Your Home: Did the market peak in February?

A mild winter plus rising interest rates make for an early start to the real estate market. It seems these days that the market never really stops, to be honest. Seasonality is not as distinct as it was when I began my career in 2004.

But has the market already peaked for the year? By peaked, I mean has the perfect storm of low supply plus high demand already happened for the year? It seems that it occurred in February. Typically it occurs in either March or April, but since February the number of homes going under contract when compared to the number of active homes for sale has been dropping each month. This is not normal. See the graphs below.

Key_Partnersh_Graph

This graph showing housing supply and demand for the last 12 months is comparing April 2016 to April 2017. The number of active homes for sale is down 4.9 percent this year. However, the big story is the number of contracts received. Contracts received are down 34.4 percent from last year during the same month. In April 2017, 319 homes went under contract in the Shawnee Mission School District. That is less than February or March of this year. And notice that the number of active homes for sale has been increasing since January 2017. So supply is going up and demand appears to be dropping.

Here’s another graph of note: sales absorption.

Key_Williams_Partners

This graph is where the rubber meets the road. Of all of the information that I review on an almost daily basis, this graph is the most important because it truly shows supply and demand. The most important number for a listing agent to know, in my opinion, is what percentage of homes are going under contract in a given area each month. As the market shifts, and it always does, if you monitor the absorption rate you can somewhat predict where the market is headed. This allows a seller and their agent to price appropriately based on the current market demand.

In April 2016, 50.6 percent of the active homes for sale went under contract. That is a fast moving market when one out of two homes are selling. Fast forward to April 2017 and we can see that 34.9 percent of the active homes went under contract. Don’t get me wrong, this is still a good market. It is just not the same market that we saw in 2016.

Here are a couple of things to consider. First, the absorption rate of 34.9 percent in April 2017 is as low as the winter month absorption that we saw in November and December 2016. Secondly, the absorption rate in the Shawnee Mission School District has been dropping since its apparent peak in February of this year. As you can see from the graph, historically the absorption rate will continue to drop from April through the rest of the calendar year. If that is the case this year, how will this affect our real estate market moving forward? I will be watching the markets closely to tell you exactly what I see in the coming days.

If you are curious about how the shifting market is affecting your neighborhood, please email me today for a free market analysis for your home.

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