The market is a hot topic of conversation right now and for good reason. Each day I’m asked, “What’s going on with the market? Is it going to cool off soon?” Let’s address that question.
Real Estate Advice / Chris
In a balanced market where supply and demand are equal, we tend to see the usual signs—homes stay on the market for around 90-100 days on average, there are multiple homes to choose from in a given price point, and prices hold rather steady.
In this market however, we are seeing major shortages of inventory as buyers are scooping up homes very quickly. As of the latest real estate stats published by NABOR for May 2021, days on market before going under contract was a short 43 days! Only a year ago in May 2020 that number was 90 days! There’s where our inventory is being eaten up.
As of today, July 15th, 2021, there are only 1,033 properties on the market. 606 of those are single family homes. We’re seeing pockets of shortages too—for example, I have a few customers right now that need a single family home in Naples with at least 4 bedrooms. Unfortunately, only 285 of those homes meet that criteria.
In May of 2020, NABOR reports that the average closed price for a single family home was $744,242 and that number rose to $1,140,487 in only a year.
I recently heard a broker say, “Asking price is the starting bid” and that quote resonated with me as it couldn’t have been truer. I’m watching my customers bid over asking price, with excellent terms in the contract, and fail to be the winning bidder.
For buyers that are obtaining financing, the property has to appraise for their mortgage to be approved. However, many buyers are either waiving their appraisal contingencies altogether or shockingly, the home actually does appraise!
I know it doesn’t feel that way to buyers right now but I do feel that the market is showing signs of either leveling off or cooling down. It is going to take a while but here are the clues that I see.
I couldn’t believe my eyes but I saw homes that I felt were overpriced have price decreases recently. While it appears that prices are all creeping up and up, some homes were lowering their price to be more in line with the market valuation of their home.
While these price decreases are still rare right now, it’s a good sign that we’re seeing some at all.
I took a customer to see a home a couple of weeks ago and as we’re walking up the driveway my customer looked at me and said, “This one has been on the market 10 days. I wonder what’s wrong with it.” It’s a funny thing to hear, right? Only 10 days and it seemed as though the home was lingering on the market. Of the 606 single family homes on the market at this second, the average days on market is actually 51.
I can’t speak for the entire market on this point but for my customers in North Naples looking in the popular single family home communities, we’re starting to see new listings hit where they hand’t before.
My last few sales where I represented the buyer were situations where we made our offer (each time at asking price or below) and had a signed contract without dealing with multiple offers. This is a huge change from just a few months ago.
I have an index card that I keep on my desk with the names of each buyer I’m currently working with. This list is strictly for customers ready to submit an offer the second something that fits their needs comes on the market—I call this “sniping.”
I’ve learned from many other agents that they have customers doing the same for chosen neighborhoods. There are zero properties matching these customers’ search results so when one pops up they go for it.
“Sniping” is one factor that leads to multiple offer situations. For example, I have two a customer that wants to live in the community of StoneCreek in North Naples. These homes were selling under $1M in the past and the lowest priced listing is $1,499,000 at the moment. If one were to hit the market today, multiple buyers waiting on a home in the neighborhood would surely submit offers and we’d have ourselves another bidding war.
With homes staying on the market, some price decreases happening, and new listings coming online, sniping will hopefully be a thing of the past soon.
I speak to potential sellers every day in hopes of getting new listings. I cannot tell you how many potential sellers say, “I’m waiting to list my property once COVID goes away.” I don’t know when COVID will truly be a thing of the past but it feels like it is going away, right? We’re in groceries stores now without masks, people are going out to eat in droves, and our short-term memory is starting to forget all about this horrible virus. Although it is far from gone, my opinion is that potential sellers are starting to get comfortable with the idea of strangers coming into their homes for showings. I think that each day, more and more people will consider it “safe” to have showings and that should help our inventory rise.
Sadly, I predict that we will see some foreclosures hitting the market soon. We all know the financial toll COVID has taken on many people. Businesses couldn’t survive and folks lost their jobs. Again, we should see an uptick in inventory as these homes hit the market.
We’re cooling off.
I feel that more inventory is coming online which leads to prices stagnating (or perhaps decreasing in some neighborhoods), days on market to slightly rise, and fewer bidding wars to jack up the prices. I think it is going to take time but we’ll see popular neighborhoods actually have more than one home at a time for buyers to choose from!
High prices, bidding wars and low days on market sound awesome for a REALTOR®, right? High prices mean high commissions! How could I not love this market?
The truth is, my wife and I hate it. One of the most rewarding aspects of being a REALTOR® is seeing the families you work for find a home they love at a price they can afford. We love showing property and witnessing the moment when a buyer falls in love with a home and decides to put in an offer on it. Then, it is so amazing to sit at a closing table a month or two later and see the smiles and pure joy as they’re handed the keys to their new home.
I used to see those moments all of the time but that isn’t happening as much since these families simply can’t find a home that matches their criteria or budget. Instead, I’m seeing a lot of frustration from buyers as they wait for a home to hit the market or they lose a multiple offer situation.
Let’s bring on the cool-down and give these buyers some options!
I’m not the only person with an opinion on this so I would love to hear from others. Drop a comment below and let me know your thoughts on this real estate market.