Rich didn’t sound any alarms in his most-recent post, and he is among the most neutral observers – he’s not in a real-estate-related profession. He said:
So, there’s nothing extraordinary or panic-worthy here… the market is a good amount weaker than it was in recent times, but that’s coming from a very hot market, so things are still very much in the realm of normalcy at this time.
You can see why. The inventory remains relatively low, and it wouldn’t take much for it to plunge again. Rich made the point that with both rates and prices higher, we may have reached the tipping point, but if one or both were to relax a bit, the current inventory would thin out.
You can see in the graph above that the inventory peaked in the middle of the year previously, when in 2018 it’s kept growing. We may just have more sellers waiting longer into the year before cancelling their listing for the holidays.
This graph doesn’t trigger any alarms either:
More factors that will create more Stagnant City, instead of a downturn:
- The county population has grown by roughly 300,000 people already this decade, and is expected to grow by another 600,000 people by 2050. Home building is so anemic that we will be short 150,000 homes by then!
- The move-up market is comatose. Prices have gone up so fast that it is miracle work trying to make sense of moving up – you really have to have a good reason, and loads of money. My rule-of-thumb is still in effect – you need to spend 50% more than the price of your old home to have it work (if you sell your a million, you can’t stay in the same area and spend $1.1 million – there isn’t enough additional benefit – maybe an extra bedroom?). There is too big of a delta between the purchase prices for someone who bought at $800,000 and can sell now for $1,000,000 who then needs to spend $1,500,000 to get enough benefit.
- Virtually nobody knows different market conditions than what we’ve had this decade. Anybody who got into this in the last nine years has only known a seller’s market, and the rest of us are too old to remember!
- Buyers don’t lowball, instead, they just walk away – which doesn’t give overly-optimistic sellers any feedback on price. They just keep waiting for that magical nuclear family with 2.2 kids to show up tomorrow.
- The trend for agents to be on salary or lower commissions means they aren’t going to work too hard – and won’t employ the expertise to create solutions.
- There are just enough sales to keep everybody optimistic!
The total number of NSDCC listings are steady, in spite of more ‘re-freshing’ than ever:
As long as fewer people want to sell, expect more of the same.