RETURN TO NORMAL?
The first 4 months of the year started with the market being starved for homes to buy. Finally this month we are seeing relief in that inventory shortage. Demand has remained high and values have come up more causing the inventory to even out. In addition, seller’s are getting closer to asking price for their homes than they have in 7 years. All pretty good news and with rates still hovering around 4%, it looks like we’ve found pretty good momentum. Let’s look at the numbers more closely…
DEMAND: The number of homes sold continues to grasp at last years numbers, inching ever closer. The homes that closed in May most likely went under contract in March. At that point, the inventory shortage was beginning to ease up. So if available inventory is an indicator of demand, which we believe it does affect it, then we should see the demand begin to fall in line with last year. It’s been our feeling that demand has been generally held back due to lack of homes that consumers want to buy. As we will discuss next, the “shortage” is easing and will have a positive affect on closed sales.
SUPPLY AND INVENTORY ACCUM: May saw the number of homes for sale catch up to last year, and finally hit a “balanced” level. Right now there is about 6.5 months of inventory available which is considered a “balanced” market, meaning the sellers don’t have the power and neither do the buyers, it’s evenly split. There are some circles (Downingtown and West Chester) that still have a strong seller’s market, but overall in Chester County it’s balanced overall. This indicates that supplies are coming up which will give buyers more choice. It’s likely that seller’s are beginning to see the value of their homes come up enough to be worth it to actually sell their home and move, which, prior, had not been the case.
SOLD TO LIST RATIO: This is actually the bright spot for the month as the ratio this month is up to 96.3%. On one hand this is great news and is reflective of what sellers were getting about 1.5-2 months ago. On the other, if this ratio goes much higher, then it’s indicative of the market heading north too quickly, which is what we saw around 2002 – 2005. 95% is a good place to be and indicates that there is healthy growth. The last time we saw the ratio at this level was in mid 2007 as the market began to cool here. During the height of the crazy market, ratios were up in the 97%-98% range. That is way too high for the entire county.
RATES: Right now rates are close to 4% and FHA is below that. This is certainly helping the market to continue momentum and also helping values to continue to head north.
CONCLUSION: As the title for this month indicates, it looks like we are beginning to return to a more “normal” market, meaning it isn’t overly tipped to buyers nor to sellers. Ideally, if we can stay in this sweet spot, it will be great for everyone moving forward. We will continue to watch the numbers and see how it goes, but it’s our feeling that the rest of the year should see steady sales with home values continuing to head north at a sustainable pace.
As always, if you need any real estate help, please do not hesitate to call us. We consider you a close friend and would love to serve you!
Want to see updated graphs like in previous months? Email us and let us know you miss them! We want to be good stewards of our time and depending on the demand, we may leave the other graphs out. . .
