Halloween marks the beginning of the significant seasonal slowdown in real estate activity that we see each year. As days get shorter and the weather gets colder, many home buyers and sellers settle in where they are for the winter. Buyer activity and homes for sale have both seen about a 10% decline in the last 3 months but the most significant drops for the whole year come in November and December.
By the end of the year I am predicting that we’ll be down to home inventory levels we haven’t seen since 2005… yes, that is six years ago. Home buyer activity today though is far lower than it was in 2005 so while this is great news, it doesn’t mean we are out of the woods yet.
One trend I have noticed this year is that more buyers are having a difficult time locating what they want. Yes, there are still a lot of homes for sale, but for certain price points and in certain areas, the inventory is extremely low. This has lead some buyers to raise their price ranges a little to find more options, for others it has meant months of searching or in some cases putting their home search on hold.
We are by no means into recovery mode in the Twin Cities but each month it seems like the fundamentals of supply and demand are coming closer into line. What makes this even more reassuring is that this is all happening during what is the toughest economic period in decades. As supply continues to drop and buyer demand finds a fundamental bottom (I believe it already has) we should see prices start to stabilize. Even price stability would be a huge win for our market!
When will we see prices stabilize? Well is some pockets and price points I think they already have. For most of the Twin Cities though it remains more questionable. Ultimately the economy will have the final say over housing – until there is real job growth there will remain pressure on housing prices. When we do see economic growth, the interest rate increases that will come along with it will keep prices from climbing quickly.
The housing news in the next few months will be mostly negative as a result of our seasonal real estate cycle but it is far more important to look at the long term trends versus the month-to-month information. When you look at the big picture, I think housing isn’t as scary as it was a few years ago.
