With more available houses, buyers feel a little less pressure after hot spring and summer
The red-hot residential housing market in spring and summer is cooling.
Well, sort of.
It’s partly the cyclical nature of home sales and partly potential buyers maybe taking a breather as they continued to see prices at record highs.
“We have certainly cooled off in the last three months,” Cincinnati Area Board of Realtors CEO Rich Fletcher said in late September. “But we’re cooling off from a record high. It would be somewhat disingenuous to say that we’re cooling off, from a historical perspective, but certainly it’s cooling off from the peak of three months ago.”
Fletcher noted that “typically, the winter months are slow, then in February, you start seeing sales, and then the peak selling period is the summer, through July, and then it starts to cool off a little bit.” 2021 has been no different.
However, a lack of inventory of homes for sale in the spring and summer sent buyers scrambling for a somewhat limited number of houses, which sent prices soaring. New listings began to trend upward in March, but they weren’t enough to satisfy demand. The median days on market for homes sold locally in March through May were two; in June and July, three days; and in August, four. Houses for sale disappeared fast.
“If you look back in 2019, it would be 10 days; 2018, 11 days,” Fletcher says. It typically peaks at some point in the year at 30 days.
In southwest Ohio, which is covered by the Cincinnati Realtors, the median price of a home went from $199,900 in February to $253,500 in June before declining in July and August to $245,000. Active inventory hit its highest point of the year in August, at a close-to-normal 2,361 homes for sale. That was well above the low of 1,376 in February, which was half of the inventory available a year earlier.
Buyers were often driving the gains by offering above the listing prices of houses. Realtors reported getting 20 or 30 offers for a home. Sellers were combing through offers that often were not only above the asking price, but also required no appraisals or inspections in some cases, depending on how much the buyer was willing to commit to a down payment.
Historically low interest rates—ranging from an average of 2.65% in January to 3.18% in April for a 30-year mortgage—also were allowing buyers to make higher offers.
The Realtors board tracks the percentage of list price that a house brings. So far in 2021, sellers have sold for an average 100.9% of list price—June was the highest, at 102.2%, so a house listed at $200,000 would have sold for an average additional $4,400. In the past five years, that percentage was below 100% every year, Fletcher says, with the 2017 average of 97.3% being the lowest, which means that buyers could comfortably offer less than the listing price.
“My wife and I occasionally will watch HGTV, and you see these shows where, on the West Coast, people are bidding over,” Fletcher says. “We’re like, who does that? Now you’re seeing that in the Midwest. It’s certainly not a typical scenario. It’s classic supply and demand. When you have this limited number of houses on the market, but the same number of buyers, prices escalate.”
The total number of houses sold for the year was up 5.6% through August when compared with 2020.
“It’s historically still a very, very strong seller’s market,” Fletcher says.
With the likely decline in sales during the winter, it’s anybody’s guess whether warmer weather in the spring will again heat up the housing market in 2022.
