Are New Listings Flooding The Housing Market Too Swiftly?
Normally, October comes and the market begins to settle down greatly. In fact, in normal years, it's about the slowest month for new contracts being written.
But this is 2020. This is not normal. The market is hotter today than it was in April or May. Today, we'll look at the supply side of the housing market and examine exactly what's happening with the inventory of homes for sale.
Here's a quick hint ... sellers are coming back!
Before our report, here's a peek at the newest listings to enter the market, sorted by price from high to low. Of course, you can re-sort them if you like.
New Listings In Tallahassee
Year Over Year Reveals Growth In New Listings
The number of new listings entering the market might be turning towards growth as two of the past three months have seen the year-over-year fresh listings rise.
The graph above shows a comparison of how each month fared (percentage-wise) compared to the same month in the prior year for fresh new listings entering the MLS.
I use the term “fresh” to describe homes listed for sale that were not previously listed. These are homes that are truly new to the market, not merely old inventory that was canceled and relisted by the agent or a new agent.
The year started off well with new sellers entering the market, but then COVID kicked in and caused inventory to move much lower.
The past three months have recorded exactly three more fresh listings than in the same three months of last year. I know that three homes is not a big number, but the fact that it is positive is important. Perhaps we’re finally seeing pent-up supply starting to release.
I’m hoping this is a sign that people who want to move are noticing friends and families safely selling their homes and moving to new ones in order to take advantage of the lowest mortgage interest rates ever recorded.
If you have been waiting to sell your home, now is the time. Buyers are standing by and you’ll get top dollar.
As a reminder, we initiated safety measures that allow us to massively market a home while reducing risks to home sellers. Today's technology allows us to do quite a bit without having to visit a property in person.
The following graphs show that we're still needing more sellers to keep up with enhanced buyer demand.
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The resulting reduced supply of homes, coupled with very strong demand from buyers due to low mortgage interest rates has made today a very strong seller's market.
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Home Sellers Needed
The following graph shows the number of fresh new (existing home) listings is down 7% in 2020 when compared to the same period last year.
Remember, this is a market that started the year with too few homes, so a reduction in what is being listed is only going to push prices higher and create pent-up demand for homes.
While this might seem like "good news" for sellers as their homes are worth more, you also have to remember that most sellers are going to be buying another home in the same market (with the same soaring prices).
The good news from this graph is that a strong month in September has reduced the decline to just 7% from last year. Considering that last year led all others, means that 2020 is now not far off from past years.
While 2020 is still the lowest year on record from fresh new inventory through September, I'm betting we'll see a stronger than normal 4th quarter and give many previous years a run for their money.
Of course, the existing home sales market does not stand alone. We also need to examine what the builders have been doing.
Fresh New Construction Listings In Tallahassee
Similar to the previous graph that showed fresh listings for the existing homes market, the following graph shows freshly listed new construction homes.
I think it's safe to say that builders have gotten the message from the market ... we need more homes.
When we combine new homes with used homes, we get the following graph that shows the total number of fresh new listings that have entered the market through September.
Fresh New Listings In Tallahassee
This graph reveals that fewer homes have entered the market, even with sky-high demand creating optimal market conditions for sellers.
Despite this influx of new homes, the relative supply of homes for sale has hit a new low. So what does that mean?
It means that the supply, relative to the current hot rate of demand, is lower than ever. Even with more new homes and more existing homes, the growth of the buyer pool has reduced the months of supply of homes for sale.
Recently, I stated that for every buyer that closed on a home in September, there was more than one buyer that missed out on the chance to buy a home. The closings would have been more than double the rate closed had there been more available listings.
The fact is, this is the hottest seller's market ever, so if you've been thinking about moving, it's time to act.
Pent-Up Supply Of Homes
I believe there are sellers who have been "sitting on the fence," unsure about selling during a pandemic. So here's what's going to happen.
This pent-up supply will grow until people start feeling safe about selling. Once they do, it could very well flood the market with new inventory. Though I'm not worried that it will be too many homes, I do believe that sellers today are enjoying far favorable conditions than sellers will when the fear subsides.
Take advantage of low mortgage interest rates (if you are buying after you sell), or just take advantage of the strong demand that low rates have created. Enjoy the strongest seller's market ever recorded in Tallahassee by selling your home for every dollar it is worth (and fast!).
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