Then last year, the market accelerated into a frenzy, and there were fewer price reductions all the way into May … and even with seasonal increases, we have still been well below the 35% “normal” rate.
Now, we’re shifting from this ultra-fast market where nobody had to do a price cut, to one where if you’re overpriced, you’re going to sit on the market, and you’re going to have to cut your price.
This means sellers are going to see the price reductions number rise above 35% this month. Even though we’re back into normal range, to uninformed sellers, that feels really slow!
If price reductions climb over 40%, that’s going to be a signal for little to no home price appreciation in 2023. Listing price reductions now mean lower prices on transactions that have yet to happen. Keep an eye on this one.
2. Immediate Sales
On the demand side, here at Altos Research we also track a stat we call “immediate sales,” which has been a defining characteristic of the pandemic boom of the last two years. These are homes that get listed and take offers and go into contract within hours, or just a couple of days.
We still have immediate sales happening at a surprisingly high rate, but it’s decreasing. We currently have 18% of new listings going into contract immediately. Earlier in the year it was more like 33%, but that’s been falling very steadily every week since April.
In late June, we had 86,000 or 87,000 homes that were newly listed that stayed on the market and didn’t sell immediately. This is the highest level we’ve seen since last year.
That being said, immediate sales have held up better than expected. The quality homes that are priced well are still selling quickly. I expected these immediate sales to evaporate much more quickly. I think this is evidence of a lot of pent-up demand: buyers who’ve wanted to buy for the last couple years and maybe being out bid in the ferocious competition but are now finally getting their opportunity to buy.
Here’s another signal to watch as a leading indicator for the future: the percent of homes that are re-listed. These homes were on the market and with no offers the listing expired, or maybe they went into contract and the contract fell through, so now they’re getting re-listed.
My expectation is that as buyer demand weakens, and as affordable credit availability weakens, you’ll have more transactions fail, and we’re going to see re-lists climbing. At only 1.6% of the market, re-lists are still relatively low, even though they’re higher than any recent July. If re-lists climb substantially, that’s also a bearish signal for future transaction prices.