A New Year Brings New Optimism
As 2021 rolls on, we feel ready to take on the world in the fresh new year. Although we are left with many of the same problems as before, it seems that with vaccines continuing to roll out to the at-risk among us, there is light at the end of the tunnel. Hopefully, a slow solution to our nearly years-long health crisis should start to bring about more consumer confidence, and as a result, even more traffic in the real estate market.
Five Metrics to Watch to Gauge the Strength of the Market
When we do market research, we focus on five key metrics that can tell us about the health of the market and what direction things might take. See below for an in-depth breakdown of these key data points to get more insight into what the market is doing:
Average Sales Price
We expect strong price appreciation in the first half of 2021, but more moderate price growth in the 2ndhalf. Homes have gone up in price in all but 4 years in the past 44! Just because we are at record high prices DOES NOT mean prices have to fall next year. Prices have been rising for 12 years straight… on average, home prices rise 6% per year. In the past 12 months, prices rose 8% for detached homes.
Months of Inventory (MOI)
MOI is a metric that illustrates, hypothetically, if prices remained at the same levels they are right now and no new homes came onto the market, how long would it take to sell all the available inventory? This metric has been relatively stable for 48 months. MOI on 1/04/2021 was 0.3, a 30yr record low! We do not anticipate improvement until mid-2021 at the earliest. We have been through tight inventory in the past (1993-2000). There is a normal level of seasonal variation in the busier spring and summer months.
Under Contract Listings
The number of Under Contact Listings is a good leading indicator of closed sales volume. Volumes are a bit higher than this time last year due to delayed demand from the COVID crisis. We anticipate strong sales volume for the new year. The lack of inventory is the main constraint; there is plenty of buyer demand (and cheap mortgage money).
Number of Listings Sold
First quarter (Jan-March) of 2020 saw a 5-14% increase in sales versus first quarter of 2019. Real estate was hit hardest in the second quarter of 2020, as people were not allowed to show homes, but recovered just as quickly. This resulted in higher than usual sales, setting records for third and fourth quarters. This was especially true in the luxury market (Homes $1MM+) as more affluent buyers took advantage of record-low interest rates.
Inventory is down dramatically for both homes and condos. It has been interesting to see the demand for homes and condos respectively change directions amidst the COVID crisis, in that detached homes are seeing an even tighter seller’s market. Inventory levels of homes and condos available for purchase had been growing in 2019 but dropped again throughout 2020. As you can see, inventory is the lowest it has been in over thirteen years!
And finally the Monthly Market Snapshot: