The dictionary says that “convergence” is the act of coming together from different directions – and that is exactly what is happening with three key indicators in the Loudoun County real estate market.
In the first quarter of 2013, we’ve seen the number of new contracts, new listings, and fully available inventory converge. A specific example: in March, there were 660 new contracts, 808 new listings, and just 1,115 listings on the market at the end of the month. Two short years ago in March 2011, there were two and a half times as many available listings and 40% more new listings than new contracts.
It’s a tight market in most prices ranges right now, and we haven’t seen these indicators so closely aligned since the peak of the market in 2004. It’s so tight that there has actually been a 28% drop in contract activity year-to-date for homes priced less than $300,000. There simply isn’t enough inventory – just a 27 day supply – to support the level of demand. But the upper brackets, while still a small slice of the market, are doing well. There’s been a 67% jump in contract activity through the first three months of the year for homes priced more than $750,000.
To give you an idea about how dramatically the market has changed, the second chart at right shows the same three indicators from January 2007 through the end of 2008. The number of active listings was as much a thirteen times the number of new contracts, and the number of new listings coming on the market was typically two and a half times the number of new contracts.
Low inventory continues to drive the market, with 21% fewer homes on the market right now than this time last year. We see more of the same in the months ahead. Thus far, there’s no discernible negative impact from sequestration, and there’s no reason to think that the low inventory situation is going to change anytime soon. Homebuyers below $500,000 are going to find it particularly challenging to find what they’re looking for.
The overall supply of homes on the market at the end of February was 2.0 months, down from 2.6 months at the end of February 2012.
Look at the supply for homes priced less than $300,000 – it’s just 27 days!
Remember that the low supply relative to last year for homes priced less than $300,000 is due entirely to the drop in inventory, not because of an increase in contracts.
AVERAGE NUMBER OF DAYS ON THE MARKET
The average number of days on the market for all homes receiving contracts in February 2013 was 50 days, which is a decrease of 21.9% from 64 days in February 2012.
With so little inventory, listings priced less than $500,000 are selling in just about 40% less time than last year.
RELATIONSHIP OF SALES PRICE TO ORIGINAL LIST PRICE vs DAYS ON MARKET
Initial pricing strategy is critical to the listing process, even in this tighter market. The longer a home sits on the market, the deeper the discount to its original list price will likely be.
Homes settling in Feb. 2013 that received contracts their first week on the market sold, on average, 0.4% below list. Those that took 4 months or longer to sell sold for 14.6% below the original price.