You may have seen recent headlines, or news reports, about the real estate market showing signs of cooling or slowing down. The last couple of blog posts and videos that I have done have also talked about a shift, or a cooling off of the real estate market as well, but what exactly does that mean and how does today's real estate market compare to the real estate markets of past years?

Continue reading below, or watch the following video, to learn more and understand what a slowing real estate market means to you if planning on buying or selling a home.

The Pace of Home Sales Remains Above Average

From what I have seen, and from the questions I am being asked, headlines about a slowing, or cooling, real estate market are creating more confusion than clarity. Slowing and cooling compared to what? If the temperature outside has been 100+ for the past week and today it only reaches 99, temperatures are cooling but it’s still hot!

With that in mind, I think it’s important to provide some perspective and take a look at how today’s real estate market compares to the markets of years past.

The real estate market we have been experiencing for much of 2021 has been anything but normal. Conditions have been white-hot due to high demand and low supply (I discuss this in detail in last week’s blog post). Even though pending home sales and total home sale numbers are down year-over-year, it is not because of a slowing or cooling market, but because you can’t sell what isn’t for sale!

Real estate isn’t the only thing being impacted by supply problems. Due to a semiconductor chip shortage, new cars are in limited supply causing used car prices to soar. Inflation is running high due to supply chain problems that are being experienced across the board. Just take a look at the number of cargo ships stacking up off our coasts waiting to be unloaded.

While home sales are down compared to the second half of 2020, we are still on pace for nearly 5.9 million home sales this year, which is more annual sales than any other year going back to 2012 as shown on the following graph:

Homes Continue to Sell Quickly

While the time it takes a home to sell is slowing compared to what we were experiencing in May, June, and July of this year, the pace at which homes are selling still remains faster than usual. Here are the national numbers for average days on market over the past 3 years:

As you can see, nationally, the current pace of sales remains faster than at any time going back to March 2018.

The comparison here in Frisco, TX is even more pronounced. The average days on market in September 2021 was 19, down 55.8% from the 43 days we saw in September 2020. Go back another year to September 2019 and the average days on market was 63.

In Temecula, CA the average days on market in September 2021 matched the national average of 17, almost the same as last year, but down from 38 in September 2019.

One of the challenges with the days on market number right now is that many homes are being listed for sale, completing the inspection period, and going pending all within the same month, which can make the number more difficult to track. Bottom line is that homes are continuing to sell quickly!

Bidding Wars are Still Common

Bidding wars are another area where we have seen a cooling in the market, but perspective is also important here. While we have probably all seen reports or heard stories of homes receiving 15, 20, 30+ offers, that isn’t happening with frequency anymore. Homes are still receiving multiple offers, but it is more likely to be 3 to 5 offers on average. Not all homes are receiving multiple offers though. Homes that buyers feel are overpriced will sit, but homes that are in great condition and priced fairly will attract offers quickly. As of August 2021, 3.8 was the average number of offers listings were receiving nationally. In the last couple of weeks, all of the buyers we are working with were still experiencing multiple offer situations and over asking selling prices, but the amount over asking has also come down. Homes are now selling for an average of 100% to 103% of list price instead of 107% to 110% that was common a few months ago. Despite the cooling. the market remains incredibly competitive by historical standards.

So, Is the Market Slowing Down?

Odeta Kushi, Deputy Chief Economist at First American put it best when she recently said:

“It’s not the white-hot market from earlier in the year & it’s not the 2020 market benefiting from a wave of pent-up demand but make no mistake this is still a hot housing market

Don’t let the headlines lull you into believing the housing market is going to reverse direction in the next 90 days, none of the leading indicators are showing that. While the market is slowing and the pace of appreciation is coming down, we very much remain in a competitive seller’s market environment.

Want to see if the real estate market is heating up or cooling down in your area? Click Here to see the latest data and look up any zip code in the country.


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