- Dax NollenbergerWhat’s Selling… and What Isn’t in Today’s Market
The last six years in the real estate market have been a rollercoaster of highs and lows (that are actually close to record highs). From steady growth in 2019 to the pandemic-fueled buying frenzy of 2020 and 2021, demand pushed prices and competition to record highs. By 2022, the market frenzy had reached a fever pitch, with homes selling quickly and often above asking prices. 2023 marked a shift, with rising inventory, increased days on market, and more expired listings as buyers became more cautious and selective. Today’s buyer is calculated, often purchasing out of necessity or the realization of what will happen if rates reduce (prices will rise). While the COVID peak produced a market where literally everything sold, today’s market doesn’t produce the same luxury for sellers. In this blog, we’ll dive into what‘s selling and what isn’t in today’s market.
Like all of my Dax’s Data blogs, I back my opinions up with data evidence. I generate a hypothesis based on what I am seeing and feeling in the market, and I analyze the data to determine if my gut is right or needs some fine-tuning. My gut (or should I call it experience…) has told me that we are in a market where not everything sells, where there is a sweet spot in pricing that substantially improves the odds of selling, and that homes that present the best sell the best. The last point I have proven in an analysis I did about how quality staging and photography SUBSTANTIALLY improves the outcome of your home sale. Not only can you ask for more but the final result produces 5% more, on average, than homes that aren’t (which pays the commission +). If you’re intrigued you can read my analysis HERE. If you’d like to discuss a listing strategy that benefits you, reach out today.
The quality of the listing won’t be the emphasis of this piece, instead, price brackets will be. My hypothesis prior to pulling the data: there is a sweet spot for sales and the luxury market (3M+) is comparatively soft. The data shows that this hypothesis is mostly correct. Now, let’s dive in:
Let’s start with a 30,000-foot view
I summarized market conditions over the last six years in the intro so let’s just focus on the numbers comparing 2024 to years past. It feels as if the general hypothesis is that the market has softened, and from a buyer demand perspective it certainly has. Fewer buyers are in the market which reduces competition and is ultimately reflected in high DOM (Days on Market) and reduced Price/Original List Ratio. You’ll also see that Median Price is at an all-time high. How could that be? Well, it all comes back to Economics 101. We have a dearth of supply. We are on pace for the second lowest supply ever, only exceeded by the year prior.
This doesn’t tell the whole story though. Check the Sales/Listing Ratio. It’s the lowest in the 6-year data set. This means fewer homes that are going on the market are selling. *This is subject to change as the homes that are still on the market may eventually sell. The point remains though, not every home that goes on the market sells anymore.
I mentioned the quality of the presentation as a primary reason why things sell. Another reason, which isn’t quantifiable at the moment, is aspirational pricing. There is a percentage of sellers who say “I want to sell… if I get this number”. I don’t have the empirical evidence to compare how often this strategy is being implemented but I do have a “gut” feeling it’s more than in years past.
Back to what we can prove. Here’s the data:
2024
Past Years
I know it’s a lot… but we’ll decipher the data one step at a time comparing 2024 to the previous five years.
Number of Sales
In totality, the number of sales in 2024 is historically low. Only year lower (will be) 2023. That said, this number is reflective of the number of homes that come on the market. With fewer homes comes fewer sales. While this correlation extends to all price ranges, the peak for luxury listings (3M+), occurred from 2021-2022, accounting for 47.8% of the total sales in the data set. Expect the trend of low sales numbers to extend well beyond 2024.
DOM
This is a metric that produces a lot of important clues about what is selling and what is not. Days on Market provides a strong indication of demand in each specific price range. Interestingly (albeit unsurprisingly), the two worst-performing sales ranges are <$1,000,000 and $3,000,000+. Let’s dive into the market under $1M first. As prices rise, fewer quality homes fall in this data set. A home that may have been in this range six years ago, will more than likely be bumped 1-2 brackets higher. This means that homes purchased under $1M are either in less-than-ideal condition or in a lower-priced area. It makes sense that a highly dilapidated home takes longer to sell and not every buyer is looking to take on a serious (and costly) project. From a location perspective, fire insurance needs to be a consideration. We have hypothesized that the gap between non-fire zones and fire zones will continue to spread as fire insurance premiums and fear of future outcomes reduce demand in those areas. That demand gap is shown in the data.
For $3M+, we saw a near doubling in DOM from the previous bracket. The most significant of any of the price ranges. This is a clear indication of a soft high-end market. I think there are a few factors at play. As sales records seem to be continually broken in Santa Cruz County, aspirational pricing becomes more common. Sellers saying “Well, if I can get that then why not sell?”. The high-end market also produces an entirely different sales motivation. Infrequently caused by desperation or necessity, high-end sellers are willing to wait for the right price… or not sell at all. Another factor is the general market condition. While a good percentage of high-end homes are purchased with cash, this price range is not exempt from the impact of elevated mortgage rates.
Sales/Total Listings Ratio
Not long ago, nearly everything sold. Putting a sign up was the equivalent of chumming the water to attract the sharks. This isn’t to say now isn’t a good time to sell, just to say that factors like pricing, representation, and presentation are increasingly important in today’s market. This ratio provides a wonderful snapshot of current conditions. In 2021, 93.54% of all homes listed sold. In 2024, it’s 65.05% (lowest in the 6-year data set). And… as you’re learning, not all price ranges are created equal. Interestingly, the best performer is the $2M-$2.49M range. Although the small sample size is a consideration. Over the entire data set, the $1M-$1.49M has historically performed the best. If you’re selling for under $2.5M, there is a 75% chance of the house selling. The worst performer by far in 2024 has been 3M+ with only 48 of the total 122 listings having sold this year (39.34%). Oversupply of high-end listings was a key contributor as we have never had this many homes listed for 3M+. Soft demand is another.
While these metrics are key representations of the market condition, the properties themselves and what you’re willing to list it for can swing those odds dramatically.
Price/Original List
Much like DOM, Price/Original List gives us a great snapshot of market demand. Simply, the ratio is the sale price divided by what it was listed for. The higher the percentage, the more demand. “Overbids” across many transactions are an indication of a highly competitive market in which buyers are overbidding to “win” the home… and it’s a great place to be as a seller. 2021 and 2022 produced a ratio above 100% in every price range (except 3M+ in 2021 which was 99.12%). 2024 has produced the second lowest Price/Original List ratio (97.91%) behind 2019. Broken down by range, homes 2.5M+ are selling well below asking price (3-6%), on average. Another indication of a soft luxury market. The best performer in this set were homes that sold between $1.5M-$2M. My gut says many of those were homes listed below the range, say 1.3M, that got bid up into this price bracket.
Off Market – E C W
Another metric that tells the story of the market is the number of listings that went on market and came off market for a reason other than a sale. This could be Expired, Canceled, or Withdrawn listings. Out of the 6-year data set, 2024 has had the second-highest total listings that were pulled from the market after not selling. As a percentage of the total listings, 2024 has produced the highest ratio of non-selling listings pulled off market. This is to say, not everything is selling.
The Sweet Spot
I started this piece with a hypothesis that there is a sweet spot for what is selling and that 3M+ is comparatively soft. The data suggests that my hypothesis is correct. The ideal range to have a home for sale in today’s market is $1M-2.5M with the $1M-$1.5M range giving you the best odds to sell, sell quickly, and sell closer to your asking price. If priced right, everything will eventually sell. Now, this isn’t to say, “Oh, the data is telling me I have to price at one of these”. No, price at what the comps are saying it’s worth and utilize a skilled/competent Realtor to help increase your odds of selling quicker and for a better price. This also isn’t to say don’t sell if you’re over 3M. Instead, utilize this information to set proper expectations for the outcome of your home.
Conclusion
The market always talks, you just need to know how to listen. The data shows us that market conditions are generally segmented by ranges and within those ranges are a multitude of possible outcomes. The luxury market always takes longer to sell but has been disproportionately impacted by oversupply and suppressed demand. We are not in the COVID peak any longer even if prices are at record highs. Strategy, a quality Realtor, and maybe even a little luck all contribute to the outcome. Current conditions still produce great opportunities for sellers but the house and your decisions help determine your luck. Presentation, location, condition, and the effort that you decide to put into your home are going to be the key factors in whether your house sells for more… or at all.
Dax Nollenberger
dax@sereno.com
831-227-5847
