Where the Buyers at?
Hey man, where are all of the buyers you assured would be looking at my house? Where are the offers? What’s wrong with me/you/my house? These are the questions that keep a REALTOR® tossing between the bed sheets on muggy nights. The answers vary from: “patience, young grasshopper” to “remember when we discussed price and you suggested one thing, I suggested the other, and we went with yours? Well…” to the dreaded, “I wish I knew, but I don’t.” However one thing is certain. Real estate traffic in the past 4-6 weeks has slowed. Or is it sped up? I’m not sure how to pull that analogy through. It’s been light. How can this be? News headlines have proclaimed with certainty that the housing market is resilient once again, that month after month we are seeing increased numbers both in transaction volume, lower days on market, and lower inventory. And if all this is true…where are the buyers?
Well in order to answer that effectively, we must, as always, look at the market as a whole to see what is going on. Thanks to the wonderful people at GTAR, this is as simple as a click of a mouse.
So here we see the truth, and as we know, this will set us free. If you look in the first column (residential sales closed) you see that with the exception of February, sales have been up every month this year compared with last year. This is a good thing. You also see that inventory has been down every month, which is another sign of a healthy market. However you may notice the trend in 2012 that shows that from July to August sales dropped off from 200 to 171. This trend shows up almost every year. Call it ‘back to school blues’. This year, to date (8/22/13), there are 112 closed transactions for the month of August, so unless there is a mad flurry of activity in the last 7 business days of the month, August is going to show a significant decrease in sales volume, both from the previous month and as compared to August of 2012. Inventory, as of 8/22/13 is holding steady at 1,244 but with fewer homes coming OFF the market, expect that number to creep up as we head into fall. What does all of this mean, you may ask?
Maybe nothing, maybe something. We may see that the numbers improve, as per past years, in September and October before finally settling down over the holidays. Or (and this is what I suspect) we are dealing with a year in which the first six months of the year marked what I believe will go down as the absolute best time in history to obtain a loan, where interest rates were at their very rock bottom, and many buyers wisely took advantage of that. As interest rates have been creeping up steadily since mid-June, it would seem that we may be looking at a front-heavy year in terms of transactions. The good news is that the numbers for the first half of the year were great. How good? Even if the sales volume for the last 5 months of the year are 25% lower than last year (which would be significant) the year will still come in with a healthy total of 1881 sales, which would be second highest in the past five years and just below 2012 numbers. The bad news is that sellers who are on the market now may see significantly lower activity for the balance of the year, due to the fact that those who were going to make a purchase in 2013 may have already done so. All this, of course, is speculation, but it stands to reason. The upshot is that whatever happens, 2013 will go down as an ‘up’ year, it just may not be AS good as the first half of it suggested, and this is mainly due to interest rates.
So what does this mean for all those sellers that are wondering where all the buyers went? Maybe nothing. It’s still speculative, and likely that the last quarter will show a significant rebound of activity and the inventory will be absorbed. However areas that are contributing to higher inventory and longer absorption rates (currently 75701, 75702, 75704, 75707, 75709) will be dealing with less of a seller’s market than those with lower inventory and shorter absorption rates (75703, 75762, 75791). So for those areas in particular, staying on the razor’s edge of premium value is paramount. Also, price point matters. The average and median sales price have increased by 1.94% and 1.62% respectively from last year, a modest amount, especially considering the heightened cost of borrowing money. Unfortunately many sellers falsely equate higher sales and price appreciation, which causes them to press for higher price, when they should really be doing the opposite. Even though inventory is respectable for a seller’s market, generally the tipping point for price appreciation occurs when the absorption rate gets below 6 months. Right now Smith County is hovering at 6.68, so there you have it.
All in all, buyers who bought in the first half of the year can go ahead and pat themselves on the back, because they took advantage of the most favorable mortgage lending climates I think we’ll ever see again. Buyers who didn’t may be hoping and wishing for a repeat, which I doubt we’ll see. And buyers whose lives, and therefore purchase decisions, are not centered around the financial markets will continue to find favorable conditions in most areas in Smith County, with decent inventory to choose from, fair pricing, and still very low interest rates. Sellers who have not gotten their result by mid-to-late November will probably do well to hang up their spurs for the holidays and wait for more favorable conditions to come around in ’14, but those caught up in the late summer doldrums need not despair yet.
As always it is my pleasure to keep you informed of what YOUR real estate market is doing, and I always welcome your feedback, questions, referrals and the opportunity to serve you. Stay cool!
Nathan ForemanReal Edge Real Estate