Market Waves & Pent-Up Demand
What low inventory means for buyers and sellers.
Join me in our ‘Weekly Market Update’ to decipher what to expect in the coming weeks & months.
Happy Friday! Brian Manning here with the weekly update. Let’s get right to it.
At the beginning of this week, there was not a lot of economic news to talk about. We had the change in administration and there’s a lot of waves in the marketplace right now. Just not a lot of market-moving news to talk about. I would say the big news of the week came out today on Friday- existing home sales. This is for December, so likely people who were shopping for a home in October and November. The report reflected better numbers than were anticipated on a month-over-month basis. This was up 2.2%, which is amazing to see because historically December is a relatively quiet time in the marketplace. There are not usually a lot of changes there as far as the increase in volume is concerned. On a year-over-year basis, this is also up 9.3%. I think the other key item for us to look at is inventory. Inventory levels are still low. They’re still below pre-pandemic numbers. I do understand on a year-over-year basis, they’re up around 16%, and that sounds like a big number, but this is still well below pre-pandemic levels, so inventory is still low.
Also, if we look at first-time home buyers, we’ve seen this number edge up, which is great to see. They make up about 31% of all purchases right now. This is really important because on an annual basis, we’re seeing household formations at about 2 million annually. So what does that mean? That means two people coming together, creating a household, and combining expenses, possibly becoming a potential home buyer in the future. So if we look at pre-pandemic levels and we look at what’s called an annualized sales pace, typically annualized sales pace was like 5 to 6 million sales per year. So right now the estimation for this year is 4.1 to 4.2 million, which is pretty similar to what the anticipated numbers were for last year as well. But it feels like there’s this pent-up demand for people that have been waiting, and it feels like the annualized sales pace is wanting to get back to that higher number of where we were at pre-pandemic levels at that 5 to 6 million per year.
I can tell you that one of my theories for quite a while has been that we have a lot of home buyers that have sat on the sideline for the last several years. Meaning three years ago they said, well, I’d love to buy a house, but rates are higher and I’m gonna wait. Another year goes by. They say, well, rates are still higher. I’m gonna wait to buy a house. Let me see what happens. Another year goes by, rates are higher. I’m gonna wait and see what happens. I truly think that there’s this demand that’s built up. We have a large amount of consumers that have wanted to buy a house. They’ve been waiting 1, 2, 3 years because they’ve wanted to see interest rates move lower, which they haven’t, and now you’re starting to see this demand come into the marketplace. I truly think that people are sick of waiting and people need to move, households are forming, whether you’re buying a second home, investment property, upsizing, or downsizing, it doesn’t matter what it is- I just strongly feel like the demand is there.
I can tell you our pre-approvals, that’s new clients, are coming in at a record pace at the beginning of this year, which is exciting to see. So it just feels like the annualized pace is really wanting to beef itself back up back to where it was at pre-pandemic levels. It’s gonna take a little while, but that feels like the path that we’re moving on.
I’m around all weekend. If you have any questions, let me know. I’m available seven days a week from 8:00 AM to 8:00 PM.
Realtors- we have a class we’re doing right now. It’s called Winning The Listing Presentation. We did a sold-out event last week in Boulder. I have one coming up next week in Denver that’s sold out already. We have other dates that are already confirmed coming up in Fort Collins, Colorado Springs, Boulder again, and Denver again. We’ve had tremendous feedback. This is really helping agents with their success in working with buyers on the compensation side and listings on the compensation side. Come on out. I think you’ll really enjoy this.
Happy Friday. Hope you have a great day!
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Brian@BrianManningTeam.com
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