Spike in Housing Inventory This Fall Means More Competition and Lower Prices for Home Sellers
Fall is the second busiest time of the year for the housing market and we’re seeing that come together but there is one change in the market that needs to be noted and that’s the inventory levels.
The housing market in Massachusetts has changed dramatically since the spring. The major driver of this change is that housing inventory is actually up. Six months ago in March there were 19,073 homes on the market in Massachusetts, which is 30% less than right now at 27,301. Typically there are more homes on the market in fall than in the spring, but this is a big change compared to last year when there were 25,115 homes on the market in September, just 25% more homes compared to last March when there were 20,013 homes.
Watch Anthony with Shannon Mulaire of Fox 25 News Discuss Changes in The Fall Housing Market
And the inventory numbers aren’t just higher this fall compared to spring. There are 9% more homes of all types on the market in Massachusetts as of today than there were in September of last year. Even in Boston right now, where everyone has been talking about how low inventory is, there are 967 homes of all types (single-family, condo, and multi-family) on the market, 52% more homes now compared to March when there were just 636 homes on the market. There are 600 condos on the market, 44% more condos than in March when there were 416; and 210 single-family homes on the market in Boston compared to March, an increase of 69%. This spike in inventory will have a negative effect on home prices.
Lack of inventory was a major factor in the early spring 2014 housing market. Since there was pent up demand for homes and fewer homes to choose from, we saw many properties get multiple offers. Lower inventory also caused home sale prices to rise dramatically in many areas. We don’t expect to see this trend continue this fall. By the end of March housing inventory numbers began to top last year’s inventory numbers, and the year over year monthly price increase gaps began to narrow.
As you can see from the chart below, prices in July increased compared to July last year, but not by as much as earlier in the year when there was less inventory. With more inventory on the market by July, year over year price increases were not as dramatic as in January. Prices in January 2014 rose 19% compared to January 2013 but by July prices increased just 4% compared to July of last year.
Overall home sales in Massachusetts dropped 4% in July compared to July of 2013. Final numbers aren’t in yet, but it looks like home sales in August will be down as well. According to the latest data provided by MLS*, there were 7,497 homes sold in Massachusetts last month compared to 8,144 in August of last year, a decrease of 8%. Another indication that the market has slowed is that mortgage applications are down. According to a report from the Mortgage Bankers Association, for the week ending September 5th, the Market Composite Index, a measure of mortgage loan application volume, decreased 7.2% on a seasonally adjusted basis from one week earlier, to the lowest level since December 2000. So we are definitely seeing a slowdown in the market that started in late spring.
Why There’s More Inventory Now
For months home sellers have heard reports on the news about home price increases, and some have even seen homes in their area sell for way over asking price. With so much talk of home prices going up, more home sellers are putting their homes on the market. The problem is many are overpricing their homes. This means there will be more homes to choose from, but they’ll be at prices that won’t attract buyers. As we said, fall is the second busiest season for home buying, but there isn’t as much demand as in the spring, and recent sales data shows a slowdown of the market. Less competition for homes and less demand will cause home prices to decrease. This shouldn’t come as much of a surprise. Historically, home selling prices tend to be lower during the fall months. But we actually expect it to be a bit worse this year. Last week Banker and Tradesman put out a great chart that shows the median prices for single-family homes in Massachusetts from 2010 to 2014. In this chart you can see that selling prices tend to be lower during the fall months.
What Does This Mean for Home Sellers?
Home sellers need to be more realistic about pricing their homes. This fall buyers already have more homes to choose from so sellers must be careful not to overprice their homes. Sellers may think they can get much more for their home than the market will allow. To attract more buyers to your home, it’s important to price it competitively. Work with a Real Estate Agent to run a competitive analysis of what homes are selling for in your neighborhood.
What Does This Mean for Home Buyers?
The good news is this is best fall to buy we’ve seen in a few years. There will be more homes to choose from, and mortgage interest rates are still low. Rates for a 30 year fixed have stayed in the low 4% range for months, making home ownership more affordable than renting in many areas. To get the most out of these market conditions work with a Buyer’s Agent to guide you through the entire process, and also get pre-approved before you shop for a home to determine how much you’re qualified to borrow.
*MLS Property Information Network, Inc.