Marty and Max: Shadow demand
| June 9, 2023 1:00 AM
Home Buyers are ready to pounce at any opportunity. One mortgage lender’s perspective is there is so much pent-up demand that is simply waiting for any break in the market. They are waiting for an opportunity in affordability or interest rate reductions. Years ago we had “Shadow Inventory,” where sellers were ready to sell but were waiting to list. Currently, we have the opposite, “Shadow Demand” where buyers are waiting for any sign, and when they see it they will pounce. One real estate consultant commented that May was a phenomenal month for new home sales and this simply can not happen without underlying strong demand.
Nationally there are 436k single-family homes on the market up slightly over last week and up 16% over last year. Our model predicts 3% growth per week for the next 3-4 weeks. The spring peak should be now but it is a little slow this year. Shrinking inventory year over year normally suggests increased home prices the following year. Last year inventory was rising 5-7% per week. There is no such surge this year. During the pandemic, there were more homes under contract than were on the market. This changed last year when demand cooled and inventory increased. There are 64k new pendings down 5%. Is 7% the magical interest rate? If interest rates drop 25 bps it is very likely a slew of buyers will emerge from the sidelines. This may not be reflected in the rate of mortgage applications due to the number of cash buyers.
Price Reductions remain healthy at 30.3%. Normally at this time of year, they are accelerating much faster but seasonal changes were late this year and normally this bottoms out in January and this year this did not occur until April. Although price reductions should rise slightly in July and later in the year, our team predicts there will be fewer than in any recent years other than the pandemic years. For your full market report or home analysis, go to MartyandMax.com or email firstname.lastname@example.org. We believe that as soon as there is opportunity the buyers will buy. The national data supports our experts.
May 2023 Existing-home sales slid for the second consecutive month, falling 3.4% nationwide according to The National Association of REALTORS® (NAR) and New Listings increased 80.0 percent for New Construction homes but decreased 10.4 percent for Previously Owned homes. Pending Sales increased 51.2 percent for New Construction homes and 7.2 percent for Previously Owned homes. Inventory increased by 150.7 percent for New Construction homes and 15.9 percent for Previously Owned homes. Median Sales Price decreased 13.3 percent to $525,900 for New Construction homes and 11.9 percent to $520,000 for Previously Owned homes. Days on Market increased 23.1 percent for New Construction homes and 31.3 percent for Previously Owned homes. Months Supply of Inventory increased by 171.4 percent for New Construction homes and 56.5 percent for Previously Owned homes. While fluctuating interest rates have pushed some buyers to the sidelines, a shortage of inventory is also to blame for lower-than-average home sales this time of year, as current homeowners, many of whom locked in mortgage rates several percentage points below today’s current rates, are delaying the decision to sell until market conditions improve. With only 2.9 months’ supply heading into May, available homes are moving fast, with the typical home spending just over three weeks on the market, according to NAR.