Buyers and sellers are facing a slightly different market this year than they did at the beginning of last year. 2022 started with an insatiable demand for very few homes for sale. Prices soared at rates we had never seen as buyers battled it out for almost every listing. As we progressed through the year, the Federal Reserve started raising interest rates, demand softened, and inventory started rising. The rise in inventory, however, wasn’t the result of new homes coming on the market but rather homes sitting on the market longer. In fact, the number of new listings coming to market started decreasing:
For the past three years, except for the pandemic lockdown months, the number of new listings coming on the market has exceeded the total number of listings on the market. The reason that’s even possible is that total active listings are measured on the last day of each month, and new listings are measured as the sum of all homes that become active during the month. Homes were selling as they hit the market, and the average number of days on market hovered around 6 to 8 days. Last month the average days on market rose to 45 days.
Buyers are less pressured to move quickly than they were twelve months ago, but it’s still a seller’s market. Currently, there are 1.6 months of available inventory of homes, meaning if no other homes were to come on the market and homes continued to sell at the same rate as the past month, it would take 1.6 months to sell the available inventory. Four months of inventory is a balanced market, so we are still in a strong seller’s market.
Sellers must prepare their homes for sale and price them right to get top dollar. Paint, flooring, kitchens and bathrooms, and staging are wise investments. From a pricing perspective, sellers should keep a close eye on their competition (other homes for sale). Right now, there is a lot of market confusion, and buyers are measuring value based on what they see on the market, and not what has recently sold.
Buyers must really dig into the numbers to understand the value of a home before making an offer. If they are not facing competing buyers for a prospective home, they would be wise to patiently negotiate their way to a lower price; however, if a home is properly priced, they should not be surprised to find themselves in a bidding war.