It’s notable this month that the number of closings in January is down 42% from the same month last year and has reached a low point not seen since January 2012. Back then we were coming off the worst recession in recent history. What’s different in 2023?
First, its important to note that a decrease in the number of home sales does not mean falling prices. In January 2012 the number of home sales was actually up 20% from the year before, but home prices were down 6%. Eleven years later, even with the number of sales almost cut in half, the average sales price is still up 3% and the median is up 7%. The big difference is obvious when we look at supply and demand.
2022 was an incredibly frenzied market defined by record low supply, multiple offers and quickly rising prices. When inflation began to rise to unhealthy levels, the Fed stepped in and started raising interest rates, making house payments less affordable and therefore reducing demand. The lower demand has helped the low inventory situation, giving buyers a bit more choice, but we still find ourselves in a sellers market with just under 2 months supply.
Back in January 2012, the housing inventory was about 8 months of supply. A six month supply is generally considered a balanced market. So while today we are experiencing a technical seller’s market, back then it was a buyer’s market. Both in 2012 and today, the number of homes under contract, also known as pending home sales, were on the rise. That’s typical in January as sales begin to ramp up for the always busier spring market.
So what can we learn? Supply (and demand) is driving the rising prices. Unlike 2012, the Charlotte market will begin the spring selling season in a sellers market and we can therefore expect to see prices continue to rise. Even with interest rates almost double what they were last year, buyers are still finding themselves in multiple offer situations.
Those who think they will “wait until prices fall,” may be waiting a very long time. There is an old cliche that “the best time to buy real estate was five years ago and the second best time is right now.” Our team agrees. We can help.
This week we’ll send out our monthly E-Newsletter with the stats for single family home sales in Mecklenburg County, comparing January to the previous month and same month last year. Here’s a sneak peak:
- Homes sales are down 30% from last month and 42% from last year.
- Average sales price is down 10% from last month, but up 3% from last year.
- Median sales price is is down 3% from last month, but up 7% from last year.
- Average price per square foot is down 5% from last month, but up 1% from last year.
- Sale to list price ratio is 98% which has not changed from last month, but down from 102% last year.
- Average days on market is up 10% from last month and 109% from last year.
- Pending home sales are up 25% from last month, but down 28% from last year.
- Supply is 1.9 months supply, up from 1.3 last month and 0.3 last year.
- Mortgage rates at 6.12% are down slightly from last month, but up from 3.45% last year.
- Average house payment is down 10% from last month, but up 40% from last year.
Photo by Stephen Leonard – Unsplash