As the world gears up for the Olympics, an event that epitomizes endurance, strategy, and adaptability, we recognize similar themes playing out in the real estate market today. Much like athletes training to anticipate and conquer obstacles, players in the real estate industry — builders, developers, bankers, and industry leaders — must stay astute and agile to thrive in a constantly evolving landscape.
Trends and Indicators
The real estate market is more than just properties bought and sold; it’s a barometer of economic health, measuring consumer confidence, financial stability, and technological innovations. This blog aims to provide a comprehensive view of the current real estate market, with a focus on both national trends and our local scene.
In today’s market, we’re witnessing a range of developments, from fluctuating home prices and varying inventory levels to shifting buyer preferences and regional disparities. Staying informed about these trends is crucial for making strategic decisions. Just as athletes must balance strength, speed, and technique, real estate professionals must juggle supply and demand along with market trends to navigate a complex playing field.
At the end of Q1 2023, the total inventory of single-family homes on the market stood at 1,530 (a 2.4 months supply). By Q2 2024, this number had increased to 1,998 single-family homes (a 3.1 months supply). This surge can be attributed to the spring/summer season when more homeowners list their properties for sale.
However, the scenario changes when we zoom in on the new construction market. Here, the inventory has remained relatively steady. We had 895 (a 2.4 months supply) active listings in Q1 2024 versus 898 (a 3.1 months supply) in Q2 2024. Builders are adopting a cautious strategy: only replacing a spec home when one is sold, rather than ramping up through the historically busy seasons. Although the number of new construction active listings remain stable, the months’ supply indicates a slowdown in the rate of sales as the inventory number stayed nearly identical.
Analyzing Months of Supply
To gauge the balance between supply and demand, we look at the months-of-supply metric. In Q2 2024, the total months of supply for the overall market is 3.1, indicating a tight market. However, when we analyze new construction specifically, the months of supply extend to 5.9 months, which is considered a balanced market. These months’ supply numbers could continue to rise even if the actual number of homes on the market does not increase, based on a slowdown in sales.
Pending Sales: The Competitive Edge
A look at pending sales reveals a decline compared to the previous two years. Currently, there are 1,248 single-family homes pending, with 404 of those being new constructions. Here’s a historical glimpse:
As you can see, there has been a significant dip over the past few years, a trend extending into 2024. Higher interest rates, election uncertainties, affordability issues, and overall economic instability have led many potential buyers to adopt a wait-and-see approach. The hope is that if the Federal Reserve lowers interest rates in the next 6 to 12 months, more individuals will feel comfortable entering the market.
In the past 12 months, a total of 7,709 single-family homes have been sold — reflecting a decrease of over 434 homes compared to the previous 12-month span. This slowdown in sales highlights the broader economic challenges and consumer hesitancy that have permeated the market.
Looking Ahead
As we look ahead, the impact of interest rates on the market can’t be overstated. While the current situation may resemble the slower pace of 2018 and 2019, where it took several months to sell a home, it’s essential to remain optimistic yet cautious. The total inventory of single-family homes has increased, meanwhile, the inventory for new construction homes has remained the same, suggesting selective growth and an emphasis on strategic planning.
One other factor to consider is the rate at which lot inventory is being consumed. Developers are not replacing lots as quickly as they are being bought, hinting at a potential shortage within the next 12 months. The road ahead in the real estate market won’t be without its hurdles, but industry professionals must embrace the challenge with agility and foresight by staying well-informed and prepared. As the Olympic torch is lit, symbolizing hope and perseverance, let it remind us to approach the real estate market with the same spirit, and by understanding and navigating the current trends and metrics, we can not only keep pace but also set the stage for future success.
You can find the detailed analysis of the Q2 real estate market statistics here.
