiating prices down, 2 other things are going to happen. 

  1. Days on market changes

Another indicator of a shifting market is the days on market change. Generally speaking, in a sellers market, the number of days it takes to sell a home is lower and in a buyers market, the number of days it takes to sell a home is higher. Now of course, this is only true if looking at a large amount of data, not for individual properties. Because in a down market, a property can still sell on the first day. And in a sellers market, a property can *still* be overpriced and take longer to sell. I will prove it later in the video when we look at expired listings for Raleigh. But looking at the changes in the days on the market for an entire area over time can tell us something about the direction the market is heading. 

Let’s actually go ahead and look at how this looks for Raleigh since our last market correction in 2008. 

First of all, you can really see from this chart how incredibly unique the current market is that we are in. Homes selling this quickly is absolutely unprecedented. I haven’t been practicing long enough to speak from personal experience for before this chart, but I can say that selling a home in a just a couple of days on average, probably wouldn’t have been possible before all the technology that we have today. As an example, the technology that allows us to digitally sign contracts rather than running around to people’s homes for wet signatures significantly increases the amount of time it takes to get an offer presented and under contract. In those days, 2 days on market or the crazy zero days on market that we see now, wouldn’t have been logistically possible. This market has never happened before. Anyway, If you look at 2004, you’ll notice that the days on market were at their highest of that period. And then they slowly begin to drop off until we hit the downpoint of that period in 2007. Homes are selling really fast in 2007 and We all know that the market adjustment came in 2008 and you can see a pretty big jump and remember this is telling us how long it took to sell a home. So the longer it took, the worse the market was. Now remember that this metric alone isn’t perfect. So let’s look at one more metric that is usually hidden and then we will look at what is happening with all of these metrics in Raleigh. 

  1. # of offers changes 

This one is probably the very first thing we will see in a market shift. Right now we are often hearing stories of not only multiple offers but 10, 20, 30 offers on a single property. As the market starts to cool, multiple offers probably won’t drop off completely. It will likely slow down, before it completely drops off. I remember when multiple offers back before 2020, was like 2 or 3. It was so cute. Aw you got another offer. How sweet. I actually LOVED negotiating those kinds of offers, because it’s so exciting to get a deal on a house when you’re up against another bidder, it’s a little bit like playing black jack, trying to anticipate what is behind the dealers hand. but that simply doesn’t happen when you’re up against 10 or 20. You’re not going to get a deal when there are that many offers on the table. You just have to make your best offer. Anyway, the number of offers made on a given property isn’t public knowledge. And I am not aware of any brokerages who actually track this data. My brokerage, Hunter Rowe, is currently working on the coding for us to be able to access that information brokerage wide. We should have it fairly soon. And that’s good because a decrease in the number of offers is the very first indicator we will see before the rest of these follow suit. So stay tuned. 

Now let’s take a look at what is happening within these metrics in Raleigh. 

So I actually pulled the data for Raleigh and the surrounding suburbs in Wake County because I realized it would give us some seriously valuable information. Look at this… this is the number of months it is currently taking to sell all the homes we have on the market. Now that number along the left side is months and notice the decimal point. Just to make some sense of this graph for you… Raleigh, Fuquay Varina and Wake Forest are currently taking the longest to sell a home in just under half a month or about 14 days. Do you see the point 5 on the left column? It’s not 5 months it’s half a month. Next is Cary at point 4 months or about 11 days.

I could go into all kinds of explanations for the differences we are seeing in each of the suburbs, but at any rate the two important things to know here are 1) it takes 14 days or less to sell a home anywhere in wake County and in most places it’s taking significantly less than that. The other important thing to notice is, those areas that are taking longer might actually be a little easier to get under contract in. But Let’s go on to expired listings and see what those are looking like in Raleigh. 

For some reason the MLS only allowed me to pull as far back as 2008. I guess they didn’t track this metric before that. Anyway, you can see that the expired listings pretty much mirrors the days on market. As the days on market goes up, so do the expired listings. 

In a previous video I talked about the 18 year real estate market cycle that tends to be fairly consistent over the last 200 years or so in which there is an 18 year interval from one housing price peak to the next one with a dip about halfway in between. Based on that criteria, we expected to see a dip in the market sometime around 2017. Now there was a little bump in expired listings from 2014 to 2015…it was a 6% increase. But then from 2018 to 2019, you see this pretty significant bump of 25% increase in expired listings and then a corresponding small increase, in the days on market. Just for comparison sake, The jump in expireds from 2008 – 2009 was about 38%. So 25% is nothing to sneeze at. What I think is happening here, and it’s just a hunch, because we never will know what *would* have happened if 2020 hadn’t hit and completely changed the way our economy is structured with all the work from home employment. But what I *think* was happening, was that 2019 was potentially the beginning of that market adjustment that we expected to begin around 2017. But then 2020 happened and a whole new pool of buyers from around the US and even from around the world created a increased demand that restarted the cycle. I still think it is going to be a few years before we see any significant changes to our market. As you can see from everything I have presented today, there are currently NO signs that the market is beginning to shift. If you liked this video you should definitely watch this one which will give you a deeper understanding of all the factors that are influencing the post covid market. 

About the Author Ellen Pitts

Ellen is the founder of Harmony Realty, a socially conscious realty company. Ellen believes in empowering her clients through education and open communication. Ellen is a number-cruncher at heart and takes great pleasure in following and analyzing the trends of the housing industry. She loves communicating the big picture to her clients and helping them to understand how the market affects their sale or purchase. Her honest and down-to-earth approach allows her clients to make informed and intelligent decisions to get the most out of their offers and negotiations.

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