Rates may be down, but so are Pending sales. Why?

A common theme we’ve been hearing over the last few weeks is that homes are sitting longer. As a matter of fact, here’s a very recent email that I received from a client:

Let’s see if it’s true across the major counties we service:

So a few things stand out for each county:

1. The trend for Average Days on Market has been steadily rising
2. The trend for the number of homes Relisted has been steadily rising
3. The trend for Inventory has been steadily rising
4. The trend for Market Action 2 has been steadily decreasing

Seems odd that time on market and inventory have been decreasing while rates have been dropping, no?

Maybe it’s due to affordability? According to Federal Data, affordability has been improving since June 2024 (the higher the number, the better)... though it’s still unaffordable to the median household (based on 20% down).

But how many people are putting 20% (or more) down?

It looks like the average downpayment is about 10%... so affordability is definitely still a problem since the affordability chart is based on 20% down..

Maybe rents have cooled off?

Nope. Over the last 5 years rents have skyrocketed 27.2% on average, nationally. I’m sure it’s more in major metropolitan areas like Boston.

I think a major challenge is availability of homes that are “affordable” for the average consumer and the fact that those consumers haven’t been able to save at a rate fast enough as rents have continued to rise.

Couple that with inflation versus real hourly wages, where prices have risen by 21.0% since Jan 2020 while real hourly wages have risen only 1.5% forcing consumers to really have to stretch their dollars.

What does this mean for the market?

1. As an agent, you have to have very frank conversations with your sellers about pricing. At this point in time, pricing too high is going to cost the seller tens of thousands of dollars. Better to price a little low and let potential buyers bid it up (if the home is listed in a price zone that is in high demand for the specific municipality).?
2. You can’t allow your sellers to have the false bravado w/r/t price unless you have concrete data to back that up. Sellers should not be expecting multiple offers at this point and if they do get multiple offers, expect it to likely be only 2-3 with offers closer to list price.
3. Agents should be doing pricing analysis for buyers that are still engaged - the days of the list price being the starting price for most homes just isn’t good advice any longer. You should be using tools like Altos Research or RPR to have visual data

2 Market Action: An at-a-glance answer to “How’s the market?”, Altos Research’s proprietary index lets you know if it’s a buyer’s or seller’s market and which way the market is headed.

3 Dana Anderson, “The Typical Down Payment Has Fallen 10% From a Year Ago As Housing Market Cools”, redfin.com, Redfin, Last Updated March 22, 2023, Accessed September 30, 2024, https://www.redfin.com/news/down-payments-decline-all-cash-january-2023/