While 2020 was the year we would all like to forget soon, it will be the year that changed how business is done for most service industries. Residential real estate is one of those industries. Much of the change was in the process of how we provide services but physical distancing, the minimal number of people together at one time, working from home, and increased internet speed and capacity accelerated the change to hyper-warp overdrive. [ A little sci-fi lingo] The ability of both buyers and sellers to look at homes virtually, mapping programs that include travel time estimates for shopping and commuting, google street video showing neighborhoods and communities has information at the fingertips of almost everyone. A seller thinking of selling can in real time see all the homes like their home to discover value and number of pending sales. Buyers know schools and their ratings, crime reports, what sellers paid for the home, and how long they have lived there plus other statistical information before they agree to see a home. Armed with this information the timeline for deciding has drastically reduced.
National Association for years claimed that a 6-month inventory of homes for sale indicated a neutral market. A neutral market means neither buyers nor sellers have bargaining power. A 6-month inventory would mean that the number of homes for sale divided by the average number of homes closed per month would equal 6.
From 2016 through the first 6 months of 2020 the average number of existing home sales annualized stayed close to 5.5 million homes. In May of last year, it dropped to around 4 million but rebounded to over 7 million in August 2020. So, for five years we have had an almost steady number of transactions of resale homes in the United States. That is true even while the inventory of homes for sale has somewhat steadily dropped to an all-time low.
Altos Research, a data company for realtors and title companies, shows a drop of inventory of existing homes on the market for sale from July 2015 of 1.15 million homes to January 2021 inventory of 388,678. The number of actual home sales per year has remained steady.
This is the new reality for real estate. The informational age we are living in has changed how quickly we do business. Manufacturing companies like to produce products on demand rather than have inventory sit in stores. Real estate is now doing just that. We no longer have inventory that sits on the market slowly adjusting to price and demand changes. Sellers can see these changes occurring even as they think about putting a home on the market. If a home should be listed, within a week to 10 days feedback will give the agent and homeowner the information they need to make any adjustments necessary.
Buyers have total access to what is on the market for sale through many different providers. Real estate brokers and agents know that they must be ahead of the curve. For realtors’ few buyers are still looking for the right home is business as usual right now. Finding the right home, whether it is listed or not is how an agent will survive.
While supply and demand factors remain the basis of market value, the ease and speed of information have changed what a neutral market timeline is. Before 2020 I would have thought it to be between 3 and 4 months. Now, I would suggest it is closer to 30 to 60 days with more homes selling before they are listed in the MLS.
Altos Research: https://www.youtube.com/watch?v=FIrru0Kdxvs&utm_campaign=Weekly+Data+Videos&utm_medium=email&_hsmi=107075488&_hsenc=p2ANqtz-8d10U5wEIHx_XLogH4NWIspaOXR2jf3dmcWqFSRyoBEgDOaXbcTzxqPQpS6eNyw_qKxwcdNXSaLrdOa2g4hUp60fbjcw&utm_content=107075488&utm_source=hs_email