Unpacking January’s Home Sales Report
Jan Stapleton - 2023 NETAR President
Are you ready for more housing market reports with conflicting data? That’s what we’re going to get until the market stabilizes.
The year started off with another expected sales decline. It was expected because December’s pending sales report showed new contracts declined. Pending sales are one of the few forward-looking indicators. Fewer new contracts mean fewer closings during the next 30 to 45 days.
Sales have retreated for seven months as affordability, lack of inventory, a barrage of media reports about plummeting prices, and an uncertain U.S. and global economy sucked the oxygen out of consumer confidence. But prices were a contradiction. They continued small monthly declines but were up 16.7% from last year. That’s been the norm for the past five months. On a month-over-month journey they’re down 11.6% ($29,000).
At the same time, they’re up $31,550 from January last year. And they’re $73,500 higher than the pre-pandemic median sales price.
Here’s a snapshot of some of January’s key metrics for consumers and real estate professionals who keep their finger on the market’s pulse rather than depending on mass media headlines. Some numbers will change in the mid-month update and pending sales report since the early report doesn’t include the closings that come in late.
DAYS ON MARKET
A key demand metric is the number of days a property spends on the market before closing. Last month it increased to 59 days. That clock starts when a property is listed. It stops when the listing is closed or pulled from the market. An increase in how long a property is on the market before selling signals consumer demand is declining. It has been slowly increasing for nine months.
Last month’s tenure was the longest since February 2020. That was the month when the pandemic shock hit the market. January’s time on the market means the typical property has a contract in a little less than four weeks.
A first look at pending sales shows they’re increasing. A more detailed accounting will be available at mid-month.
New listings are increasing. Look for that to pick up beginning next month as we enter the early stages of the prime home buying and selling season.
The number of properties on the market is significantly higher than this time last year. But at the current sales pace, it’s only 1.7 months of inventory. We won’t have balanced market conditions until inventory is at a five to six-months level.
January’s median listing price was $305,955. That’s the highest it has even been. It has increased for 10 straight months.
The balancing act to steadily increasing listing prices is the number of sellers who come off their asking price to close a deal. Last month, 43% of the sales in the region monitored by NETAR were discounted. The average was $15,853.
The reason listing prices are not coming down is the number of sales going for above list. Last month they accounted for 23% of all sales, and the average price sweetener was $8,700.
The bottom line is about one-in-three sales were for the list price.
Barring some major unexpected shock, look for next month’s market to show some improvements. That should continue into the prime home buying and selling season, which typically peaks in July or August.
The 800-pound gorilla in the local market is how will prices perform? Core Logic has upped the odds of softer prices for the two Tri-Cities markets to the 70% probability range. Other outlooks look for small rural metro markets that have solid economies, low taxes and high quality of life to eke out some small price gains.
And just about everyone agrees 2024 will be a recovery from the chaos of the restricting that began last year.
NETAR is the voice for real estate in Northeast Tennessee. It is the largest trade association in the Northeast Tennessee, Southwest Virginia region, representing over 1,800+ members and 100+ business partners involved in all aspects of the residential and commercial real estate industries. Weekly market reports and information for both consumers and members are available on the NETAR website at https://netar.us