Wolf takes a linear view of the housing market on his blog, which doesn’t always factor in the emotional components involved in the decision-making, which is fine. His content tends to be more on the alarmist, doomer side – like in this case where is his comparing the changes in year-over-year percentages to really magnify the concern:
I’m all for being on the lookout for seller panic.
What are the two simple signs of panic?
- New listings flooding the market.
- Many homes selling for radical discounts below recent comps.
Those are the two most obvious signs of seller panic. Comparing the YoY percentage of active listings is interesting, but doesn’t tell us enough.
Here is the graph of the NSDCC new listings for September-October, and how they compare to previous years. There are no real signs of panic here, and, if anything, it shows us that comparing to last year is measuring against one of the lowest amounts ever:
What aren’t signs of panic:
- A growing inventory of unsold homes.
- More price reductions.
We are going to get comfortable with a larger inventory of homes for sale. The more unsold homes lying around means that sellers aren’t very motivated, because they didn’t price aggressively in the beginning and they still think their price must be right.
On #2, more price reductions don’t tell you much. Wolf touts a recent surge, but most price reductions aren’t lopping off big chunks – they are usually 1% or 2% off, which are too small to change anything and they will have to keep doing more. By the time they knock off 5% to 10% from their original and overly-optimistic list price, they will feel like they are giving it away and change course (rent it, reverse-mortgage it, or wait until next year).
Could there be sellers motivated enough to dump on price? Very unlikely.
Let’s consider the sellers who might be motivated – the Big Three:
Death – for those who inherit, this is their lottery. Not only will they hold out for crazy money, but one of them could probably use a residence so there are other alternatives to giving it away.
Divorce – what was once 100% equity is now 50%, and each spouse will want/need every dollar to split between them. If they can’t sell for enough to make everyone happy, well then everyone has to live somewhere. One of the spouses could occupy until the market ‘improves’.
Job Transfer – renting instead of selling is always an option, especially for those who think they might want to return some day.
Sellers who aren’t in the Big Three categories are definitely not going to give it away, so the worst that will happen is a slight downward trend in pricing.
Reasons given why the market will tank, and how sellers feel about them:
- Affordability – sellers don’t care.
- Higher rates – ‘not my problem’.
- More inventory – ‘I only have one to sell’.
Sellers get a vote!