Remember a few videos ago I told you that there were a few things we needed to watch for so we would know when a shift in the booming housing market was happening? Well I’m definitely seeing some changes in the market. If you don’t remember or you didn’t see that video where I talked about the criteria I watch for, I’ll link to it at the end of this one, but I’ll also remind you here of what those elements are for tracking the housing market. They are: expired listings, days on market, absorption rate and number of offers.
The data for July is in and July was a particularly interesting month for tracking the market because historically we ALWAYS see a slow down in July. In a normal market I beg sellers to get their home on the market before July because once everyone goes on vacation for July 4th, there is very little house shopping happening. When people get home from vacation, everyone who has kids is busy getting them ready for school to start, buying new clothes, school supplies, doctor appointments, and of course, people with kids generally want to have already moved into their homes before school starts so most of that house shopping is done in the spring and the majority of buyers have closed on their new homes by July. Not everyone who is house hunting has children, but when we remove that large segment of the population from the equation, it leaves a much smaller pool of buyers and that means less competition.
Last year was very different. I had tons of buyers with kids moving in the middle of the school year. School had a much smaller impact on the housing market because so many kids were in remote schooling that it didn’t cause the same seasonality we usually see. With most schools back in person and expected to be in person for the fall…although I guess it remains to be seen what kind of impact the Delta variant has on the classroom, Anyway, I suspected that there was a chance that we might see the same slowdowns that we have historically seen in previous July’s in July 2021. But again, the market surprised me.
I have three pieces of evidence I want to share to illustrate the changes I saw in the market in July. It was not what I was expecting. I was actually surprised by this. Because while I am not one of those people crying “market crash!!!” I’m also asking myself how much longer can this really last?
The Triangle business journal reported that homes in Raleigh have increased in value almost 24 percent over the last year.
“Data from the Triangle Multiple Listing Services show the average sales price jumped from $332,165 in June 2020 to a whopping $411,528 this past June, a 23.9 percent rise.
Days on market dropped from 27 in June 2020 to only 10 in June 2021. And inventory plummeted, with June 2020 inventory coming in at 6,388 and June 2021 at 2,553.”
But back to those 4 criteria…. Obviously the triangle business journal data appears as though the market is still on the upswing. Is that actually what is happening? We have to look at two telling data points to find out. The two criteria that we see first in a shift and where I am seeing a change now, are the number of offers and the number of expired listings. In my brokerage, we received an average of 3.26 offers per listing in July of 2021 compared to 1.5 offers on average per listing for July of 2020. So the number of offers still seems to be increasing. This is a little surprising because it seems to contradict the growing chorus of people predicting an imminent market crash. Remember those are averages so for example, this July, the listing that had the most offers had 22 total offers. But that is an outlier, it isn’t typical.
Expired listings is the next most telling sign. I was really expecting this number to either hold steady or to increase just a little bit as buyers get weary of making over list priced offers and housing gets more expensive. But the expired listings actually dropped 43 percent. In July of 2020 we had 217 expired listings and in July of 2021 we only had 123 expired listings. Usually when a house expires from the market it means that the price is too high for the type of house that it is. Buyers will pass over homes, really in any kind of market if they are overpriced compared to other inventory. For example, in California this home is priced over a million dollars. But If you tried to price it like that here, you would have competition that looked like this. Nobody is going to make an offer on this house at that price when they can get this one at this price. And while it is usually more subtle there are always examples like this in any market no matter how hot. So listings expire without selling. Now it is true that because the number of listings is so much lower this year than last year, that the percentage of listings that expired went up. But combine that with the increase in number of offers and I have to believe that because of the excruciatingly low number of listings, the percentage of expired listings isn’t significant.
But all news for buyers is not bad news!! while it is still a hot market here in Raleigh I think there are actually some signs that show we can expect to see some slowdown in the next 3-6 months.
First of all, remember that increasing supply is an indicator of a market shift. When more homes are listed on the market, buyers have more to choose from and their offers are lower than if there are fewer homes competing for more buyers. National Redfin data is showing that there is a pretty big increase in homes for sale across the country. But look at this graph and look at where this inventory is increasing…. Inventory is up 19 percent in the midwest, 10 percent in the northeast, 18 percent in the west and 4 percent in the south.
If we think about all of this information I have just given you about the July market in Raleigh and the national market I think we can infer that our market here in Raleigh is still primarily driven by people relocating from other states. Remember what we said about the July market and how it’s still hopping here even though it’s usually quiet once everyone goes on vacation? I think what happened is everyone went on vacation… they came here from California and Chicago and New York and went house shopping during their vacation. So when we see the inventory increasing in these higher cost of living areas, but not increasing so much here, it makes total sense. Yes, the market is changing but that change hasn’t gotten here yet. With the increase in inventory in high cost of living areas, it will start to take time for those properties to sell. And as that market drags, it will eventually cause a drag here. But we’re not seeing it yet. And this is the prediction… I predict a housing FIZZLE…. I don’t think it is going to crash here in Raleigh. And I think this dynamic will be similar for the rest of the south where prices are generally lower than the rest of the country. I think one thing that could potentially prop up our southern market a bit longer is the new delta variant that is causing some companies to delay going back to in person work. Also this week I have seen several news articles indicating that workers are not going back to in person work, and giving up their new experience with flexible work schedules, willingly. It’s the wild west out there and that will probably have some continued impact on where people live as well.
But now let’s talk about money predictions. According to the Evercore ISI Housing Economic report, they are predicting a meager price increase over the next two years here in the Triangle. Actually these are the numbers we used to consider pretty average year over year increases in Raleigh. Historically if you wanted to get a 2-3 percent increase every year, you would stick to the most popular areas which back then was North Raleigh and Cary. But the prediction is that we will see continued high price increases, about 9 percent for 2021 and then in 2022 it will slow down to 3.5 percent and then 2 percent in 2023. I really like this prediction. It makes a lot of sense to me. So when homes are increasing in value at that type of rate, that will likely mean that we are not seeing any or at least very few multiple offers. Making an offer on a house will be much more fun and less stressful than it has been for the last few years. 2022 is the year for buyers. Sellers if you’ve got a house to sell and you’ve been waiting, NOW is probably the time to get it on the market. As usual, I do not have a crystal ball and neither does any economist that is making these forecasts. So make your plans at your own discretion.
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.