There are two things that are in the news today when it comes to real estate. One is from Redfin, saying, “Homebuyer Competition Drops to Lowest Level in Over Two Years.” The other is from CNBC, saying, “June home sales fell 5.4% from May, as prices set yet another record.”
Let’s just dive right into this one. You have to dig into the data because the data tells us the story.
According to Redfin, “The bidding-war rate dipped below 50% for the first time since the start of the pandemic in June as rising mortgage rates and inflation took a bite out of homebuyer budgets.”
They also have a graph of the monthly share of Redfin home offers that faced competition. Back in April 2020, they were at around 32% or 33%, and it boomed in 2021, from around 60% to more than 65%, reaching the peak in January 2022 at 69.6%. Then it dropped when the rates were raised, and we are now at 49.9%.
If you dig into the article, you’ll see the top three areas are Tampa, FL, Riverside, CA, and Phoenix, AZ. Redfin shows side-by-side the percentage of Redfin offers that had bidding wars, from June 2022, May 2022, and June 2021.
Tampa is at 28.9%, which was a big drop month-over-month (54.2%), and year-over-year (58.8%).
Riverside is now at 31.9%, last month at 47.6% and last year at 70.5%, while Phoenix dropped to 35.3% from 54.5% last month and 58.1% last year.
Let’s look more into the market insights of each area.
Tampa, Florida, which we all know is still a very hot market:
Riverside, California, a market that has been relatively stable despite the recent things going on:
Phoenix, Arizona, one of the markets that we have to watch out for, and is said to be “overvalued” according to a lot of data analysts:
So, what is this sale-to-list price ratio (or list-to-sale ratio)?
According to Beverly-Hanks Realtors, “The sales price of a home divided by the last list price, described as a percentage, is referred to as the list-to-sell ratio (or list/sell ratio). If the list-to-sell ratio is above 100%, the home sold for more than the list price. If it’s less than 100%, the home sold for less than the list price.”
Why is this ratio important? Because we want to look at what homes are actually selling for, and in the case of the three metros above, homes are still selling for over the asking price.
The price drops are happening now because sellers are adjusting their prices to what they think they should be and what people will pay for them. But if you take a look at history, the list-to-sale ratio according to Statista, from 2012 to the present, was around 95%. Now, we are at about 102% on average. We are still doing better right now, despite people freaking out and saying, “No, Tristan. We’re sinking.”
Yet, according to CNBC, “The still-tight supply, however, is keeping the heat under home prices. The median price of an existing home sold in June set yet another record at $416,000, an increase of 13.4% year over year.”
And if you go to NAR (National Association of Realtors), they are saying the same thing. According to them, “The median existing-home price for all housing types in June was $416,000, up 13.4% from June 2021 ($366,900), as prices increased in all regions. This marks 124 consecutive months of year-over-year increases, the longest-running streak on record.”
People will be like, “Well, it’s not going to last.” Of course, it’s not going to last. But the point is, people keep on talking about a crash, and I want to show you what we are heading into, based on the data.
If you keep on paying attention to the current data, it looks like we are heading into a normal market.