PENDING SALES ARE SURGING HIGHER AS HOUSING BOUNCES BACK FROM VERY LOW LEVELS.
A month ago, open houses were empty, showings were light, and there was little real estate activity. Now, buyers have returned, demand has surged higher, and market times have plunged.
Demand, a snapshot of the last 30 days of pending sales activity, jumped 38% in just the past couple of weeks. It was the largest two-week rise since February 2021 and the strongest demand reading since October. The current level surpassed the low readings during the initial lockdowns of COVID in April 2020.
- Keep in mind that demand is still at shallow levels for this time of year.
- Affordability constraints, the high mortgage rate environment still precludes many would-be purchasers from isolating a home. Demand would be much stronger if rates dropped to the mid-5s.
Demand is also muted due to the lack of available homes to purchase. Feeding into this inventory crisis is that fewer homeowners are listing their homes. In January alone, there were 45% fewer sellers than the 3-year average, leading to fewer pending sales and less demand.
In the past two weeks alone, the Expected Market Time, the time between coming on the market and changing to pending status, tumbled from 81 to 56 days, shedding 25 days, its lowest level since June last year.
When a home is appropriately priced according to its Fair Market Value, considering location, condition, upgrades, amenities, and age, it will acquire plenty of immediate attention and sell fast. This does not mean that buyers are willing to stretch and pay over the asking price. Housing is not back to the heydays of the pandemic years of 2020 through the first half of last year. It does mean that the increased competition will slow the pressure on falling home values.
A WARNING TO SELLERS: Home values are NOT climbing right now. Overpricing a home in this market will result in a lack of success and waste valuable market time. Until rates fall considerably from here to at least the mid-5s, home values will not rise.
A WARNING TO BUYERS: Lowball offers to purchase and looking for a “deal” will be an exercise in futility. Due to the high mortgage rate environment, the market has lined up in favor of buyers up to this point. That advantage is diminishing with the significant drop in market times. Sellers are not desperate and are not panicking to sell, unable to afford their monthly mortgage payments. Instead, carefully arriving at an offer to purchase based on a home’s Fair Market Value is a winning formula for isolating a home.
