Housing Market Still Hot but Buyers Have More Options

Real Estate News: Real Estate Investing Podcast

Transcript

00:00:00 Intro Music

[Speaker] Kathy Fettke

The housing market appears to be settling down a bit as we head into the Fall. Home price growth is stabilizing and buyers are facing a bit less competition. According to Redfin, the percentage of deals tangled up in bidding wars last month dropped to the lowest level since January. (1)

Hi I’m Kathy Fettke and this is the Real Estate News for Investors.

Redfin is reporting a steady decrease in buyers submitting competitive bids. Competition peaked in April when 74.1% of the offers written by Redfin agents faced competition. In June, competition dropped to about 66.5%. And last month, in July, only 60.1% of the offers went head-to-head with other buyers. Redfin calls it a bidding war when a buyer faces at least one competing offer.

Homebuying Conditions Have Improved

Redfin says that homebuying conditions have improved over the summer. It says that prices are stabilizing due to an increase in supply. That’s giving buyers more options to choose from, and less competition. It’s also the end of summer when buyers are typically busy with other things, like getting their kids back to school.

Redfin agent, Scott Mercer, from the Sacramento area says: “Competition has started to slow in the last three weeks. We’re now seeing five to eight offers on homes instead of 25, and they’re coming in $5,000 to $10,000 above the listing price instead of $50,000 to $60,000.” He says they’ve even started including appraisal contingencies, which many were previously waiving as a way to make their offer more attractive to sellers.

Demand Still Outpacing Supply

Demand is still outpacing supply, however, so prices continue to rise but instead of double-digit price growth, we’re now seeing single-digit price growth. Realtor.com’s Weekly Housing Trends report for the second week in August shows that the median listing price grew 8.6% compared to last year. That’s half of what it was in April when the annualized home price growth was 17.2%. (2)

Realtor.com expects to see even lower prices as we move into the fall and winter season, but that only means we won’t see new record highs. Inventory is still on the low side which helps push prices higher, but there’s also an increase in listings. Redfin’s Weekly Trends report shows a 3% increase in new listings.

It’s the 17th time in 20 weeks that listings have gone higher. But the quantity of new listings is still lower than 2019, when the market had a more normal number of homes for sale. So the inventory gap is shrinking but it hasn’t gone away. Realtor.com says year-over-year total listings are down 28%.

Homes are also selling fast. Time on the market is just 17 days compared to 38 days in 2019.

Supply of Homes

The months supply of homes is another good housing market indicator. A report from RE/MAX shows just 1.3 months of supply in July, although inventory rose 4%. That’s also 29% lower than it was in July of last year. (3)

RE/MAX President Nick Bailey says: “Some buyers have stepped away in light of high prices, seller expectations, multiple offers and intense competition, but new listings are still selling quickly. Clearly, the demand is still there. The market should continue to run hot, especially if interest rates remain low, prices stabilize a bit, and more sellers jump in to take advantage.” (3)

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Thanks for listening. I'm Kathy Fettke.

Links:

1 - https://www.redfin.com/news/real-estate-bidding-wars-july-2021/

2 - https://www.realtor.com/research/tag/home-prices/

3 - https://dsnews.com/daily-dose/08-17-2021/housing-inventory-grows-month-over-month-in-july