Around this time last year, the housing market was at its' peak with incredible demand and low interest rates. Home prices soared, with examples of homes selling like one that went for $128,000 over the asking price, in just five days and with 18 offers on the table. A year later, after eight rate increases, the Feds are hopefully done raising rates. The market has cooled, what are homes selling for compared to their asking price?
In February, single-family homes sold for 97.2% of their asking price, strata properties were also at the same 97.2%, giving buyers more bargaining power and room to negotiate. This is after two consecutive years of selling at 100% of asking price in 2021 and 100.1% in 2022. The 2.9% drop is giving buyers more opportunities and time to find the right home, which is a welcome change. Right now the sale to ask price is even below the 10-year average for February of 98.2%.
Even with the the ratio down 2.9% from last year, area by area and property by property there is different demand for each type of property. In the past two years a lot of real estate marketing by my peers showed that homes sold over ask, almost like it was a badge of honour, personally I have never liked that marketing, nor saw it as something that should be celebrated. The market is the market, just because a home was underpriced and sold over ask, to me that is just one of a handful of pricing strategies and not one that should be celebrated.
Using Kettle Valley as a case study, it goes to show you should not just trust one number when looking at the health of the market for instance is currently sitting at sale to list price at 99.9% which I think we would all agree is very good right now. Digging a bit further that ratio on 4 sales in 2023 so far with an average days on market of 79.75 which still is not terrible but not as good as the original number and the kicker, there are 24 active listings, using February sales of 2, that is giving 12 months of inventory which is heavily in the buyers market territory. That is a lot more supply than demand and proof that you can't just trust one number when looking at the market.
Using South Rutland as another case study helps prove the other side. With a ratio of 97.4 of sale to ask price, it is slightly above the overall market. There were 11 sales in February, and 34 active listings. That is 3.2 months of inventory, which is a sellers' market.
Economics tells us that the relationship between supply and demand dictates pricing, and the housing market is no exception. But how does supply and pricing/expectations of prices for sellers and buyers correlate?
With depleted inventory and high demand, the competition in the housing market has been intense in the last couple of years. This is evident in the first image where the correlation between the active listings and sale to ask price is clear. In 2016, there was a dip in inventory which caused the ratio to separate slightly, but nothing like the past couple of years. The little bit of green you see, that is the ratio of sales compared to list price. The blue is the active inventory.
The second image shows the same inputs but with reversed roles. The blue represents the sale price to list, and the green shows active listings. Despite two years of rapid price growth, sale prices are not as competitive now, giving home buyers some bargaining power back. However, homes are still selling at good prices, provided they are priced accurately. While some inventory may have been sitting all winter, new inventory has been moving fairly well, with multiple offer situations still happening, but more situational and more sporadic.
These ratios give us an idea of how competitive the marketplace is in each segment and market. When no one else is offering on the home, the ratio will typically go down, but when competition goes up, the strength of offers comes into play.
It remains to be seen where things will go from here with months of inventory back in the balanced market for February, time will tell. Mark and Maddie