This is the beginning of a new season for housing- the Holiday Market. With shorter days and all the distractions of the holidays, housing will downshift with a drop in both the supply, the active inventory of homes available to purchase, and demand, the last 30-days of new escrows. To the buyers and sellers that remain, the overall market will still feel sizzling hot, but there simply will be fewer active participants. Exhausted from politics and COVID-19, the holidays will be a welcome, positive diversion.
The inventory will steadily drop from now through the end of the year. Fewer homeowners will place their homes on the market since 2020’s end is fast approaching. Intuitively, many will simply “wait until spring.” It is a common phenomenon that repeats itself every year. There will still be homeowners lured to enter the fray due to the public knowledge that housing is by far the strongest sector of the United States economy, yet most will opt to wait until at least March of 2021.
At the same time, many homeowners who have attempted to sell for quite some time without success will opt to throw in the proverbial towel and pull their homes off of the market in order to enjoy the holiday season. They will be tired of the lengthy real estate process that did not allow them to achieve their housing goals. In fact, 33% of the current active listing inventory has been on the market for more than two months. It is hard to enjoy all the festivities while buyers continue to set appointments to tour sellers’ homes.
As a result of fewer homeowners opting to sell and unsuccessful sellers pulling their homes off the market, the active listing inventory will drop. In the past five years, it has plunged an average of 27% from now through the end of the year. It is going to be difficult for the inventory to drop an additional 27%, as it is already at a very low level, 3,944 homes, its lowest level for a start to November since tracking began in 2004. Only 2012 came close, with 4,043 homes on the market, but it still shed 800 homes by year’s end, or 20%. The bottom line: Expect the number of homes available to purchase to consistently drop for the rest of the year.
Sidelined buyers and fewer new potential purchasers will result in a significant drop in demand. In the past five years, it has fallen on average of 31% from now through the end of the year. Today’s demand is at 3,019 pending sales. That means that it will fall to around 2,075 by 2020’s end. That will be significantly lower than this year’s peak of 3,340 pending sales achieved on September 3rd. Yet, that will be demand’s highest level for a finish to a year since 2012 when it was at 2,413. For perspective, at the end of December 2019, it was at 1,590 pending sales, 23% fewer than the projected 2,075 to end 2020. The bottom line: The Holiday Market will still be quite busy with plenty of buyer activity compared to recent years.
Reports on Housing: Stephen Thomas