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Overall, we are seeing homes sit longer and less transactions year over year (which comes off a year that was already slow). So, from a transactional standpoint, real estate has kind of come to a halt.
Commercial and residential transactions are still happening. People are still moving. People are still selling their homes and still buying homes. But, relative to what we’ve done in a normal market, much less when we had a good market, transactions are relatively frozen.
And so, if you’re a seller right now, you’re wondering, “Why is my house still on the market? I’m not getting any showings.”
We are seeing inventories rise, and we’re seeing months’ supply rise as well. Months’ supply is the measurement that tells us whether you’re in a seller’s market, buyer’s market or a balanced market.
Right now, we’re showing in some areas six months’ supply while some are still at three months. Well, between four to six months, you’re in a balanced market and six months plus is a buyer’s market.
If all of that were true, then in some areas, you’re getting closer to a buyer’s market is what you would think based on the normal, predictable measurements. But the issue is the measurement of the month’s supply itself right now.
You’ll hear people say you’re technically in a buyer’s market now or you’re in a balanced market now. However, it’s not a normal balanced market or a buyer’s market in truth because you have fewer transactions that give you that measurement.
Month’s supply provides you with a snapshot of how many transactions occurred in three months, showing how long it takes to move the inventory, the current inventory or homes for sale on the market.
So, for instance, if it takes three months to move 100 homes, you have three months inventory.
If it takes five months to move 100 homes, you have five months inventory.
Well, if your transactions are low, then that’s an issue. You’re still not moving much product, but you still have low inventory compared to a normal market. You don’t have this excessive inventory that you typically have in a balanced market or working your way into a buyer’s market.
That might be a complicated explanation to help you understand that, but it’s important to understand because in some markets, the numbers would show we’re in a balanced market, but the reality is, that’s kind of skewed because there’s not many transactions occurring to base that measurement on.
But it is a good indicator. We are seeing more inventory and that is the good news for buyers. Not so much for sellers.
And what happens in a market cycle is that you start in the sellers’ market, then you go to a balanced market and then you go to a buyer’s market. And, what creates that shift is inventory.
When the inventory rises, the next step is prices fall.
So, the biggest news lately is the last three months in DFW, inventories have risen year over year by 30%.
And what that sends is a big signal that affordability may be around the corner for the buyer and seller looking to sell and make a move or purchase a new house afterwards.
Just so you know, there’s a good chance that prices could drop over the upcoming months because when inventories rise, prices usually fall.
That’s just a natural market cycle.
Even though we have still 405 hundred people moving to the Metroplex, the market, the consumer has said, “Enough is enough.”
With 7% interest rates, even though they’ve come down some, we’re seeing some sixes now and buyers are thinking, “The increase in prices is not what I’m going to buy it at.”
The good news for the seller is that you still have a buyer there in a normal market shift when in years like with the Great Recession, there’s just not a buyer there.
But in this market, there is a buyer and strong demand there at a reasonable price and that’s the good news for you sellers.
Prices are basically flat year over year. Prices are not falling really at this stage, even with three months of 30% inventory rising. But any market analyst or economist would tell you the next step is that prices are going to fall.
I don’t think it’s going to be something like what we saw in the Great Recession because demand is still there. It just must be affordable and at a reasonable price.
So, for sellers, the good news is you’re likely moving and you’re going to be able to benefit from that on the buy side.
So, that’s the market update right now. As always, we would love to serve any of your real estate needs. Please reach out if we can help you with a residential or commercial transaction or with property management services.
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