This regular sponsored Q&A column is written by Eli Tucker. Realtor from Arlington and a resident of Arlington. Please send him your questions by email for an answer in future columns. Video reviews of some of the articles can be found on YouTube at Ask Eli, live with Jean playlist. Enjoy!
Question: Have you noticed changes in the real estate market lately?
Summer slowdown is normal, probably more pronounced in 2021
It is normal for the real estate market to slow down as we move from an intense spring to a summer market, and we (myself, my colleagues, and the lenders I spoke to) have seen this shift over the past few weeks.
I don’t think we are close to experiencing a market correction, but I do think that the change in market conditions from the spring market (which did start in January / February 2021) to the summer market will be more pronounced this year due to COVID-19.
Shoppers are more distracted by travel / events
Now that most of our buying population has been vaccinated and businesses / events are open, shoppers are finally focusing on travel, activities, and visiting friends and family, not just finding a home. Variations are usually highest in summer and during the holidays, so markets have always been slower, but this summer and the holiday season there will be an unusually high number of distractions for shoppers. (This is a good thing!)
Asking prices are catching up
Another factor in the shift in the market this summer is that offer prices in many cases are finally starting to approach actual market prices. During the first 3-4 months of 2021, there was no or insufficient sales data (sales prices) to give sellers confidence in a 5-10% + increase in asking prices compared to 2019-2020 prices, which is why in this year we have seen such a sharp rise in prices. Now that asking prices are dropping more in line with what the market is willing to pay (in my experience over the past 4-8 weeks), bids and wild escalations should diminish.
What is most likely to happen / not to happen
Homeowners planning a sale shouldn’t have to worry about the market bottom dropping, but expectations should change from previous months. This is how I think the shift will and won’t look like:
- WILL LEAD TO Fewer Bids for Competitive Homes
- WILL lead to a decrease in property sales in the first week
- WILL lead buyers to negotiate better / more contingencies
- WILL result in a smaller price spike
- As a result, there will be fewer houses for sale (probably 20-30% less than in March-May).
- Will NOT lead to a drop in prices (prices should stabilize)
- Will NOT lead to the appearance of a buyer on the market
Spring and summer 2016-2019
Let’s take a look at how the Arlington real estate market has changed from spring to summer 2016-2019 to give some historical perspective. I have not included 2020 because it will always be an outlier of little value to historical trends / context. I looked at four data points that I use to measure market conditions:
- Percentage of homes contracted within one week of listing
- Percentage of Homes Sold at or Higher Original Bid Price
- Average selling price compared to original asking price
- Number of houses for sale
Here’s a summary of the findings from the charts below:
- Demand intensity (on contract for the week and homes sold on demand or higher) fell from spring to summer all four years, with the exception of a small increase in the number of homes sold at ask price or higher in summer. 2019 (likely due to a significant drop in supply due to the November 2018 Amazon HQ2 announcement putting upward pressure on prices throughout the year).
- The average selling price to the original selling price has declined every year except for 2019 (virtually unchanged), suggesting less sharp price increases and pricing negotiations.
- The number of homes for sale in the summer has declined by about 20-30% annually compared to the spring market.
If you would like to discuss buying, selling, investing or renting, do not hesitate to contact me at [email protected]…
If you would like an answer to a question in my weekly column or to discuss buying, selling, renting or investing, please send an email to [email protected]… To read any of my older posts, visit the blog section of my website at EliResidential.com… Call me directly at 703-539-2529.
Video reviews of some of the articles can be found on YouTube at Ask Eli, live with Jean playlist.
Eli Tucker is a Licensed Virginia, Washington and Maryland Realtor with RLAH Real Estate, 4040 N Fairfax Dr # 10C Arlington VA 22203.703) -390-9460.