What could slow down rising prices?
It depends on the inventory. We’ve been seeing a late-season surge in sales over the last couple of months, but has that caused more sellers to jump in? Nope, new listings have remained throttled.
Here is how this year’s combined October/November period compares with recent history. There are fewer new listings coming on the market, yet sales are soaring – 33% more than last year, and we still have a couple of days left:
The most obvious thing that could slow down pricing is a tsunami of new listings hitting the market early next year, which would cause buyers to pause. And it would take a huge flood, because the current frenzied conditions would be able to handle a surge, especially if they were well-priced.
But won’t sellers get greedy and try to milk it for an extra 10% or so? Most definitely.
If sellers are motivated enough, we’ll find a gradual sorting out of pricing as buyers grab the higher-quality buys first. It will be an orderly marketplace, with the OPTs coming to their senses as the spring selling season transpires.
The market will handle over-priced listings as needed – and we’ll see if buyers blink first. If so, prices will be on the run. If buyers are cautious, it just means sales will be delayed until sellers lower their price.
For the pricing momentum to slow, it will take a flood of new listings, and that isn’t happening yet. We have averaged 903 new 4Q listings for the last three years, and we’re only at 62% of that so far this year heading into December.
Banks are done foreclosing, short-sellers are tempted to wait, and those with equity look to be fairly comfortable. Pricexs haven’t gone up enough for most sellers to change their mind yet, so it appears that we’re in for more of the same in 2013 – tight inventory, and frustrated buyers.