Wait… days on market is up, total sold properties has dropped like a rock, and months supply is up? All of those signs should point to the market slowing down (finally), right? If properties are on the market longer, not as many are selling, and we’ve got a 53% increase in months supply that all says, “here comes the buyers market,” right?
Not so fast, dear reader. This is a classic case of seasonality. As we move from Thanksgiving to Valentine’s Day, the real estate market, in general, slows way down. People are not interested in putting their homes on the market over the holidays, places like Bismarck, North Dakota have an average temperature of 22 degrees as the high, and in general people are busy – which all translates to less of everything in real estate. So let’s unpack each one.
Days on market is up: Yup. Mostly because there are still some people who, because of timing in their life, put their homes on the market during this time. However, everything just moves slower including buyers, offer processes, closing timeframes, literally every aspect of the business takes a little longer. So that puts upward pressure on days on market and makes it seem like the market is slowing but really it’s just the pace of the people doing real estate slowing.
Solds way down: That means we’ve finally hit the price ceiling for homes, right? No, it doesn’t. Remember how I said a lot of people hit the pause button? That’s on both sides of the equation. There are fewer sellers who want to put their home on the market and fewer buyers out and about. Both sides of the equation put downward pressure on the overall transactional volume.
Months supply is up… a lot: Silver linings, right? More inventory is what we’ve been talking about for months and months. It’s finally here, right? Sadly, not yet. This is just because we’re coming off the floor of the slowest time of the market. If you have fewer transactions happening (the denominator in this fraction equation) being divided by a bigger number, more homes on the market (the numerator… I know, you were told there would be no math). The reason this one seems to be changing so much is we did so few transactions and new inventory is starting to come back on the market. More than some substantive change in inventory levels.
All of this is an indicator that the market is normalizing and coming out of seasonality rather than some market shift. However, it is important to pay extra attention over the next few months that will give us the real indication about what the market is doing.
Also, I probably should have opened with this but remember, ALL real estate is hyper local. If you really want to know what is going on in your market, looking at the national numbers is a mistake. You should be talking to your local real estate professional to really get your finger on the pulse of what is happening in your area.