There is a slowly growing shift towards a more balanced market, though it remains favorable for buyers at the moment. Demand remains quite weak, but comparisons with last year will become much easier after July because August through December saw a strongly declining trend for demand in 2013. The fall in new listings and the tendency of sellers to take existing listings off the market means that the supply of active listings is still dropping. This is giving sellers a reason to be relieved, but it makes for low volumes and a lack of urgency. Sellers with no patience might be better waiting until demand climbs back to match the supply.
Changes are taking place only slowly so we don’t expect dramatic movements on any of our measurements in the short term.
Here are the basic ARMLS numbers for July 1, 2014 relative to July 1, 2013 for all areas & types:
- Active Listings (excluding UCB): 24,440 versus 15,692 last year – up 55.7% – but down 4.4% from 25,555 last month
- Active Listings (including UCB): 27,695 versus 19,463 last year – up 42.3% – but down 4.3% compared with 28,950 last month
- Pending Listings: 6,426 versus 8,892 last year – down 27.7% – and down 7.7% from 6,965 last month
- Under Contract Listings (including Pending & UCB): 9,664 versus 12,663 last year – down 23.5% – and down 6.6% from 10,360 last month
- Monthly Sales: 7,254 versus 7,924 last year – down 8.5% – and down 4.0% from 7,558 last month
- Monthly Average Sales Price per Sq. Ft.: $129.46 versus $120.13 last year – up 7.9% – and up 1.5% from $127.51 last month
- Monthly Median Sales Price: $197,000 versus $182,500 last year – up 7.9% – and up 2.5% from $192,250 last month
The most interesting fact to note is that active listings (excluding UCB) rose 1.5% between June 1 and July 1 in 2013 but fell this year by 4.4%. This drop is encouraging for sellers.
The monthly sales rate held up fairly well during June but the under contract listings and pending listings remained weak. Price recovered a bit from the lull in May but the price measures are still distorted to the upside by the low number of sales under $125,000.
Everything that we mentioned last month is still contributing to the weak demand:
- low participation by first time home buyers
- the inhibiting effects of massive student loan debt
- millennials preference for the flexibility of renting
- the foreclosure wave in 2008 through 2012 which has introduced a new sensitivity to the fact that home ownership can sometimes be financially hazardous
- a large tranche of former home owners who have not yet repaired their credit enough to re-enter the market
- low rates of household formation, especially among 20-30 year-olds
- a growing wealth gap causing stronger demand for high end homes but leaving large numbers of people renting for the foreseeable future
There is talk of loan underwriters getting more flexible, but so far the changes have been only modest. Loan application rates remain very subdued according to the Mortgage Bankers Association. Purchase mortgage applications are down 16% nationally from a year ago.
In June we saw 25 closed sales of homes priced over $2,000,000 which represents a much stronger total than May’s 18, but is still a long way below April’s 39. Homes over $1,000,000 represented 11.5% of the dollars spent, up from 10.7% in May, but well down from the 13.4% in April. We still have 29 pending listings for homes of $2,000,000 and over which is a strong start to July.
The higher sales of ultra-luxury homes has helped the average price per sq. ft., as we predicted it would last month. Nevertheless we would expect the annual appreciation rate to drop from the current 7% to 8% back into “normal” levels of 5% to 6% rather than recovering to the 15% to 20% we saw just a few months ago. I expect this rate will bounce around but continue to trend lower over the next 5 to 8 months.