One consistent trend in housing is that prices fall every January. To get the industry’s earliest indication about January prices, today for the first time Redfin is releasing home price information for the current month. According to data from home sales recorded in the first three weeks of January, the median home price is $266,400, down just 1.2 percent from last month, a mere third of last year’s decline. And the median price is actually up a solid 7.6 percent compared with last January.
So what’s different this January? More people listed their homes for sale in December than in any other December since 2008. That led to a 4.8 percent year-over-year increase in total homes for sale heading into January. That much-needed inventory paired with strong buyer demand led to a solid increase in home prices in January compared with last year.
Last week, Redfin home-tour demand hit an all-time record, up 62 percent from the same week last year, with signed offers up 58 percent. In the first three weeks of the year the number of customers requesting tours surged 40 percent from this time last year, while the number of customers writing offers with Redfin agents leaped by 30 percent.
A rebound in first-time homebuyer interest is helping to strengthen demand this year. In the week of January 12, 57 percent of Redfin home tours were taken by first-timers, compared with 31 percent the week before, 44 percent a month earlier and 48 percent the same week last year. It’s also the highest rate of first-timers touring we’ve seen since the end of 2012.
Redfin agents across the country are having déjà vu, with bidding wars and packed open houses reminiscent of the 2013 frenzy. But in true 2015 style, buyers are now competing over homes at affordable price points.
Redfin agent Klaus Gosma says that more than 130 people visited this $350,000 three-bedroom Seattle townhouse during its open houses over the weekend.
“I have never seen so much traffic at an open house,” says Gosma, who has sold nearly 300 homes in his career. “The big draw for buyers was the home’s affordable price point.”
These early stages of buyer interest are driven in part by rock-bottom mortgage interest rates and a more lenient lending environment, but December housing activity shows us that buyers are finicky when it comes to prices. They will buy, but they won’t overpay.
A 2.3 percent drop in the median sale price in December from the previous month helped drive a 4.9 percent increase in sales for December compared with 2013. But only 14.8 percent of those homes sold for more than their list price, the lowest percentage of any month in three years. Homes also stayed on the market an average of six days longer than they did a year before.
After a year of hand wringing due to an underperforming first quarter, sales in 2014 across all Redfin markets were essentially flat, down just 0.03 percent from 2013. The shift to a more balanced market that we’ve seen signs of for months finally crystallized in the fourth quarter in many markets. Most metro areas (36 of 46) had more homes newly listed for sale compared with a year earlier, with the usual exceptions being in the Bay Area, Minneapolis and Seattle. In some places, the market has clearly shifted in favor of buyers.
“The tug of war between buyers and sellers here was settled late last year, with buyers edging out sellers,” says Redfin agent Paul Reid in the Inland Empire. “Prices have slowed considerably and inventory jumped quite a bit in the fourth quarter. Homes are staying on the market longer, a clear sign of buyers gaining an advantage in 2015.”
Reid says buyers will walk away at the first sign of an issue: a surprise on a home inspection, a low appraisal or a seller who doesn’t seem willing to negotiate.
Conditions heading into 2015 are favorable: buyer demand, low interest rates and more homes for sale. But inventory in a few metro areas is critically low, which could really sink sales volume in those places unless we see a much-anticipated surge in new listings in the next few months.
A clear warning sign on this comes from San Jose. The number of homes for sale was down 35 percent from November to December, and 8 percent year over year. The metro area had a 76 percent month-over-month drop in home sales.
In metro areas like Dallas, Boulder and Portland, the number of homes on the market is down more than 10 percent from a year ago. Homes in Denver are now selling faster than in the San Francisco Bay Area, which had long been the fastest housing market in the country. Because of low inventory in Denver, half of all listings were off market in less than two weeks (48.1 percent) and the median days on market was just 16 compared with 43 in all Redfin markets.
In the hottest neighborhoods, the lack of inventory paired with high demand will put upward pressure on sales prices. But buyers will only act if there are enough homes to choose from at the right price, which means that the 2015 housing market hinges on sellers.
Full data for December 2014 may be downloaded in this spreadsheet.
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