Housing market data from May points to an easing of buyer demand.
The Market Is Still Hot, But The Thermostat May Be Adjusting
Approximately 66% of Single Family homes sold for more than their list price in Santa Cruz County in May, but there are signs that housing market demand may be reaching its peak, according to my analysis of housing market trends from MLS Listings and recent industry studies.
Pending sales in May were down 5% from April, compared to a 10% increase during the same period in 2019. (2019 is being used as a reference point since 2020 data is skewed by the pandemic)
Mortgage purchase applications have also decreased in recent weeks. For the third week in a row, applications dropped, falling 3.1% in the week ending June 4. Refinances have taken the biggest dip, according to the latest report from the Mortgage Bankers Association.
Make no mistake, the housing market is still sizzling and will remain hot for the rest of 2021, but there may be signs in recent market data that some would-be buyers would rather be spending money on restaurants, vacations and other things they held back on since early 2020 instead of on housing now that the threat of the pandemic is easing.
Further indicators of a trend toward easing buyer demand in relation to supply of homes are in the numbers associated with new listings, closed sales and months of inventory.
- New listings of homes for sale were up 9% month-over-month and up 24% from May 2020 and 20% from May 2019.
- Total closed sales were down 5% month-over-month.
- Months of inventory jumped from 0.9 at the end of April to 1.2 in May.
This is all happening, of course, while prices remain astronomically high. In May the median price for a single family home in Santa Cruz County set another record at $1,300,000.
Perhaps as a result of rising prices and waning demand, homes in May took 20% longer to sell with average of 19 days on the market. Homes sold, on average, for 6.7% above asking in May, falling from 7.5% in April.
Mortgage rates rose in the last week giving buyers further pause, as they jumped six basis points to 3% - a consideration for would-be homebuyers who were seeing the sub-3% rates earlier this year and during the peak months of the pandemic in 2020.
In Summary (TLDR;)
Housing market statistics from May seem to point to an easing of buyer demand month-over-month:
- Inventory is increasing
- Homes are taking longer to sell
- Fewer homes are going into contract
- The number of sales has decreased
- Months of inventory has risen
- The sale-to-list price ratio has decreased
- Fewer homes are selling above asking
- Mortgage applications are declining
Contributing factors include, but are not limited to:
- A median price that continues to rise
- Interest rates are on the rise
- As the world reopens after COVID families are choosing to spend their time and money elsewhere
A shift may have begun, but don’t be fooled - this is still without a doubt a sellers’ market. Housing demand is still far outpacing supply, but maybe, just maybe, buyer demand has taken its foot off of the accelerator. Stay tuned for an analysis of June’s data to see if May was a blip or if the ship has indeed started to turn (as a sailor, you know I couldn’t write this without some boating reference!).
Are you curious what all of this means for your home buying or selling goals? Let’s find out. Despite the numbers, there are great opportunities and solutions out there for everyone. But don’t just take my word for it, lets connect sometime and discuss your needs.