With gas prices low and consumer confidence at the highest reported level in seven years, there was a lot to be cheery about heading into the holiday home-buying season. However, positive consumer sentiment did not translate into more real estate transactions last month as the number of homes sold plunged 21 percent in November versus October and was down 5 percent from this time last year.
Another sign of the seasonal slowdown last month was a 27.7 percent dip in new listings. The average number of days on market and the percentage of homes selling above list price were little changed from October.
Home prices did not budge last month even as sales slumped. In fact, the median sale price has essentially flatlined at $274,000 for the past three months, a pattern that is different from last year when prices decreased by 0.9 percent from September to November. On a year-over-year basis, the median sale price increased 6.2 percent this November.
Ideally, price growth would be accompanied by strong sales. This would indicate that the market was in balance. A balanced market is one in which buyers and sellers are on the same page when it comes to prices and there’s enough inventory to meet buyer demand and vice versa.
This was not the case last month as sales declined year over year across Redfin markets. And while homes were no longer flying off the market, one in four homes still sold in two weeks or less in November and one in six homes sold for more than list price.
Sales decreased the most from last year in three California metro areas: San Francisco (-19.4 percent), San Jose (-18.8 percent) and San Diego (-17.5 percent). The sales slump was not due to absent buyers but to too few sellers. Inventory plunged 22 percent on average in these three metros in November from October.
“A lot of buyers who didn’t find homes this summer expected to buy during the holiday season when the market usually slows down and there’s less competition, but now there are fewer homes for sale,” says San Jose agent Angelica Robles.
We usually see fewer homes listed in November than in October, so last month’s nearly 28 percent drop in new listings was not a surprise. What is surprising is that the number of homes on the market in November declined 1.5 percent from last year, the first year-over-year drop in inventory we’ve seen all year.
Homeowners are in a better position to sell now than they’ve been in years. The number of homeowners with negative or low equity has decreased significantly in 2014. We estimate that just 11 percent of homeowners owe more than 80 percent on their mortgages in November, compared with 19 percent in April of this year.
Some homeowners may be turned off from listing due to the lack of homes available for them to purchase as their next home. Others may be using their increase in equity for home equity loans, which increased 21 percent in 2014.
This strong price growth that we saw heading into December could finally lure would-be sellers into the housing market.
