Resuming The Conversation
Resuming the conversation… about a market that had managed to defy the odds, rewrite the rules, break all the records and steamroll over any/all previously held beliefs for more than ten years… until last May, when things suddenly began to change. That’s when cracks began to appear in a market that had once seemed invulnerable.
Bottom line: Here a year later, in May of 2023, we’re still in the early stages of a much larger market shift, one that was long overdue. If you want to follow along as the new market paradigm unfolds.. here’s a short list of the things you should be watching:
More Doms (Days on Market): They’re both a symptom and a cause of a shifting market. When listings sell in the first week they typically have multiple offers and sell well-above asking. The longer a home is on the market the less it sells for. After that first week, the list price becomes suspect. Look for more of the usual suspects in the months to come.
More Listings: Low inventory was the driving force behind that longest running, highest appreciating market we’ve ever seen. If inventory increases, buyers have more choices and become more discriminating, the pace of the market slows while prices flatten out. So far in 2023, we haven’t experienced any dramatic increase in the number of listings.
Fewer Multiple-Offers: As doms increase there are fewer multiple-offers. Instead of ten offers there may only be five. Instead of five only two or three. Instead of two or three, there may not be any.
Lower Overbids: Fewer multiple-offers means that even when prices get bid-up, overbids aren’t as high as they were a year ago. Instead of 30% they may only be 10%. Instead of 10%, maybe 5%.
Return of Contingencies: With fewer multiple-offers, lower overbids and more doms, contingencies (once an endangered species) have gradually reappeared in the offer landscape. As contingencies become commonplace, so do more price renegotiations, seller credits and canceled escrows.
Fewer Cash Offers: When multiple-offer pressure subsides, fewer buyers find it necessary to muster all-cash offers to be able to compete. There are also fewer pre-emptive offers.
More Price Reductions: When doms increase and fewer offers are made, more price reductions happen as Sellers lower their initial aspirations to try to entice buyers.
Longer Escrows: With fewer cash offers and more contingencies in place, average escrow periods gradually get longer. Thirty day escrows are closer to the norm again.
Fewer Overall Sales: With all of the above, the overall number of transactions will decrease. And that’s where we’ll stop because the number of sales so far in 2023 is at historic lows. We’ll pick up the thread and look for the “why” next week.