Not only have the clocks changed, so has the housing market.
The Spring Market: The best conditions to sell a home are right now.
It is that time of the year again. The hills are a dazzling green. Trees are beginning to bud new leaves. Flowers are opening their petals for the first time. Hummingbirds are feeding on the sweet nectar from birds-of-paradise. The season is changing and so is the housing market.
Housing has been accelerating all year and is officially moving at full speed. It took a while to ramp up, starting the year with an Expected Market Time of 140 days, a slight Buyer’s Market. [The Expected Market Time is the amount of time it would take for a home that comes on the market today to open up escrow down the road]. The market has improved dramatically since, on the backs of dropping interest rates. Back in November, rates nearly reached 5%. They dropped to 4.5% by the start of 2019. They recovered even more, dipping to 4.35% by the end of February. As a result, more buyers entered the fray and demand increased by 91% since January 1st. Last year, it improved by 61%.
As the New Year unfolded, the market sped up. By February, it transitioned to a Balanced Market, one that does not favor buyers or sellers. It continued to develop, and the Expected Market Time just dipped to 84 days, a slight Seller’s Market.
Before sellers jump up and down celebrating a return to the housing run, this is not a market with rapid appreciation and multiple offers on every home regardless of the condition. This is not a market where sellers get away with stretching the asking price, where eager buyers are willing to pay a lot more than the most recent comparable sale. The Spring Markets of 2012 through 2018 were all HOT Seller’s Market. The Expected Market Time dropped down to as low as 33 days. That is significantly different than today’s 84 days.
From here, the Expected Market Time will flatten and not change as much as the first couple of months. Do not anticipate a lot more improvement unless interest rates miraculously drop further. The odds of that happening are currently slim to none. Today’s lower interest rates are a gift to prospective buyers. For buyers who are looking at obtaining a $750,000 mortgage, their payment has dropped from a height of $4,026 last November to $3,734 today, a drop of $292 per month, or $3,504 per year.
Today’s housing market is exceptionally interest rate sensitive. Lower rates produce much higher demand, which is where the market is today. Higher rates slow demand. Buyers are enjoying much more favorable rates right now because of a perceived global slowdown, the trade war, uncertainty, and Wall Street volatility. But, that can change on a dime. If the trade war were to end, the stock market could get an enormous boost and interest rates would rise.
Advice to Sellers: approach pricing your home with extreme caution. Overpriced homes will sit without success. Currently, there are plenty of homes in every price range that have been sitting for quite some time already. It all boils down to pricing carefully based upon comparable pending and recent closed sales, condition, upgrades, and location. Buyers today want a home to be turnkey and ready to go. Homes with deferred maintenance, or a lack of upgrades, or a poor location, must be priced accordingly. The SLIGHT Seller’s Market means that sellers are able to call more of the shots during negotiations; yet, prices are not appreciating much at all right now.
Active Inventory: In the past couple of weeks, the active inventory increased by 1%. In the past two weeks, the active listing inventory increased by 72 homes, up 1%, and now totals 6,366. It is not rising that rapidly because demand has increased tremendously this year while the number of homeowners opting to sell is a bit subdued. So far this year, 4% fewer homeowners have opted to sell compared to 2018. The wet weather may have something to do with this recent trend. Only time will tell.
From here, expect the inventory to slowly rise until it starts picking up momentum at the end of this month. It will then increase at a higher rate with a lot more homeowners deciding to sell as housing rolls deeper into the Spring Market.
Last year at this time there were 4,420 homes on the market. That means that there are 44% more homes available today. This is the highest level of homes on the market for this time of the year since 2012.