Clark County Housing Market Update
(You won’t read THIS in the paper)
1) Buyer surge slammed by inventory shortage.
Tools to capture today’s value and close later when you are ready.
The best indicator we have for the level of buyer activity is our lockbox readings. These come out weekly and provide us with the most current information on market activity. It is more current than closed units or even pending sales as these come out monthly.
From the last third of December to early February, buyer activity increased 119% (more than doubling). Yet our January inventory ratio moved up suggesting a slowdown.
So you might ask, “Chris, if buyer activity is such a good indicator then why did our inventory ratio move from 1.8 to 2.4 (discussed below also)? So, a fair question.
Buyer activity is a good indicator because there is little time loss between the activity and the reporting (about 10 days) as opposed to the inventory ratio which is based on closed sales. It takes on average about 30 days from pending to closed and it then takes almost 30 days for the closed sale to show up in the stats. The rush in buyer activity that I suspect happened in January would not be producing closed sales until February and March. The inventory ratio for January is actually calculated based on closed sales that went pending in November and December and we know December buyer activity was less than half the buyer activity in January.
Another reason the inventory ratio for January jumped up and the reason the February ratio will likely not come down as much as one might expect (after all my blabbing about this huge surge in buyer activity), is that the inventory is not there for the buyers we have.
“How do I know this”, you ask? Another fair question. Well, let me try and talk myself out of this corner.
OK, so I just put a home on the market two weeks ago. It went on the market late in the evening and by the next afternoon we had 9 showings scheduled for that same day resulting in two offers that evening. All that activity occurred in less than 24 hours on the market. We ended up with two good offers, both at $30,000 over what the comparable properties would easily support. Naturally, we accepted one of the offers and that means there are 8 other buyers (and likely more since we were on the market for less than one day) who wish to buy, if only there were enough homes.
This is the period of the year (January through March) when the price of homes is most likely to rise the quickest. (Do you remember my discussion many months ago on the two factors of home value, historical and hysterical? If you missed that and want the explanation, just reply.) The hysterical factor is in full force right now. It likely will die down in April when inventory usually begins its rise and buyers find home shopping much easier and less stressful.
OK, so you are thinking perhaps that the real explanation for the high buyer activity on this new listing is I just priced this home wrong and that is why all the craziness. That certainly is a possibility yet just today I talked with a top agent who confirmed that she too is experiencing the same sort of issues. Prices are rising so quickly that the comparable homes are just not keeping up with the market as well as the price buyers are currently willing to pay.
Inventory levels were at 1.8 in December and rose to 2.4 in January. This might seem contradictory to my prediction of a strong start in January but I am sticking to my story. My reasoning is discussed above. We have a very strong start in buyer activity for January as was expected but it will not show up until February and even then it likely will be somewhat subdued because we simply are not getting the listings for all our buyers to find their homes.
This is the thing that defies logic. As is typical, we did not see any growth in listings in January even though the holidays are over. Sellers that took their home off the market during the holidays did not put them back on in January. My thinking is that most sellers would quickly put their home back on the market in January but it never seems to work out that way.
January 2020 listing were down 23% from January 2019 and down 9% from December 2019. (Yet, buyer activity increased 119% in January over December.) ….Thus the hysterical buyers.
Seller Tools: sell now while it is hot and close later
If you plan to sell in 2020 and have the flexibility to sell now then you are advised to do it. If you are almost ready but need a few months to be fully ready then consider a delayed closing. It is a creative tool for such hot markets. For example, I currently have a home sale where the seller reserved the right to lease back for as long as 6 months thus cementing a buyer in during this hot period of the market. 2-3 months is a more common period to delay a closing but while the market is hot, you can likely find a buyer for your needs.
Pending sales from December to January rose 142 units or 27%. This will not affect the inventory ratio until the deals close. This will likely occur largely in February. Again, based on my experience and that of other agents, we can safely say the number of pendings would have been even higher if the inventory was there for the surge of buyers. If you are a potential seller, you should consider taking advantage of this brief market phase. It will mean more dollars in your pocket. How many more depend on exactly your home’s position in the market (price, condition, location). The hysterical factor can mean between $10,000 to $30,000 in your pocket. This factor is a function of how buyers are feeling and this can change very quickly, like in a matter of days the market will change and the hysteria and competitive bidding is gone.
As you can see from the graph, the past two years suggest pending sales likely will not rise much from January to February and I speculate the reason being a lack of inventory rather than a lack of buyers (discussed above).
Price reductions have been on a steady decline the past few months. They have fallen from 757 in October to 483 in December and risen slightly in January to 522.
The Average Price:
The average price of a home in Clark County remained relatively steady from December to January, holding at about $414,000. I expect this to begin rising most quickly the next 3-4 months. The rate of rise will then slow for the rest of the year as inventory levels catch up with demand. Keep in mind that the hysterical factor disappears quickly, in a matter of days.
Market time rose from 65 days to 77 days. I am sure this will drop quickly next month as buyer activity is too strong to remain this high.
There is a window of opportunity for sellers in this current market IF the market plays out as it has for so many prior years.
There is an unusually large buyer activity surge (more than double since a month ago) and low inventory that will likely stay low until early April. Then sellers will begin their march back into the market as usual. During the first 3 months of this year we will likely see competitive bidding over the list price that will net sellers more. After that time, the number of listings will begin catching up and buyers will begin to see some comfort.
But there is a strong cautionary word that seems appropriate. We are in unusually precarious and unpredictable political times. The strong market of today could change quickly as they almost did with the conflict involving Iran last week. If a market change occurs then your short range plans may get put on hold.