A return to the new normal in real estate? This week we're seeing real estate inventory continue to climb and demand pull back a bit, with more homes taking price reductions, and fewer immediate sales.
Available inventory of unsold single family homes rose 2.5% this week to 422,000 homes. If you watch the Altos data every week, you might recall that just three weeks ago I said I expected us to top out at 400,000. Inventory has blown past that prediction and continues to climb. Every week, conditions are improving for home buyers.
Some things to note about our rising inventory levels: 2.5% in and of itself is not an alarming change. It’s pretty common. Inventory is still 50% below normal. My friend Ryan Lundquist, an appraiser in Sacramento, said it this way: "A car going 100 mph down the highway and you take your foot off the gas, is rapidly decelerating and it’s still going really really fast. Both things can be true at the same time." That’s really the right way to look at it. Given that our low point for inventory was not until April 30, and that the market is shifting, I can see a scenario where inventory doesn’t peak in 2021 until October. That means if you’re a buyer, you might see opportunities opening up this fall that just a few months ago felt like they were gone forever.
You can also see the demand shift in the percent of homes taking price reductions. Always this time of year price reductions kick in on those homes that didn’t sell in the summer. Normally we’d end the year with 35% or more price reductions. It’s now looking likely that the market will reset into the old normal cycle. We’re up to 25.4% of homes on the market with price reductions. That’s climbing by 1% each week. You can see how that could get back to normal by the holidays.
In fact in last week’s webinar, I pointed out Boise, Idaho as being one of the craziest hot markets this year. Many locals were happy to sell to the inbound Californians at inflated prices. But what we can see clearly is the limit to that over pricing. Boise is now at 41.5% of the active market with price reductions. Normal for this time of year... but Boise was at only 5% earlier in the year. This is not prices falling in Boise, just that the rocket ship has landed.
Our immediate sales tracker reinforces the foot-off-the-gas metaphor, but still 21,000 homes listed and sold immediately. Each week slightly fewer are immediate sales. We have a long way to go before this is in any way bearish.
And let’s wrap with home prices today. The median price of a single family home in the US this week is just under $391,000. This is another downtick week from $394,000 last week. Annual gains are compressing and we’re looking at 10% year over year price gains at this point. Last fall and winter were so strong that the annual comparisons for the rest of the year will continue to compress.
The median price of the newly listed cohort is unchanged this week at $355,000. You can see each year at this time the price of new listings is pretty stable as sellers have adjusted to fall demand and we should expect to stay in this range until November. You can see a little bump up each year in October actually, so we’ll keep our eye out for that in a couple months.
So that’s the data for the week. Inventory continues to surprise to the upside. Sellers are still trying to take advantage of a hot market. But did they wait too long? Watch the full video on YouTube.