Temperatures are rising, sunsets are getting late, daffodils are beginning to peek green leaves from the ground, and spring is approaching. And just like bears are waking up from their long winter naps, so are homebuyers and sellers waking up from their hibernation…or at least generally waking up.
Nationwide, the first week of February before the pandemic is typically the lowest time of the year for home inventory as sellers return to the market in time for the spring, but since the pandemic began. , this predictable trend has gone off.
“The pandemic has definitely changed the real estate market,” says Todd Alperin. Better Home and Garden Real Estate Masiello Group said an agent based in southern New Hampshire. “When the pandemic started, it was a low-inventory environment, but the pandemic exacerbated the inventory shortages, causing major problems in the real estate market.”
According to President Mike Simonsen, Altos Researchit is quite unusual for housing inventory to decline throughout February as it has this year.
In a February 13 housing market update, Simonsen said, “Before the COVID-19 pandemic, spring home sellers started listing homes and there weren’t enough buyers yet, so inventory was in February. “It’s normal to see an increase,” he said. “But for 2020-2022, buyers showed up as soon as the year started and stocks bottomed out much later in the spring.”
Home inventory has been declining nationwide since late October after hitting a two-year high of 577,172 units on average over the seven days on the market, according to Altos. As of February 24, 2023, his seven-day average in stock was 429,757 pieces, and watchers don’t expect this to change much in the coming weeks.
“We are really surprised that inventories are declining pretty quickly right now,” Simonsen said. “My guess is that if interest rates stay high at 6% or 7% for a few years, inventories will slowly rise each year and return to normal.”
housing wireChief Analyst Logan Motashami added: “Inventory has been slowly declining for nearly a decade now because people get homes with fixed rate mortgages and their income typically increases over time, but the cost of housing remains the same for them. is a really good deal, we have more inventory than last year, but we’re working from an all-time low, and we’re going to have more inventory if mortgage rates stay high long enough and housing It takes time to sell.”
What happened to “normal”?
In late fall 2022, while buyers struggled with mortgage rates doubling in months and sellers were adjusting to the changing market, many brokers felt the market was returning to “normal.”
“My team and I are seeing more ‘normal activity’ in the marketplace,” said Austin, Texas-based Kent Redding. Berkshire Hathaway Home Service the agent said real trend in November.
Market conditions remain well below the frenzied pace of the housing market in 2021 and early 2022, Redding said. no It was back to normal as he expected it to be.
“We’ve seen some gains, but the pressure is still there for buyers,” Redding said. “Personally, in my business, I’ve been pretty busy getting sellers ready to go to market in March and April, but it’s easier now that sellers are starting to understand what used to be an anomaly. Things are starting to look more like normal trends now: higher prices and more days on the market.”
Although Redding expects inventory to recover in March and April, he expects about 8,500 homes on the market, up from a peak of about 10,000 in October 2022. said it was still below
In southern New Hampshire, Alperin expects a similar trend.
“I don’t expect the inventory to increase significantly anytime soon, but I do expect a few more homes to hit the market in the coming weeks, as happens every spring,” Alperin said.
Alperin said the timing of the rise in housing inventory feels like it follows the normal pre-pandemic seasonal trends. But so far, the gains are far from normal, and he expects the trend to continue throughout the year.
“I don’t think there will be a huge push of inventories into the market as many potential sellers are rethinking their sales,” Alperin said. “So many people refinanced when mortgage rates were in the 2% to 3% range, but they didn’t want to lose that low interest rate by moving to another property. Because there are so few, other sellers are on the sidelines, worried about where they will go once they sell.”
Alperin said that in addition to the usual timing of the spring sales season, other aspects of the southern New Hampshire housing market have returned to more normalcy, including a slowdown in home price gains and a decline in bidding wars. rice field.
“It’s no longer dramatic beyond the question of when the bidding war will happen, depending on the community and price point,” he said. “Maybe $10,000 or $15,000 at most.”
But Megan Fox compass needle An agent based in Bergen County, N.J., said that wasn’t the case in her market at all.
“We still have multiple offers and open houses are being canceled all the time because we have multiple offers in the first few days,” Fox said. “Right now, I feel like it’s going to be even tougher than it was in 2021 or early 2022 because we don’t have inventory and there are still a lot of buyers compared to the amount of inventory in the region.” They are fighting over the handful of houses. ”
Fox said in early February that a home in her metropolitan area went on sale and received 18 offers within days of going public, ultimately winning for a surpassing asking price of $150,000. Stated.
“We’re still seeing huge leaps beyond questions,” Fox said.
Her experience is backed by data. In January, 41% of resale listings in the Northeast received multiple bids, according to the company. John Burns Real Estate Consulting.
The 90-day median list price in Bergen County has been trending upward since early February 2022, rising from $639,000 to $799,000 as of February 24, 2023, according to data from Altos Research. . Meanwhile, inventories have been steadily declining since the fall in September 2022. An average of 1,414 homes were on the market over a 90-day period, with 777 homes for sale as of February 24, 2023.
Despite the tough conditions, Fox is optimistic that things will improve at least slightly in March and April.
“Pre-pandemic, the spring market was our biggest market, but this year, I definitely think we will see a stronger spring market,” she said. “While some people may be preparing to put their homes up for sale right now, we strongly encourage prospective sellers that this is still a good time to go public.”
In Miami, local Compass agent Mike Martirena is also dealing with very low inventory conditions, but since the market’s heyday in 2021-early 2022, a bidding war, especially like that Fox described haven’t seen
“Prices are pretty stable,” he said. “It’s probably a percentage or two off its height, but we expect it to be fairly stable this year.”
How can we get back to “normal”?
While not all metropolitan areas have seen large-scale bidding wars driving home prices higher, home prices are still on the rise and a shortage of supply is hurting agents.
“Inventories are really preventing the market from returning to its pre-pandemic normalcy,” Fox said.
Combined with the slower-than-expected drop in inflation, some officials worry this could potentially mean more aggressive action by China. federal reserveBut Motashami feels the Fed needs to act differently.
“The Fed has talked about the housing reset, but we cannot base monetary policy solely on house prices,” Motashami said. “The Fed wants to raise interest rates to a certain level and keep them there, and said it should stick to that level because bond yields will get ahead when the economy starts to deteriorate. I think it’s just a matter of raising rates a few times and then pausing and seeing what happens. We’ll have to wait and see if it falls apart, but the Fed rate hike story is coming to an end.”
Alperin, back in southern New Hampshire, is keeping a close eye on the Fed and its rate plans.
“The Fed is very aggressive about raising rates,” Alperin said. “Interest rates have now almost doubled in less than 12 months, but housing supply has not returned. increase.”