The number of new listings dropped 22.2% in the first six months of the year. Desperate buyers and a lack of homes for sale meant that almost every listing received multiple offers. The summer housing market was intense and bidding wars were common place. In July, we received 14 offers within 24 hours on a brick ranch home that we listed in West Carrollton. It was not unusual for us to be reviewing offers via text with agents while talking on the phone with clients as we negotiated the best deal possible. In a word, the first half of 2023 was frenzied.
Why was the number of new listings the lowest we have seen in more than 6 years? Many homeowners were sitting with mortgage rates at 2.5-3.0%. Staying in their existing home made more financial sense than selling since they would need to purchase a property with interest rates over 6%. So unless there was a compelling reason to move, many decided to stay put. The shortage in housing continued to push average sale prices higher even as interest rates were rising. It was a good time to be a seller and a very difficult time to be a buyer.
On average, it took 61 days to sell a property in 2023. Sellers who priced their homes correctly at, or slightly below, market value saw their houses sell quickly, typically with multiple offers over the listing price. Those who tried to price their home too high, were forced to take reductions. Buyers facing higher interest rates and increasing home prices were unwilling to spend more than a property was worth. Their housing dollar was already stretched too thin.
While looking back at the 2023 results for Montgomery, Greene, and Warren Counties tells us a lot about our market, it is difficult to see how much it changed just by looking at the topside numbers and averages.
A Year of Change
In August something interesting happened. For the first time in more than a year, we saw an increase in the number of new listings vs the prior year. That trend continued through the rest of 2023. In October, new listings increased 10.6% and in November by 16.2% vs 2022. (Contrast that to the -29.8% decrease in new listings that buyers faced in the month of April.) All of those new listings in the second half of the year began to drive up the total number of available homes in the market. By the time we reached October, the number of active listings was up 7.6% vs last year. That was the highest inventory jump we have seen in 5 years. By the time we hit December, there were 21% more homes for sale than in 2022. It was definitely a year of contrasts.
The higher inventory levels for the second half of the year helped increase sales, especially in the 4th quarter. While sales still lagged behind 2022 numbers, they were only down 3.3%. That is a huge gain over 3rd quarter when sales fell 17.2% vs last year!
The average sale price of homes continued to rise, but the pace of increase slowed. Prices for the year rose 6.5% which was the lowest year-over-year increase since 2018. In a typical year, sale prices in November and December drop 9-12% from their high in May and June. This year, they only fell 2% in the 4th quarter. It is noteworthy that the highest average sale prices of the year vs 2022 happened in November and December despite the increase in inventory levels.
So what does this mean for 2024?
While we do not have a crystal ball, market experts and our local market trends point to a couple of big changes in real estate this year.
Better inventory levels for buyers
Based on the the last 6 months, there is every reason to believe that inventory levels will continue to ease in 2024. New home construction continues at a brisk pace. Several of our clients built houses in 2023 and we think that trend will continue this year. Now that interest rates have stabilized, existing home inventories should also increase as current owners finally decide to make a change and list their homes for sale.
While it will take some time for the increase in housing to make a big impact, we should see the market shift in the buyer’s favor. We are still a long way from a balanced market, but there will be more houses available for buyers this year.
Lower interest rates
The Fed has signaled that if inflation stays where it is, that they will adjust rates as many as 4 times in 2024. There is a lot that can change, particularly in an election year, but there is optimism looking forward. If rates drop, even a little, we will start to see more homeowners willing to get back into the market even if it means trading in their lower interest rates to do so. Buyers who jumped to the sidelines during the rate hikes of 2023, will also get back into the game if we see lower rates this year. Time will tell if the increase in housing supply will be enough to meet the needs of the additional buyers.
Have you been considering buying or selling this year? 2024 should be a better market for buyers, but housing inventories will still be low. It is important to put together a plan to ensure you can get what you need. Give us a call so we can help you achieve your goals this year.
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