If there is a surge of inventory in early 2025, what will happen?
Here are the choices:
Frenzy – With rates stubbornly high, the best case is a mini-frenzy where buyers engage in bidding wars for only the top-quality listings. Some of the insanity bleeds over to the not-so-great homes and a few get picked up. About 33% to 50% of listings sell, and the more sane, rational buyers are left shaking their heads.
Not Frenzy – There aren’t enough buyers left who are willing to pay whatever it takes, and instead the wait-and-seers get even more picky and only 1 out of 10 listings are selling.
Middle Muddle – This is the most likely scenario. Great agents list the spruced-up homes for attractive prices and there is a good, solid flow of sales happening….while most listings are languishing on the market. Those sellers want to believe that if they just wait longer, they will be rewarded. By summertime, there are unsold listings stacking up everywhere – and being ignored.
I heard about one seller who has already moved, and intends to list their home for sale in early 2025. They paid $1,800,000 for it two years ago, and when you look at the listing photos, you wonder what they were thinking. But now their zestimate is $2,475,000, so they are going to list for $2,500,000 – even though they didn’t do any work.
There will be hundreds of listings that try to pull off a miracle like that one. Pricing will seem insane.
In the first quarter of 2024 there were 763 NSDCC homes listed for sale.
If there is the 20% surge on top of last year’s inventory, it would make for 916 listings in 1Q25.
Let’s predict 1,000 first-quarter listings to account for the many re-lists coming from late-2024.
I’m going to guess only 25% to 33% of those are salable.
We know that usually there are 2/3s of the listings that sell, so it will be a weird mix that nobody sees coming. There will be a steady flow of sales but only a minority of the total homes for sale are getting lucky.
It’s the swipe-left generation, where the junkers, bad-locations, and terribly-presented homes get ignored immediately. Buyers will forget them forever unless there are major price reductions – which won’t happen because “hey, I’ve only been on the market a couple of months and I’m not going to give it away”.
What will happen as we get into March-May? The unsolds will be stacking up to the sky, causing buyers to get even more picky, while sellers are digging in on price.
Mortgage rates are too high, and I think Powell is going to finally get what he wanted – peak pricing.
The main reason? If sellers have to take 5% to 10% less, they can.
Last time, they were maxed out on ez-qual financing and had no equity. But it’s the total opposite now, and we’re going to see how bad the sellers want and need to sell. If they had to take 10% to 20% less, they could, and they would still come out with a load of cash.
Think of my last Over-List report.
In November, HALF of the NSDCC sales closed for at least $100,000 UNDER the list price!
Because the creampuffs selling for top-dollar will be a smaller minority, our lousy pricing metrics will get dragged down by the sellers who dump on price. They could have spruced up their home and/or hired a better agent in the beginning, but nobody told them it was going to be this tough to sell. Instead, they dump.
A larger price gap between the creampuffs and fixers will develop, causing more appreciation for how critical it is to have an excellent presentation AND an attractive price.
> paid $1,800,000 for it two years ago
As much as I dislike most everything about those Zildoes, I must commend them for their price and tax history data. It makes it harder to pull a quick no effort flip and it can tell you if a flipper has any margin.