Market Producing a Surge of Inventory

I have been helping several buyers in the $350-$400k price range which in our market is about 95% to 115% of median price for a detached home. I have seen a massive swelling in the listed units that is outpacing the pending units by a significant amount in this price area. This will lead to a flip in the market that should start favoring buyers as the summer closes.

Under 300k will likely remain RED-HOT for some time to come locally however, as there is no shortage of buyers at the entry level and inventory remains tight. But rising rates has put the squeeze on buyers in the above median price ranges. And sellers seem to be jumping in.

The median price has been dead flat all year long. The chart above shows the county wide median for all single family detached units this year. Many agents and sellers are living in a fantasy where they think prices are still skyrocketing. They are not. This market is healthy, just not out of control like it was from 2014-2017. The sky is not falling here friends, the economy is strong, employment is strong, the housing market remains stable. But it is NOT the red-hot craze that media types following trailing data suggest. Many agents fall into the trap as well. We are headed to a healthy neutral market.

The local market is absolutely prime for a seller sitting on a small house in the sub $300,000 range. They can get top dollar for that house while enjoying some choice and a neutral market in the above median price range such as a house in the $350-$400k range.

This is ideal conditions for sellers under 300k, yet they are not bringing inventory to market that fast. It is showing signs however of slight improvement on inventory. The chart above shows data for detached single family homes from $200k-$300k in Clark County. The sold units by month are in the big red bars. But the real data lies in the line chart above the red bars. This shows listed units and pending units. Look at January where there were substantially MORE pending units than new listings coming to market. Inventory was shrinking, the market was gobbling up new listings faster than they came online. In May things flipped a bit. Now you see a few more listings coming online and less pending units. This can likely be directly correlated with rising rates putting a bit of a damper on the buying pool. But if that chart continues to follow the trend line, inventory will still favor sellers to the end of the year and maybe into 2019. Under $300,000!

If you are a seller with a small house and want to make the move up to the next level, there is a window of opportunity to sell your current house quickly and for a great price, while having a little room to negotiate with the sellers above $350k. We had this same scenario when the market first emerged from the recession and we have it now that things are settling in. A 3 bed 1 bath starter house with 1100 SF in good shape can fetch $280k and that seller can upgrade to a similar quality two story  4 bed 2.5 bath home with 2000 SF for only 10-15% more money! This is GOLDEN!

Now look at this next chart above. This shows the same data from the price range of $350k-$400k. Many agents have not been paying attention! Look at the trend line. Listed units has outpaced pending units all year long and in May a massive spike in inventory began. Sellers trying to get King Midas prices for their homes in this range are seeing little success. Too many agents look at the sales bars which are TRAILING indicators, rather than the listed vs pending data which are LEADING indicators. Trailing data shows what already happened, leading data shows what is likely to happen. For example the pending units in the chart above shows a trend DOWN but sold data is UP. The pending line leads us to the conclusion that the next months closed sales will be either flat or down. If this data line trends out to the end of the year, we will see a complete change from this weak sellers market to a moderately strong BUYER's market in the above median price range. Again above 350k here, and it progressively softens the higher up you go in price range.

Sellers need to understand this. The ship full of overpriced listings sailed away. I showed several overpriced listings that even made my clients shrug their shoulders. They didn't even want to deal with the idiot trying to sell their house at that price. Nobody wants to enter a contract with an unreasonable person. In 2016-17 overpriced listings were fine in this price range because there was no inventory and prices were rising. But this year the market appreciation is flat. If a seller is waiting for the market to come to him, they are going to have to wait quite awhile.

Price the house right and it will sell. That is good advice in almost any market and it is absolutely gospel in this market. Sellers above the median could find themselves chasing the market down if they try to get greedy. Potential sellers sitting on a sub median starter house, you have a window right now! Interest rates will push that window of opportunity closed soon.