Friday Update March 5, 2021
One of the best things about real estate is it's pretty hard to panic sell it. You can't just dump your house with the push of a button like you can stocks and bonds and that is a very, very good thing. (You can to like investors or wholesalers but I'm talking about normal, not under duress, type of real estate sales) There are of course a few companies out there looking to change that and make the real estate market as quick and liquid as possible. Click here to buy, click here to sell. Watching those companies lose half of their valuations in the last 10 days brought joy to my face, and watching them lose the final half will force me to throw a party.
You see speculation is good and great and a whole lot of fun. I love hearing people's stories about their crazy winnings in DOGEcoin or GME or BTC or whatever. It's so exciting when people are able to ride the wave of some super unlikely stock or crypto to massive profits. Those are the fun stories, on the opposite end of that are a bunch of losers that no one cares about. Their stories suck. Their stories make up the uninteresting majority.
The beauty of the housing market is that despite how crazy fast it feels to us today it's actually remarkably slow. People think about selling, call some agents, chop it up, get the house listed, show it to a bunch of potential buyers, get some offers and go under contract. Maybe 30 days after that there is a closing which represents another tick in our market data. In February we had a total of 981 sales here locally, so 981 little data points for our market to consider. Compare that to the stock market where just one insanely medicore company who's name rhymes with Pillow saw 2 million shares of its stock traded today. The hypothetical company has seen its share price fluctuate by well over 70% a quarter in a rollercoaster like fashion. That is fine for speculating on stocks but if this was possible in the housing market it would be the worst thing to happen to it. Worse than meth or flooding. Worse than Martha Stewart. Worse than those little signs that say shit like "#blessed #stressed and #coffeeobsessed or something about #wine that makes your alcoholism into a cutesy little hash tag.
Imagine a real estate market that runs like the stock market. Where homes are able to be sold exteremely efficiently and quickly with minimal human input. Just click here to sell or buy. Any news story could move the market up or down by 10% or more in a week. Imagine the whole real estate market was like that. Who do you think would end up benefitting? The homeowners or the investment banks? The banks would force panic waves of selling just like they do across the stock market and leave the vast majority of people as life long renters. If you take one glance at the stock market on weeks like this one or last one it's not hard to imagine how that type of volatility would shake a lot of homeowners to the core. So I'm grateful for our slow, inefficient, clunky model as it makes it just hard enough to move that people don't make terrible impulsive decisions (at least most of the time).
Today going into the weekend we have 281 single family homes listed. This is slightly higher than last week as Spring is coming and the inventory should be increasing. This level of inventory is insanely low and is part of a national problem. Right now nationally there are about 200,000 less houses listed than this time last year. Year over year pricing nationally is still trending about 10-12% higher. For the first time ever we finished a month with a median price point of over $400,000. I've mentioned plenty of record highs in the last couple of years, this one breaks into a whole new century!
Interest rates are very volatile because of the easy liquidity mentioned in my rant above. Last week Jerome Powell came out and stated the obvious, that inflation is real, and the bond market sold off hard. Interest rates on the 10 year bonds went up by about .5% in the last 2 weeks which has had a similar effect on mortgage rates. If we were in a slow market that was saturated with inventory this could be something to worry about. However in the state of the market that we're in this bump in rates is going to go largely unnoticed unless it continues on much higher quickly.
Multiple offer situations are the norm, appraisal gaps are the norm, appraisal problems are the norm, sellers are 100% in control, builders are low on inventory and prices are continuing to go up. Same as last week.