The Market Shift Continues

As we have been reporting for a while now, supply is increasing as the market continues to shift towards rebalancing.  The number of homes for sale is up 42 % since May, and up 24.7 % in just the last month – which would be alarming if we didn’t start from a ridiculously low point of supply. The new supply of homes for sale is showing up most prominently in the price range from $400,000 – 1 million.  But, far from alarming, this increasing supply is actually good news.  Bubbles do not recover this way, normal markets do. Sellers, who have waited on the sidelines to capture the rapidly increasing values the first half of the year provided, are finally easing back in to the market as appreciation rates have started to abate. 

Does that mean we are headed towards plummeting prices?  No.  Balanced markets tend to appreciate in keeping with inflation rates.  But it does mean that the days of 50+ offers on homes are likely over.  Price reductions have already crept back in to the market – they are up 131% since May with a median drop of $14,000.  A sure sign of a market that no longer will bear pricing that is too exuberant.  In short, a sense of normalcy is on its way.  If you have been waiting to sell, these signals may be a sign that you need not wait anymore.

Demand remains in a normal range, but seasonal patterns have returned to the market.  The seasonal pattern for buyers accelerates at the first of the year hitting its peak March thru May and then gradually declining each month through the end of the year.  As demand begins to decline seasonally and the supply continues to slowly build, eventually you end up with a balanced market.