Let’s consider for a moment the possibility that the home price correction, which started in earnest last summer, is over. Prices in our part of the world have taken quite a dip since then.
The seasonal drop in price and activity is normal, but still- the median sale price in January was about 18% lower than it was in July, and 5.5% lower than it was last January. So it’s been a more sustained drop than in previous years, driven by the interest rate hikes along with the normal seasonal decline. For example, here’s what 2021 looked like, back in the halcyon days of sub-3% interest rates:
The sale price in January of 2022 was equal to what it was in May of the previous year, and 10% higher than it was the prior January.
In a nutshell, the story of the second half of 2022 has been about giving back the equity that was built up in the first half of 2022. The question on everyone’s minds is will it keep giving back, or are we going to see some version of the typical rise in prices through spring and summer?
If you’re going down a hill too fast what are you going to do first to correct it? Slow down:
Looking at each month’s median sale price compared to the prior year shows us a couple things:
- December was the first month in 2022 that had a year-over-year drop in median price.
- January of 2023 had the same percentage drop as December.
That’s what flattening out looks like, albeit just for two months. It may not be a firm indicator that we’ll start to rise again, but it’s certainly better than the trend we were seeing in the fall.
The other data point we can look at to see if the market is thawing are the amount of pending transactions per week or month. This is as close to a real-time indicator of market activity as it gets, since it counts those who are DocuSigning on the proverbial dotted line right no, instead of a couple months ago (I’ll point out again that sales data is a lagging indicator- January’s sales are November’s transactions).
Pending transactions have been increasing. That’s the yellow line here:
Throughout fall, the number of pending transactions was running at about half the level of the previous year. January 2023, however, came in about 21% lower than the same month in 2022.
In other words, there was an uptick in pending transactions. More buyers are getting into contract.
When we run out of usable data, the anecdotal can help fill in the cracks. This is where boots-on-the-ground matter as we’re talking about open house traffic and number of offers. Speaking personally, last weekend I experienced the busiest open houses I’ve worked since last summer, and other agents in my office have reported similar results. Our office averaged two offers per listing in January, and a couple of our agents were involved in a listing that received 15 offers. It remains to be seen if this groundswell is going to continue, but personally I believe we will see a spring thaw.
I am a licensed real estate broker in the state of Oregon with ELEETE Real Estate. Data is sourced from RMLS, and all analysis is mine and mine alone. If I can be of assistance in your home search or sale, please contact me at eli.cotham@eleetere.com or via the contact page.
