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July was hot but the market? Not. But don’t worry, keep watching for some good news and my hot take on the future!
As expected in the summer season, the number of listings that were taken off market in July by sellers, combined with listings that went into contract last month, was double the number of new listings coming to market. This slow pace of new supply is expected to last into Labor Day, and liquidity pace, which is a measure of demand, is low, even for the season, but not terrible – we can see the buy side, demand, expanding while supply remains constrained.
Looking at contract signed activity, it is also falling although not as fast as supply, and August is expected to be even lower. However, we are getting back to seasonal levels - the historic average is moving more slowly than the current – closing the gap and showing market strength. So it’s getting better, not far from where we want to be anymore.
All of this is causing a rise in the market pulse, but it’s not demand-driven. It’s the tight supply pushing it up.
PPSF is something that I suspect will cause some confusion in the coming weeks. Most reports and articles will show you a decline since they are recording closed deals only. But that data is lagging by about 3 months. Looking at a comparison with prices based on contracts signed, we already see the sharp increase typical of the spring market. The more accurate image shows us that prices per square foot are on the rise.
Looking at the state of the economy, we have some volatility in the stock market that could affect housing market. But some good news as promised: mortgage rates have dropped to a 15-month low! There is also a 100% chance of a small cut in interest rates this September, a quarter to half percent.
Now what does all of this tell us?
We had high mortgage rates during the hottest season, spring, which affected buyer activity negatively and gave us a less active spring market. Now, we have a drop in rates and tight supply, and we are about to enter the fall season, the second most active in the housing market. I predict buyers becoming more active over the next month-to-month-and-a-half, as they jump on the opportunity to score a deal before sellers, who can already see prices trending up, put their units on the market and leverage the increasing demand. Sellers who list now, beating the fall rush, can hope to use the currently low listing discount to their advantage. Buyers – the tight belt you’ve been feeling might just loosen up a bit soon.
Market Data and Charts: UrbanDigs
