Statistics are continuing to confirm what I have been hearing “on the street” from real estate agents and brokers; the hot spring/summer markets have given way to a cooldown. Some of this can be attributed to the annual seasonal shift that occurs when school begins, the weather cools and people shift into fall mode. Pending sales, which is a measure of buyer activity, declined nearly 3%. That’s only part of the story.
While there is a decline in buyer activity, we know from the massive buyer demand earlier in the year that many buyers did not find a home to purchase. The demand is still there. Concurrently, we are experiencing an increase in listing activity. Year-to-date there has been a 2.9% decline in new listings, but there was a 7.6% increase in new listings in August compared to August 2017. In fact, there were more new listings in August than July, this hasn’t happened since 2012. This was the same year that months supply of listings began to decline and has been in decline ever since.
In a nutshell, buyer demand has decreased while seller activity has increased. It is too early to draw any conclusions about what this means for the market, but I have some thoughts. Considering that low listing inventory has plagued the market for years, an increase in new listings is welcome news. In my opinion, one explanation for the increased listing activity is seller confidence. Sellers now feel that they can sell their home for a price they are comfortable with. Perhaps the decrease in buyer demand reflects a lack of buyer confidence? Maybe the increase in prices, +7.1% year-to-date, has prevented some from buying due to affordability? We are in a period of increasing interest rates, this certainly has an effect on consumer behavior. Perhaps it is as simple as consumer confidence. Consumers may want to take a “wait and see” approach with political turmoil and talk of trade wars gripping the daily headlines.
Whatever the case, the residential real estate market is poised to finish the year strong, but not with as much gusto as the previous two years. While listings are increasing and pending sales are declining, the net effect is still a decrease in listing supply. In August the months supply of homes for sale still decreased by 3.8% despite the uptick in new listings. Listing inventory is decreasing, just not as dramatically as in past years.
I think we are heading toward a more balanced market, which is good news for most. It is too early to draw conclusions, but I do not believe we are heading toward a housing bubble or recession. Trends are shifting and we are watching it closely, but most indications are that the market is on track for what we have experienced in the past few years; a robust and healthy housing market.
Andy Fazendin – Owner/Broker