Around January 15th we were all beginning to think that we were getting off easy this winter. December was warm and snowless and January seemed to be going the same way. Along with the warmer than normal weather, the New Year started off with a high amount of buyer activity and it showed in the numbers. Pending home sales in Massachusetts from January 1st to 15th were up 14% over the same period in January 2014. Then on Tuesday January 26th everything changed. We got the first of four major snow storms in 22 days. In all we received over 90 inches of snow in 22 days. All of this snow dramatically impacted car dealers, restaurants, and of course the real estate market! The real estate market really went into hibernation mode for about three weeks. It is entirely understandable since people could not even get out of their own houses, never mind go look at others.
There are a few different ways to measure real estate market activity. One is homes listed, another is total homes on the market (inventory) and the third is pending home sales, which is contracts accepted.
The snow caused many home sellers to delay listing their homes. For the entire month of February there were 4,489 homes listed compared to 6,777 last year which is a 34% decrease in the total amount of homes listed for sale.
The lack of homes being listed for sale has created the current ultra-low inventory. On February 1, 2015 there were 16,750 homes for sale in Massachusetts. At the end of February there were 16,201 homes for sale. This represents more than a 3% decrease in inventory and was actually the first February since 2002 that inventory decreased from the beginning of February to the end. In comparison to the same time last year, 18,352 homes were for sale – which was 12% more than this year!
Pending Home Sales:
This metric is the best one there to measure actual buyer activity, as it tells us how many offers on homes were actually accepted.
From January 16th to January 31st pending home sales were down over 8%. The first two weeks of February was the worst of it since it was snowing almost daily. Pending home sales were down almost 19%! February ended the month with pending home sales being down 9.4%. This is the biggest drop in pending home sales for one month in years.
So what does this all mean for the year ahead? Here is what we predict will happen:
Pending sales being down so much in late January and February means actual home sales will be down dramatically in March and likely down in April as well. One thing to keep in mind is we will not hear about it until late April when the statistics are released. By that time the market will be on fire! March home sales will probably be down over 20%
The Rest of the Year
All of this snow has created a mountain of pent-up buyer demand like never before. Over the last ten days, buyers have been back out looking at homes and the market is getting back into gear again. By the middle of March, the market will be taking off like a rocket and properties will be flying off the shelves. All of the buyers and sellers that would have bought and listed their homes in February will now buy and list over the next month.
As a result, home sales will be up dramatically in May and June and then the market should be back to functioning more evenly. All signs still point to this being a breakout year for the real estate recovery. Nationally, the year is off to a great start. In January, pending home sales surged to their highest level in 18 months, as they were up over 18%! Back in January we put out a blog that explained 9 Reasons why 2015 will be the biggest year in Real Estate since 2005. In retrospect, it is clear we should have made it 8 Reasons and took out “a mild winter,” as that did not continue! In all this will be a great year for both buyers and sellers.