As you start searching for homes, you’ll likely come across different terms that describe the status of different listings. One term, “Days on Market” (DOM), can play a role in your strategy for making an offer. Knowing what this term means will help to inform your discussions with your agent as you go about finding the right home for you.
What is Days on Market (DOM)?
Days on Market (DOM) is a metric used by real estate professionals (and home buyers) to measure the time that a certain property has been listed for sale. In other words, it’s the running total number of days since a home hit the market. Different factors contribute to how long a home is on the market, including the home’s features, its location, and the local market conditions. Brush up on seller’s and buyer’s markets to understand how these market conditions affect days on market.
Why does DOM matter?
Buyer Hesitancy: Just like contingent and pending listings, a home with a longer Days on Market may make buyers think there is something wrong with the property. The right buyer may very well come along, not swayed in their decision by the DOM number, but for some, it raises questions about why the home hasn’t sold yet.
Market Value: Over time, Days on Market can impact the home’s listing price and how much it ultimately sells for. If a property stays on the market for an extended period, the seller may need to reduce the price to prevent it from going stale. On the other hand, the longer the DOM, the more leverage a buyer potentially has to negotiate a more favorable offer.
Local Market Conditions: Looking at trends in DOM can give both buyers and sellers a better understanding of local market conditions. If homes are flying off the market left and right with low DOM, it’s a competitive market that favors sellers. Buyers will be more likely to remove contingencies to make their offer stand out amongst the competition. If DOM is high across the board, the market is not as competitive, and buyers have more leverage.
Negotiations: The leverage created by Days on Market flows through to negotiations. If you have leverage on your side, you can expect that the seller will be more willing to negotiate on price or repairs than they would if the tables were turned. Make sure you and your agent are on the same page regarding how the DOM figures you’re seeing locally will affect your strategy for making an offer on a house.
Connect with me for more information about Days on Market (DOM) and how long homes are staying on the market near you. This one statistic could alter your strategy for approaching the market and, when the time comes, how you put together your offer on a home.
This video shows Windermere Chief Economist Matthew Gardner’s Top 10 Predictions for 2024. Each month, he analyzes the most up-to-date U.S. housing data to keep you well-informed about what’s going on in the real estate market. See more market insights on our blog here.
Matthew Gardner’s Top 10 Predictions for 2024
1. Still no housing bubble
This was number one on my list last year and, so far, my forecast was spot on. The reason why I’m calling it out again is because the market performed better in 2023 than I expected. Continued price growth, combined with significantly higher mortgage rates, might suggest to some that the market will implode in 2024, but I find this implausible.
2. Mortgage rates will drop, but not quickly
The U.S. economy has been remarkably resilient, which has led the Federal Reserve to indicate that they will keep mortgage rates higher for longer to tame inflation. But data shows inflation and the broader economy are starting to slow, which should allow mortgage rates to ease in 2024. That said, I think rates will only fall to around 6% by the end of the year.
3. Listing activity will rise modestly
Although I expect a modest increase in listing activity in 2024, many homeowners will be hesitant to sell and lose their current mortgage rate. The latest data shows 80% of mortgaged homeowners in the U.S. have rates at or below 5%. Although they may not be inclined to sell right now, when rates fall to within 1.5% of their current rate, some will be motivated to move.
4.Home prices will rise, but not much
While many forecasters said home prices would fall in 2023, that was not the case, as the lack of inventory propped up home values. Given that it’s unlikely that there will be a significant increase in the number of homes for sale, I don’t expect prices to drop in 2024. However, growth will be a very modest 1%, which is the lowest pace seen for many years, but growth all the same.
5. Home values in markets that crashed will recover
During the pandemic there were a number of more affordable markets across the country that experienced significant price increases, followed by price declines post-pandemic. I expected home prices in those areas to take longer to recover than the rest of the nation, but I’m surprised by how quickly they have started to grow, with most markets having either matched their historic highs or getting close to it – even in the face of very high borrowing costs. In 2024, I expect prices to match or exceed their 2022 highs in the vast majority of metro areas across the country.
6. New construction will gain market share
Although new construction remains tepid, builders are benefiting from the lack of supply in the resale market and are taking a greater share of listings. While this might sound like a positive for builders, it’s coming at a cost through lower list prices and increased incentives such as mortgage rate buy downs. Although material costs have softened, it will remain very hard for builders to deliver enough housing to meet the demand.
7. Housing affordability will get worse
With home prices continuing to rise and the pace of borrowing costs far exceeding income growth, affordability will likely erode further in 2024. For affordability to improve, it would require either a significant drop in home values, a significant drop in mortgage rates, a significant increase in household incomes, or some combination of the three. But I’m afraid this is very unlikely. First-time home buyers will be the hardest hit by this continued lack of affordable housing.
8. Government needs to continue taking housing seriously
The government has started to take housing and affordability more seriously, with several states already having adopted new land use policies aimed at releasing developable land. In 2024, I hope cities and counties will continue to ease their restrictive land use policies. I also hope they’ll continue to streamline the permitting process and reduce the fees that are charged to builders, as these costs are passed directly onto the home buyer, which further impacts affordability.
9. Foreclosure activity won’t impact the market
Many expected that the end of forbearance would bring a veritable tsunami of homes to market, but that didn’t happen. At its peak, almost 1-in-10 homes in America were in the program, but that has fallen to below 1%. That said, foreclosure starts have picked up, but still remain well below pre-pandemic levels. Look for delinquency levels to continue rising in 2024, but they will only be returning to the long-term average and are not a cause for concern.
10. Sales will rise but remain the lowest in 15 years
2023 will likely be remembered as the year when home sales were the lowest since the housing bubble burst in 2008. I expect the number of homes for sale to improve modestly in 2024 which, combined with mortgage rates trending lower, should result in about 4.4 million home sales. Ultimately though, demand exceeding supply will mean that sellers will still have the upper hand.
About Matthew Gardner
As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.
In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.
For equestrian homeowners who are thinking about selling, there’s a long list of to-dos to get to. Not only do you need to spruce up the home itself, but your surrounding property should be in prime condition as well. To maximize your return on investment and drive buyer interest, consider making strategic upgrades that enhance both your home and your land. Improvements like these will add value to your home and cater to the equestrian enthusiasts.
Boost Equestrian Property Value
Equestrian Facilities
What truly matters to equestrian buyers? Their horses. Knowing that their horses have access to high-quality facilities will be the key to attracting serious buyers. Focus your upgrading efforts on the stables and barns. Proper ventilation, spacious stalls, and easy access to the surrounding pastures on the property.
Buyers also want to know that their horses will be safe, so secure fencing is a must. Consider investing in durable fencing materials like vinyl, wood, or pipe fencing depending on the area that needs fixing and/or upgrading. Make sure all paddocks are fenced off appropriately. This is certainly a factor equestrian buyers will consider as they compare your property to other listings.
Depending on what discipline you’ve trained on your property, your riding arena will have different footing. Talk to an equestrian real estate specialist about best practices for upgrading and cleaning up your arena as you prepare to sell, they’ll be aware of any recent buyer trends and patterns you might want to lean into. What’s most important is that your riding arena look professional and clean, ready for buyers who are looking to train or compete.
Equestrian Property Value: Landscaping
Maintaining an equestrian property is more time consuming than caring for a typical single-family home, but as you prepare to sell, your land maintenance will kick into high gear. Well-kept landscaping will not only increase your home value, but it will also provide a safe environment for the eventual buyer’s horses. This is especially important if your property has scenic trails; landscaping features like these are a selling point and should be treated with care accordingly.
Home Improvements
The typical high ROI remodeling projects like upgrading your bathrooms, bedrooms, and kitchen apply for equestrian homeowners as well, but there are certain equestrian-specific upgrades that will apply uniquely to home buyers with horses. A remodeled mudroom or tack room will help you differentiate your listing, as will sustainable upgrades like solar panels or renewable energy capabilities throughout the property. Sustainability continues to grow in importance for homeowners of all types, equestrian included. Now more than ever buyers are mindful of ways they can sustainably manage their property. If you invest in eco-friendly improvements, your property could appeal to a wider pool of buyers.
By making upgrades like these, you’ll present your equestrian property in the best light, and you’ll significantly increase your chances of engaging buyers who are willing to pay a premium.
Maintaining a tidy home not only helps it to look its best, but it also makes for a more peaceful and organized living environment. Regardless of the size of your home, these tips will help you achieve and maintain a consistently tidy and inviting living space that you, your household, and your guests will enjoy. With a few simple steps, you can go from cluttered to tidy in no time.
5 Tips for a Tidy Home
1. Start by Decluttering
The first step on your journey to tidiness is getting rid of clutter lying around your home. Go through each room and evaluate your belongings, asking yourself what is truly necessary among them. If something isn’t a keeper, consider donating, selling, or discarding it. Decluttering creates more spaces and will make cleaning up easier in the long run. Not sure where to start? Focus your initial decluttering efforts on the closets throughout your home and see how much space you can open up for belongings that are currently stored elsewhere.
2. Find Your Cleaning Routine
Making your home tidy is one thing; keeping your home tidy is another. The difference between the two is finding and establishing a cleaning routine that works for you, whether that means doing a few upkeep chores daily or hit “reset” by dedicating a chunk of time to it once a week. Whatever you choose, consistency is key. Include quick tasks like making the bed, wiping down kitchen counters, and doing a load of laundry. Having a routine in place will help you keep up the momentum that’s required to maintain a tidy home.
3. Prioritize Storage
Everything in your home has to go somewhere. To stay organized, store your items neatly in dedicated bins to maximize your storage efficiency. Keeping items accessible but stored out of sight will give you more room in the open areas of your home and help each room feel tidier. Use containers, shelves, and organizers to keep items like toys, books, and accessories neatly arranged. In the closet, you can maximize space by using hangers, bins, and dividers to keep your wardrobe and accessories in order.
4. Multi-Purpose Cleaning Products
Using multi-purpose cleaning products will simplify your cleaning process and get your home sparkling clean. Having a single cleaner to tackle tough stains and messes around the house can save you money too. Natural cleaning solutions that you can find in the aisles of your grocery store will streamline your cleaning efforts without spraying chemicals throughout the house. Things like lemons, salt, and vinegar will eliminate household odors and can even help to keep bugs and pests at bay. When shopping for cleaning products, look for organic solutions that won’t harm members of your household and your pets.
5. Areas of Focus
Turn your attention to high-traffic areas throughout the house such as the living room and the kitchen. Improvements in your home’s tidiness in these areas will go a long way in contributing to its overall cleanliness. Also, focus on cleaning your appliances. These machines are the workhorses behind a well-functioning home, so giving them some attention will help keep things tidy at home in the long run.
The following analysis of select counties of the Western Washington real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere Real Estate agent.
Regional Economic Overview
The pace of job growth continues to slow in Western Washington, as the region added only 21,907 new positions over the past 12 months. This represented a growth rate of 1.4%, which was the lowest pace of new jobs added since the pandemic ended.
The regional unemployment rate in August was 5.8%, which was marginally below the 6% rate we saw in the same quarter in 2022. A few smaller counties lost jobs over the past 12 months while King County’s employment levels rose a meager .4%, mainly due to job losses in the technology sector. I’ve said before that I’m not convinced that the U.S. is going to enter a recession; I still stand by that theory. Slowing job growth does not necessarily need to be a precursor to a recession, but I expect that we will see lackluster growth until next spring at the earliest.
Western Washington Home Sales
❱ In the third quarter of 2023, 14,970 homes sold. This was down 22% from the third quarter of 2022 and 1% lower than in the second quarter of this year.
❱ Sales fell even as the average number of homes for sale increased 29.5% from the second quarter. This is clearly a sign that significantly higher mortgage rates are having an impact on the market.
❱ Sales fell in all counties except San Juan compared to the third quarter of 2022. They were up in 9 of the 14 counties covered in this report compared to the second quarter of 2023. San Juan, Mason, Grays Harbor, and Whatcom counties saw significant increases.
❱ Pending sales fell 6% compared to the second quarter of this year, suggesting that closings in the upcoming quarter may be lackluster unless mortgage rates fall, which I think is highly unlikely.
Western Washington Home Prices
❱ Prices rose 2.8% compared to the third quarter of 2022 and were .6% higher than in the second quarter of this year. The average home sale price was $776,205.
❱ Compared to the second quarter of this year, sale prices were higher in all counties except Grays Harbor (-.5%), Kitsap (-1.5%), Clallam (-1.6%), Whatcom (-2.6%), and Skagit (-3%).
❱ Compared to the prior year, the pace of price growth slowed in the third quarter. This wasn’t too surprising given that the market was coming off record high
prices in the summer of 2022. But what was surprising was that prices rose over the previous quarter despite the fact that mortgage rates were above 7% for almost the entire quarter.
❱ I don’t expect prices to move far from current levels in the coming months, and they likely won’t rise again until mortgage rates start to fall. When prices do rise, I anticipate that the pace of growth will be far more modest than we have become accustomed to.
Mortgage Rates
Mortgage rates continued trending higher in the third quarter of 2023 and are now at levels we have not seen since the fall of 2000. Mortgage rates are tied to the interest rate (yield) on 10-year treasuries, and they move in the opposite direction of the economy. Unfortunately for mortgage rates, the economy remains relatively buoyant, and though inflation is down significantly from its high, it is still elevated. These major factors and many minor ones are pushing Treasury yields higher, which is pushing mortgage rates up. Given the current position of the Federal Reserve, which intends to keep rates “higher for longer,” it is unlikely that home buyers will get much reprieve when it comes to borrowing costs any time soon.
With such a persistently positive economy, I have had to revise my forecast yet again. I now believe rates will hold at current levels before starting to trend down in the spring of next year.
Western Washington Days on Market
❱ It took an average of 32 days for homes to sell in the third quarter of 2023. This was 8 more days than in the same quarter of 2022, but 3 fewer days compared to the second quarter of this year.
❱ Snohomish and King counties were the tightest markets in Western Washington, with homes taking an average of only 19 days to find a buyer. Homes for sale in San Juan County took the longest time to find a buyer (57 days).
❱ All counties except Snohomish saw average days on market rise from the same period in 2022. Market time fell in 9 of the 14 counties compared to the prior quarter.
❱ The greatest fall in market time compared to the second quarter was in San Juan County, where market time fell 23 days.
Conclusions
This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.
Although it was good that listing activity rose in the third quarter, it still remains well below levels that can be considered normal. This is unlikely to change anytime soon given that over 86% of Washington homeowners with mortgages have an interest rate below 5% and more than a quarter have rates at or below 3%. There is little incentive for them to sell if they don’t have to.
More germane to me is the disconnect between what homeowners believe their homes are worth and what buyers can afford with mortgage rates in the mid-7% range. Most sellers appear to be getting their asking prices, or very close to it, which reflects their confidence in the market. However, home buyers are being squeezed by multi-decade high borrowing costs.
It is all quite a quandary. However, taking all the factors into consideration, sellers still have the upper hand but not enough to move the needle from the position I put it in last quarter
Given all the factors discussed above, I have decided to leave the needle in the same position as the last quarter. The market still heavily favors sellers, but if rates rise much further, headwinds will likely increase.
About Matthew Gardner
As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.
In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.
Windermere Chief Economist Matthew Gardner gives an updated analysis of the U.S. housing market in 2023, using data released by The National Association of REALTORS® on listing activity, home sales, price growth, and more.
This video is the latest in our Monday with Matthew series with Windermere Chief Economist Matthew Gardner. Each month, he analyzes the most up-to-date U.S. housing data to keep you well-informed about what’s going on in the real estate market.
U.S. Housing Market 2023
Hello there, I’m Windermere Real Estate’s Chief Economist Matthew Gardner and welcome to this month’s episode of Monday with Matthew. The National Association of REALTORS® released their data on the U.S. housing market in August, and it contained a few things which I found interesting and wanted to share with you.
As you can clearly see here, the number of homes for sale remains at close to historic lows. When adjusted for seasonality, there were just 1.03 million single-family and condominium homes for sale in the month of August, and that’s down 8.3% from a year ago and the second lowest level in 2023. When adjusted for seasonal variations, there were just over 911,000 single-family homes for sale in the month, that’s 15% lower than a year ago and 36% below August of 2019. And the condominium market is not faring any better with just over 123,000 units available for purchase, listing activity was down year-over-year by just over 9%.
Homes for Sale August 2023
And to give you a little different perspective, this chart shows you the total number of units for sale in the month of August going back more than 20 years and I think it gives a pretty good indication as to how tight the U.S. housing market really is.
Now, we’ve talked before about the reasons why supply is so limited, and the blame is almost totally attributable to mortgage rates with sellers remarkably reluctant to move because that would mean losing the historically low mortgage rate that they currently benefit from. And as the old saying goes, “you can’t buy what’s not for sale,” and this is certainly true in the housing market today.
U.S. Housing Market 2023: Sales Activity
With such limited choice in the marketplace, it’s unsurprising to see home sales having plummeted following the pandemic induced surge we saw in 2021. At an annual sales rate of 4.04 million units, that is only 40,000 more than the low seen this January and we are now holding at levels we haven’t seen since 2010. Interestingly, single-family sales did see a little jump at the start of this year, but they have since pulled back—likely a function of rising financing costs, which were getting close to 7% in June.
But the condominium market, while certainly down significantly, appears to be somewhat more resilient. I find this interesting as we have not seen any palpable increase in listing activity for multifamily units.
Home Sale Prices Off All-Time High
When prices started to fall in the summer of 2022, many expected to see them continue to plunge in a manner similar to that seen following 2007 collapse, but that has certainly not been the case. Sale prices have rebounded and remain remarkably resilient—especially given significantly higher financing costs.
Although we did see a small drop in home prices between June and July of this year, U.S. home prices are only 1.6% below their 2022 peak; they’re up 3.9% year over year; and up by 11.1% from the start of 2023.
Single-family home prices paint a similar picture with prices down by 1.8% from peak; but up 3.7% year over year, and up 11.2% from the start of the year. Interestingly, sale prices in the Northeast were actually 3.5% higher in August than their 2022 peak. And condominium prices are just 0.1% below the high seen in June of last year. Prices are now up 6.2% year over year and are 11.6% higher than we saw at the end of 2022.
Now, of course the data shown here is unlikely to reflect the recent surge in mortgage rates so it will be interesting to see what impact that has not just on sales but sale prices when the September and October data is published.
My intuition suggests that—even with mortgage rates where they are today—as long as they don’t move significantly higher, prices at the national level are unlikely to collapse. But I do see sales volumes pulling back further as listing activity remains very constrained.
Price Growth vs Payment Growth
This chart shows a different way to look at the impact that mortgage rates are having on the market. The dark blue line shows year-over-year home price growth, and the light blue line shows the 12-month change in average mortgage payments.
Although we did see that annual growth in mortgage payments fall to just 10% in June of this year—the first time we have seen that since 2021—it has subsequently jumped back up. This means that a buyer of a median priced house in the U.S. is faced with payments that are 26 and a half percent higher than they were 12 months ago. At the same time, home price growth has stalled.
As I’ve mentioned in several past videos, I find it unlikely that inventory levels will increase significantly in 2023, and I also believe that supply will be constrained next year as well as rates remain at elevated levels.
As we know, it is this lack of inventory that has helped to support home prices; however, there is a breaking point. 10-year bond yields are holding at multi-year highs and do not appear to be thinking of pulling back at any time soon—especially given new bond issuances that the country is going bring to market in order to address our burgeoning debt levels.
And it’s because of this that I now expect to see rates remaining higher for longer, and the question then becomes how much tolerance will buyers have if mortgage rates hold where they are today or if they head closer to 8%.
Although I am not expecting this to happen, it is possible. And if it does, then sales will fall further and the underpinning of price stability will certainly be eroded. And there you have it. As always, I’d love to hear your thoughts on this subject so feel free to leave your comments below. Until next month, stay safe out there and I’ll see you soon. Bye now.
To see the latest housing data for your area, visit our quarterly Market Updates page.
About Matthew Gardner
As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.
In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.
The desire to maximize property value among homeowners is stronger now than ever. As the movement of short-term rentals, turnkey properties, and real estate investment continue to grow in popularity, it’s worth it to take a moment and understand the regulations that dictate a property’s potential. Understanding a bit more about the process for obtaining the necessary permits to build structures on your property will help you avoid getting bogged down in legalities when trying to complete these projects.
Do I need a permit to build an ADU?
Accessory Dwelling Units (ADUs) and other additional property structures have emerged as viable options for homeowners looking to maximize their property’s potential. These structures offer additional living space while creating opportunities to generate extra income or accommodate multigenerational family members. But before you break ground on your building project, here are some of the things you should keep in mind.
Permits and Regulations: No matter where you live, it is necessary to obtain the appropriate permit before you begin the construction process. Permits ensure that your project complies with local building codes and regulations. Though some guidelines are universal, keep in mind that every local area has its own specific building requirements for residential properties.
Code Compliance: Building codes aren’t just red tape for the sake of red tape; they exist to make sure that all buildings are safe. Whether you’re building the structures on your property DIY or hiring a professional to do the job, you are the one kickstarting the project, not your local municipality. But by having these codes in place, they can ensure that you’re adhering to the required standards of safety. Before you even start on your project, familiarize yourself with your local codes and regulations. Contact your local zoning department or building authority to learn more.
Applying for a Permit: The permit application process varies by location. Typically, you’re required to submit detailed plans for your project with documents that outline its scope, size, etc. Whether you submit architectural drawings, engineering plans, or some other form of detailed blueprint, be prepared for a thorough review on behalf of your local authority to make sure your project complies with the rules.
Whatever project you have in mind—ADU, garden shed, pool house—it’s important to become well-versed in the permits and regulations that will allow you to get it built hassle-free. Consult with local authorities to get the full picture of what’s required from you. Once you’ve checked all the boxes, you’ll be well on your way to maximizing the value of your property.
Windermere Chief Economist Matthew Gardner demonstrates how the U.S. housing market is adapting to low inventory levels. He touches on the new construction industry, supply changes in large metro areas, median home sale prices, and more.
This video is the latest in our Monday with Matthew series with Windermere Chief Economist Matthew Gardner. Each month, he analyzes the most up-to-date U.S. housing data to keep you well-informed about what’s going on in the real estate market.
Low Inventory Housing Market
Hello there, I’m Windermere Real Estate’s Chief Economist Matthew Gardner and welcome to this month’s episode of Monday with Matthew. As we are all aware, the housing market has softened considerably with the number of existing homes available to buy close to record lows. Today we are going to talk about supply, and how the market is starting to adapt to low inventory levels.
Housing Market Inventory
This chart shows the average number of homes on the market by year. Although year to date we have seen a little bit of an uptick, it’s clear the country remains supply-starved. And with just over three months of inventory—as opposed to the normal four to six—the market is clearly out of balance. But even though inventory levels have risen nationally, as I’ve said many times before, not all markets are equal.
Housing Inventory Changes in Metro Areas
This chart shows how supply levels have changed. The data here is representative of the 100 largest metropolitan areas in the country. The horizontal axis shows the change in inventory versus the second quarter of 2022, while the vertical axis shows the difference and the number of homes for sale versus the second quarter of 2019. I think you’ll agree that the difference is stark. Although two-thirds of the metropolitan areas have seen the number of homes for sale improved versus the same period a year ago, just one (Austin, TX) had more homes for sale higher in the second quarter of this year than it had in the second quarter of 2019.
And even more stark was the fact that inventory levels in 53 of the 100 largest metropolitan areas were down by more than 50% compared to the same period three years ago.
Interestingly, on a percentage basis, smaller metro areas saw the greatest decline compared to three years ago. For example, in Hartford, CT, the average number of homes on the market in the second quarter was just over 900, down by 80% from the second quarter of 2019 where there was an average of over 4,400 units for sale. Supply levels were down by 78% in Stamford, CT; 75% in New Haven, CT; and 74% in Allentown, PA.
It is true that supply levels are generally higher when compared to a year ago, with the greatest increase being seen in select markets in Florida, Tennessee, Texas, and Oklahoma; however, other than in Austin, supply levels remain well below their long-term averages. So, how is the market adapting? The answer is rather interesting. Even with all the talk of escalating material, land, and labor costs, it’s the new home industry that has been taking advantage of the lack of housing supply.
New Construction Market Trends
This chart shows the share of new homes on the market compared to their resale counterparts—here we are just looking at single-family homes. Historically, new construction makes up roughly 10% of active listings at any one time, but as you can see here, that share has been rising not just since the end of the pandemic but for the past several years. Although off the high seen a few months ago, 30% of the single-family homes for sale this July were brand new. I find this particularly interesting because, historically speaking, a premium was paid in order to buy a new home rather than an existing one.
Median Sale Prices: New and Existing Homes
As you can see here, the spread in median sale prices, which was pretty stable from 1990 until the bursting of the housing bubble, grew significantly starting in 2011 and in 2022. The premium averaged 16%. But when we look a bit closer at the numbers, they gives us a somewhat different picture.
You can see here the spread has dropped to just 6%. And in June of this year, the difference was a mere $1,000.
With the share of new homes for sale holding at a four-decade high, the share of sales themselves is at a level we haven’t seen since 2005. But even though we know that there is demand for housing, shouldn’t sales be constrained by mortgage rates? Well, what is happening is that builders are attracting buyers through incentives, and here we’re talking about mortgage rate buydowns which are becoming increasingly prevalent across the country.
In fact, a recent survey from John Burns Consulting suggested that 30% of home builders reported using interest buydowns more in the second quarter of this year than they had previously. And this is attracting buyers to visit new development communities.
An example of these buydowns is the 2/1 program that DR Horton—the largest home builder in the country—is offering at some communities. This program gives buyers a mortgage rate that starts at 3% for the first year, rises to 4% in year two, and then goes to 5% for the balance of the 30-year term. That’s pretty compelling, given where mortgage rates are today.
The bottom line is that as far as I can see, the new home industry will continue to take an outsized share of the market for the balance of 2023 and likely through most of 2024. That said, once the market starts to normalize, I expect them to pull back from these incentive programs, making them more likely to start raising asking prices, and we will return to the traditional spread between the prices of new and resale homes.
Although it’s pleasing to see more homes being built, I still believe that the country will still be running a housing deficit when it comes to meeting demographic demand and this will continue to hurt first-time buyers who continue to be priced out of the market.
As always, I’d love to hear your thoughts on this subject so feel free to leave your comments below. Until next month, stay safe out there and I’ll see you soon. Bye now.
To see the latest real estate market data for your area, visit our Market Update page.
About Matthew Gardner
As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.
In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.
A lot of information comes at you during the house hunting process. As you search for a home, you’ll likely come across the term “pre-listing inspection” here and there. It can be confusing, especially if you’re buying a home for the first time. So, what is this special report and why is it only found in certain listings? Let’s take a deep dive on the pre-listing inspection, how it factors into making an offer on a home and unravel why some sellers choose to conduct it.
What is a pre-listing inspection?
A seller’s pre-listing inspection is a report issued by the seller before listing their home for sale. A professional home inspector thoroughly examines the home, checking everything from the roof, foundation, and plumbing to its heating, cooling, and electrical systems to identify any repairs that need to be made or any larger issues that need addressing. During the more developed stages of a real estate transaction, you’ll have a professional home inspector perform an inspection to make sure you’re buying the home as advertised. With a pre-listing inspection, the seller is pre-empting this process.
Pre-Listing Inspection Benefits
There are three main reasons why sellers conduct a pre-listing inspection: transparency, repairs, and pricing. It also helps to streamline the buying/selling process, especially in highly competitive markets. In these market conditions, it’s also more common for buyers to waive the inspection to sweeten their offer and get a leg up on the competition. Talk to your agent for more information.
By providing buyers with a clear picture of the home’s condition upfront, sellers are putting their cards on the table. This transparency helps to build trust with buyers interested in their home.
It’s also a way for sellers to identify outstanding repairs and make them before their home goes on the market. The seller can proceed through the selling process with a clear mind knowing they’ve already addressed the issues they found early on. Then, when it’s time for the buyer’s inspection, you can compare the results to make sure you have a full understanding of the home’s condition.
The findings of a pre-listing inspection also help to solidify the asking price the seller eventually sets; they either reaffirm its condition or show the areas where it’s lacking or needs attention. After you make an offer, the bank will order an appraisal of the property to make sure you’re paying a fair price.
For you, walking into the buying process with a pre-listing inspection in hand means you have intimate knowledge of the home’s condition right from the beginning, which will inform your strategy for making an offer. If the seller invested heavily in repairs, they may be less likely to budge on price. If there are several outstanding issues, that may be a negotiation opportunity for you and your agent.
Image Source: Getty Images – Image Credit: sturti
Who pays for home inspection?
The seller pays for the pre-listing inspection. You’ll want to conduct your own to see whether there are any discrepancies between the two. Even professional inspectors can miss something, so it’s worth it to double check their work. This inspection is just one of the costs of the home buying process, but it can save you from the significant costs of undetected repairs down the road. Besides, even in the short amount of time between the pre-listing inspection and when you make your offer, it’s entirely possible that something regarding the home’s condition changed. Getting your own inspection is crucial to gaining a crystal-clear understanding of the home before purchase.
So, should you trust a seller’s pre-listing inspection? Yes, but approach with caution. It shouldn’t necessarily be the final authority on the home’s condition, but it is mutually beneficial for both parties and allows you to make a better-informed decision on whether you want to move forward with your offer. Connect with me for guidance on how to navigate the home inspection process.
Congratulations, you’ve found a buyer! But before you celebrate, there’s an important part of the closing process you need to pass: the final walkthrough. The final walkthrough isn’t a full-fledged home inspection, but if the buyer finds issues during the process it could complicate things. Your seller duties are still in play here, so be sure to communicate with your agent regarding best practices during these final stages. Let’s take a look at the final walkthrough and how to make sure you pass it with flying colors.
What happens during the final walkthrough?
As the name suggests, the walkthrough takes place during the closing process. This is not the time for discussing negotiating terms or buyer contingencies, since those details have already been ironed out at this point. The final walkthrough is a chance for the buyer to make sure they’re getting the house they’re paying for. They’ll examine the property with their real estate agent to verify that the terms of the deal are legit. For example, they’ll make sure that you’ve made the negotiated repairs, that you’re handing the property off to them in its agreed-upon condition, and that no new issues have popped up since it was formally inspected. If the buyer finds issues during their walkthrough, it could delay the closing process and/or hurt your net proceeds from the sale. Worst case scenario, complications discovered during the walkthrough could lead to a buyer backing out of the deal.
The final walkthrough will take place near closing day. You’ll have time to empty the house and make sure everything about its condition aligns with what’s spelled out in the purchase agreement. No matter how careful you try to be during the moving process, sometimes a wall or trim can get scuffed or scratched when trying to get the couch the last few feet out the door. Accidents happen. Just be sure to repair any damage before you’re fully moved out.
Keep a record of the work you’ve done to make sure your house is being sold as described in the real estate contract. Hold on to all paperwork that shows evidence of the repairs you and the buyer agreed on to verify they have been completed. You and your listing agent will iron out the details regarding which items you intend to take with you, but in general, appliances and other items that are fixed in place stay with the home. If there is something specific that you want to take with you to your new home, that will be a point of negotiation.
Make sure everything is clean and working properly before the buyer conducts their walkthrough. Check your appliances, HVAC, and other home systems including the thermostat, the home security system, and any smart home tech products. For a full moving checklist and a timeline of all tasks leading up to your moving day, visit our Step-By-Step Guide to the Moving Process. This list is also available as an interactive web page and downloadable PDF here:
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