The macro/ micro analysis of the current market is very diverse. It is a healthy, more balanced market now than it was this spring. It’s also very dynamic and fluid. There is no trend that fits the market as a whole. The conditions can vary greatly neighborhood by neighborhood.
The highlights of the state of the current market are:
There is still a large pool of buyers in the market for a home
Contingent offers are on the rise
Price appreciation has slowed
Days on market has increased but that is not at all alarming
The new lending guidelines are impacting the market
Fallen transactions continue at a higher than normal rate
We are seeing plenty of showings. However, buyers seem to be taking longer to make a decision unless the home really stands out due to price/value, location and or features. And many of the buyers on the market have a home to sell and want to lock up the home to which they’ll be moving before or just as theirs goes on the market.
Prices appreciation has tapered, in most ranges. The sub $350K to $400K is still very, very strong. Inventory has grown steadily since the beginning of the year and in some areas has risen enough to stall appreciation. In others, the shortage of homes still exists to an extreme and in those areas price appreciation is still very strong and days on market still incredibly low.
Houses are taking a bit longer to sell, although there is a new trend emerging; backup offers being put on under contract homes. Buyers have become aware that there is a higher than normal volume of transactions falling through on under contract homes.
While inventory is higher, the selection of premium properties in each price range is still low. It’s not unusual to have multiple offers but most are just below or right at asking. The number of offers that exceed asking price has dropped. Over the last few months’ buyers have become a bit hesitant to do that. Most that I talk with feel the market is healthy and will remain that way for the long term but don’t feel the need to “get the house no matter what”. They believe the right house at the right price will become available in the time frame they need.
The lending environment had improved over the last year or so, however it is now being hit with the transition to new Federal requirements and it is having a serious impact on the market. Some lenders are having challenges transitioning and contributing to confusion over how offers should be written and deadlines set. Many offers are being written with unusual clauses to anticipate potential problems and that in itself is making things challenges. In my opinion, a lot of it is unnecessary. The real estate agents and lenders who have planned well and are cooperatively participating in counseling the buyers at to the timeline for deadlines in the offer are seeing transactions go smoothly.
Due to the volume of contingent offers (offers where the buyer still needs to sell their current home to complete the purchase of the new one) it stands to reason that there is a higher than normal rate of fallen transactions. With all the moving parts in a home sale, inspection, appraisal, buyer’s final underwriting approval, it stands to reason some contingent sales get delayed or don’t happen at all and therefore the primary purchase transaction falls. And although it’s early in the new lending process, there’s already been fallout from that on non-contingent purchases. If a sale does fall through though, typically it’s not taking long to find a new buyer for that home. If the home was desirable to one buyer it will be to others so it’s usually not a big challenge to get the home resold.
If I’ve learned anything from the way things have gone since the recovery began it’s that no matter what the market is like, there’s no auto pilot. The same hard work and solid practices are just as necessary in a great market as they are in a tough one. I’ve seen this market change for good and bad in the last 15 years and I am grateful that my super analytical and detail oriented nature is actually necessary. 🙂