We all know that the real estate market has slowed down since the dramatic April increase in mortgage rates — right?
Seeking to document and measure that slowdown, I checked the statistics available to me as a member of REcolorado, Denver’s MLS. Below is a chart of the statistics I gathered for the period Jan. 2021 to present. Analyzing that chart, you can see that while there are fewer active listings this May than a year ago, there are roughly the same number of sold listings — and they went under contract just as quickly, with a median days on the MLS (DOM) of just 4. And, more significantly, the median sold price this May was nearly $100,000 higher than May 2021, with a slightly higher ratio of sold price to listing price. April’s statistics year-over-year were even more impressive.
The smaller chart is a 7-day residential “Market Watch” widget that I copied and pasted from the MLS on Tuesday morning. Although I don’t know how to replicate what that chart would have looked like a year ago, it’s safe to say that it’s much different — and does not paint the same picture as the larger chart above. It definitely shows a vibrant market with lots of new, pending and closed listings, but the number of price reductions must be significantly higher than they were a year ago — and 10 times the number of price increases.
So, what does all this data mean for the average homeowner thinking of listing his or her home for sale?
The number of price decreases suggests to me that too many sellers are starting out with a listing price that might have worked in the past, but that is too aggressive for the current market. While the median days-on-MLS is still only 4, you can be sure that those listings lowered their prices a week or more into their time on the MLS. At the same time, that low days-on-MLS number tells you that the sellers who price their home correctly outnumber those who do not. Good for them. That’s the group you want to be in!
Another obvious conclusion is that while the dramatic increase in mortgage interest rates has impacted many buyers, there are enough buyers who are paying cash or are not deterred by the higher rates, which are still historically low. (When I bought my first home in 1983, I benefited from a subsidized interest rate of “only” 13%!)
Bottom line: Sellers should price their homes less aggressively. Buyers should focus on homes with a DOM over 10 days. That’s where the best deals can be found.