We are so often bullish about our market, but is it as “hot” as news outlets like to believe?
We certainly have a shortage of inventory, which does create pressure on acting quickly and agressively on well priced houses that are in “show-ready” condition. That does not mean that prices are rising exponentially, or even that much at all?
Simple example is taking all sales of single-family houses that are already built, not new construction or “to be built”, and arrying on a monthly basis. This sample below includes everything in the entire Ann Arbor school district exposed through the local MLS, one month at a time. The prices and price per sqft are shown based on the medians. Each month has between 50 sales and 128 sales, which is sufficent for trending.
Ann Arbor is the test market, because it is the main market with the greatest number of sales within the Washtenaw County real estate market. Data above does indicate a slightly increasing median price over time, but a slightly declining price per square foot. This equates to stable, to a slight increase, not substantial. In fact, if you take July 2018 and compare it with July 2019 and July 2020, the median prices are not that dissimilar.
July 2018 had 127 sales with median price of $399,900 and median size 1,796 sqft
July 2019 had 121 sales with median price of $392,000 and median size 1,839 sqft
July 2020 had 128 sales with median price of $403,450 and median size 1,856 sqft
Comparing those same periods means that the current median price is 0.89% higher than the same time two years ago, while at the same time 3.34% larger median size. Not an increase.
The same period 2019 to 2020 shows a larger increase of 2.92% and 0.92% increase in size. Did prices drop in 2019?
Obviously, it is important to compare a longer period and look at monthly changes. It is equally important to compare the competitive market segment for any property, as not all submarkets increase or decline at the same rate. It is possible that the higher priced houses in the market are not selling well, with the lower prices gaining market share and increasing at a higher rate. Or it could be the opposite, or any number of reasons.
Above are two years’ worth of sales on a monthly basis, showing three measures; 1) number of sales, which shows how cyclical the market locally is; 2) median price over time, and 3) median price per square foot. There are other ways of looking at the market, including days on the market for the sales, list to sales price ratios, inventory levels, among others.
Markets can also change rapidly. If inventory increases, supply and demand can change. If interest rates rise, affordability drops, and prices could follow. If unemployment does not improve, fewer buyers can purchase, increasing inventory and affecting prices. If evictions increase, tenant occupied housing may become available for sale, affecting inventory levels. If mortgage forbearance is not properly handled, homeowners who obtained it could find difficulty in continuing in their present arrangements and may have to list their homes, changing inventory levels. If the virus increases in the Fall, as has been suggested, there could be more layoffs and more people thrown into circumstances that would cause them to sell. There is a myriad of issues that could change the market, but as of this writing, it looks stable to slightly increasing, and going through the normal seasonal cycles.