Ask Eli: Is the real estate market slowing down?
This regularly sponsored question-and-answer column is written by Eli Tucker, Arlington-based real estate agent and Arlington resident. Please email your questions to him for a response in the next few columns. Video summaries of some articles are available on YouTube on the Ask Eli, Live With Jean playlist. Enjoy!
Question: Have you noticed a change in the real estate market lately?
Summer slowdown is normal, probably more pronounced in 2021
It is normal for the real estate market to slow down as we move from the intensity of the spring market to the summer market and we (myself, my colleagues and the lenders I have spoken to) have seen this change over the course of the last few weeks.
I don’t think we’re about to experience a market correction, but I think the change in market conditions from the spring market (which really started in Jan / Feb 2021) to the summer market will be more pronounced. this year due to COVID.
Buyers more distracted by travel / events
Now that most of our buyer population is vaccinated and businesses / events are open, buyers’ attention is finally focused on travel, events, and visiting friends and family rather than just their home. house search. Diversions are typically highest in the summer and during the holidays, so historically slower markets, but this summer and the holiday season will face an unusually high number of distractions for shoppers. (This is a good thing!)
Ask for prices to catch up
Another factor in how the market has moved this summer is that asking prices are finally starting to catch up with, in many cases, actual market values. In the first 3-4 months of 2021, the sales data (selling price) was not there or was not sufficient to give sellers the confidence to increase their asking prices by 5-10% + per compared to 2019-2020 prices, which is why we have seen such extreme price escalations this year. Now that the asking prices are more in line with what the market is willing to pay (in my experience over the past 4-8 weeks), the number of offers and wild escalations should decrease.
What will / will not happen
Homeowners who are considering selling shouldn’t be worried about the market downturn, but expectations should change from previous months. Here is what I think the change will look like and not look like:
- AURA results in fewer total bids on competing homes
- AURA results in fewer properties sold in the first week
- Will result in buyers negotiating better / more contingencies
- AURA results in less extreme price escalations
- AURA results in fewer homes listed (likely a 20-30% drop from March-May)
- Will NOT cause prices to drop (prices should stabilize)
- Will NOT result in a buyer’s market
Spring vs summer, 2016-2019
Let’s take a look at how the Arlington real estate market went from the spring to summer of 2016 to 2019 to give some historical perspective. I did not include 2020 as it will always be an outlier that provides little value for historical trends / contexts. I have looked at four data points that I use to measure market conditions:
- Percentage of dwellings having been the subject of a contract in the week following their registration
- Percentage of homes sold at or above the initial asking price
- Average selling price compared to the initial asking price
- Number of houses put up for sale
Here’s a summary of the results of the charts shared below:
- Intensity of demand (contracted within the week and homes sold at or above demand) fell from spring to summer every four years, except for a slight increase in the number of homes sold at or above demand in the summer of 2019 (likely due to a significant drop in supply due to the Amazon HQ2 announcement in November 2018 putting upward pressure on prices throughout year).
- The average selling price compared to the original asking price has fallen every year except in 2019 (remained almost unchanged), suggesting less extreme escalations and more price negotiations.
- The number of homes listed in the summer has fallen by around 20-30% each year compared to the spring market.
If you would like to discuss buying, selling, investing or leasing, please do not hesitate to contact me at [email protected].
If you would like an answer to a question in my weekly column or to discuss buying, selling, renting or investing, please send an email to [email protected]. To read one of my old articles, visit the blog section of my website at EliResidential.com. Call me directly at 703-539-2529.
Video summaries of some articles are available on YouTube on the Ask Eli, Live With Jean playlist.
Eli Tucker is a Licensed Real Estate Agent in Virginia, Washington DC and Maryland with RLAH Real Estate, 4040 N Fairfax Dr # 10C Arlington VA 22203. 703) -390-9460.