The Holiday Chill
Now that the Holiday Market is here, housing shifts to its slowest time of the year.
This is the time of the year where the country gets pummeled by blizzards, freezing temperatures, and undrivable roads. School days are cancelled to the delight of so many children. It is no wonder that the housing market cools to its slowest season of the year; who wants to look for a home when the weather is not cooperating. And, there are not as many sellers willing to allow buyers to trapes through their homes, dragging the snow with them.
It is easy to understand precisely why housing slows for the rest of the country, but why does it occur here in sunny Southern California? Yes, it is a bit cooler than the rest of the year, but the temperature bounces around in the 60’s. There is no snow, just a little bit of rain. Regardless of the weather, housing begins to slow during the Autumn Market, after the kids go back to school. It slows further when the distractions of the holidays set in. The holidays are here and with it come weekly parties, plenty of shopping, family gatherings, eggnog, spirits, and nonstop festive music.
It just is not the time to hunker down and tiresomely search for a home. It is also not a time when a wave of homeowners place their homes on the market. Most everybody is laser focused on enjoying the holidays and all of the hubbub. Since Thanksgiving, 150 sellers placed their homes on “Hold Do Not Show” so that they could enjoy the season. The Holiday/Winter Market is the time of the year when typically, both supply, the active inventory, and demand, new pending sales over the prior month, drops like a rock until after we ring in a New Year.
After peaking two months later than normal, and then hovering around that peak for an additional month, the active listing inventory is finally dropping. It declined by 6% in the past two weeks, shedding 398 homes, and now totals 6,820, the highest level for this time of the year since 2011. Normally, the active inventory peaks sometime between July and August and then falls for the remainder of the year. With the delayed peak, there is not as much time for the inventory to drop, so the start to 2019 is going to be the highest since 2012. The current active inventory is 58% higher than last year’s 4,323 mark. There are 2,497 more homes on the market, a lot more competition for sellers. Expect the active listing inventory to continue to drop until New Year’s Day, but it will remain elevated at levels not seen in years.
Demand, the number of new pending sales over the prior month, has been dropping since August, the end of the Summer Market. In the past couple of weeks, it accelerated and dropped the most this year, 122 homes, or 7%, and now is at 1,654 pending sales. It’s the lowest level for a start to December since 2007. Last year, demand was 26% higher with an additional 428 pending sales.
The Expected Market Time, the amount of time it would take to place a home listed today into escrow down the road, had been climbing at a very rapid rate since August. The quick pace was due to the active listing inventory peaking late and remaining elevated while demand dropped. Today, with both supply and demand dropping, the Expected Market Time only increased slightly from 122 to 124 days, a Slight Buyer’s Market (over 120 days). It was at 62 days last year.
For housing, the holiday chill is here. That means that fewer homeowners will place their homes on the market and many current sellers will opt to throw in the towel and wait until next year. For buyers and seller who remain, it is best to properly set their expectations.
Seller Expectations: the market is lining up in favor of buyers for the first time since the start to 2011 and it is taking a lot longer to sell. Price is king. Upgraded homes in great condition without deferred maintenance and priced accurately will sell quicker than everybody else. Pricing based upon location, condition, and upgrades is absolutely fundamental. Homes that need a bit of work or have an inferior location need to adjust their price. After arriving at a realistic Fair Market Value, sellers are required to pack their patience. This market is far from instant.
Buyer Expectations: buyers may be in the driver’s seat, but a “slight Buyer’s Market” does not mean that prices are dropping right now. Buyers cannot get ahead of themselves. They have the upper hand and can call more of the shots, but this is not a market for writing unrealistic, lowball offers in hopes that some desperate seller is going to bite. This is NOT a deep buyer’s market. That occurs when the Expected Market Time surpasses the 150-day mark. The current market is not even close to that level. There are finally more homes to see. Homes are no longer flying off the shelves in days after generating over a dozen offers. Buyers no longer have to rush. There will be fewer homes coming on the market until after ringing in 2019.