Attention, Home Shoppers: You Now Have More Leverage
If you’ve been aching to buy a home of your own all year but haven’t been able to seal the deal—hey, we feel your pain. Really, we do. After all, each month has offered fewer homes for sale than we had a year prior, and yet demand has continued to grow. As a result, the market has somehow produced more sales from that lower inventory.
How is that even possible? Homes for sale have spent less time on the market. Simply put, well-priced homes in sought-after neighborhoods move quickly.
Successful buyers this year have had to bring their A-game, which means they are…
- Pre-approved for a mortgage
- Working with an expert and responsive local Realtor®
- Laser-focused on their needs, ready to make a decision rapidly
- Willing to avoid contingencies or making too many demands of sellers
But the market just shifted to be a bit more in your favor, would-be buyer. Do we suddenly have more homes for sale? No. We’re estimating that active listings will be down 8% over last year when the month ends.
The reason you have relatively more leverage now is simply because of the calendar. The real estate cycle has shifted into its slower fall phase, and we see it evident in the median days on market.
In May and June, active listings remained on realtor.com® a median of 65 days. In July, that crept up to 68, and we expect August to end at 72. The reason for the median age increasing is that while inventory is seasonal as well, it peaks later than sales (July rather than June), and the difference between the lowest inventory month of the year and the highest inventory month of the year is only 20%.
In other words, there is a fairly consistent number of homes for sale in any given month.
At the same time, demand follows a more extreme seasonal pattern. The busiest month on average is June, and June has almost 75% more sales than December, the slowest month of the year.
Why is that? Well, the weather plays a big role. It’s clearly harder to buy a home in winter than the summer in the colder parts of the country. You have to see the curb to experience curb appeal!
The school calendar also plays a role. Fewer people want to move when school is in session.
We’re also creatures of habit, so we’ve learned the behavior of buying in the spring. I think this effect is actually the strongest, because the seasonal pattern exists even in temperate places and areas where the population (for example, with many retirees) should care less about the school calendar.
This annual cycle shifts to favor buyers in the fall and winter. From now until January, buyers will have more inventory available relative to each sale with each passing month.
The cycle will shift again to favor sellers starting in February.
When the cycle favors buyers, prices weaken and inventory sits longer.
So even in a tough “seller’s market” like this one, the cycle can be your friend if you are willing to buy when others aren’t as interested.
In fact, the month that most favors buyers is January.
I’d still advise bringing your A-game, whatever the month. And talk to a local Realtor about the cycle in your market, as it can vary locally.
By: Jonathan Smoke. He is the chief economist of realtor.com, where he analyzes real estate data and trends to develop market insights for the consumer. Photo: IgorBukhlin/iStock; Steve Debenport/iStock