Stats have finally caught up to the reality of the market. As of August we have officially reached a balanced market. The Cromford Index hit 106; a balanced market is 90-110, so we are now in the upper levels of balanced. This is similar to what we experienced in 2018 and 2019 before the craziness ensued.
In August we also saw a stabilizing of the inventory. After a few months of sharp increases in supply, August saw a leveling off. We will have to see if this holds as we are now about to enter the 4th quarter of the year which is historically a slower market for us.
All-in-all I am still not fearing a crash of any kind. The conditions that were present during the 2009 crash are not the same as what have now. In the previous crash we were actually in a Buyer’s Market with more than 40,000 homes listed for sale. Even with our increase in supply over the last few months, we are sitting with a little over 17,000 active listings. We simply don’t have the supply levels we did back then. Couple that with the more strict lending criteria we have now and it makes me confident in stating a full on crash is not in the cards, unless some drastic unforeseen event occurs.
Will we have a price reduction? Probably, and some areas already are seeing it. I don’t think it will be massive though and different areas, types, and price points of homes will be hit differently.
Personally I feel a lot of it has to do with the volatility of the interest rates, not necessarily the rates themselves. Seeing rates in the 5’s and 6’s is not unusual (if you remove the last few years). What IS unusual, is how much they are bouncing around. I’ve seen a 3/4 point swing in the middle of one day. That swing is what is making buyers more cautious right now. If the interest rates level off, we should see some more buyer activity and a stabilizing of home prices. If they continue to fluctuate drastically for an extended time, my guess is that overall value reduction will likely be a little steeper.
August Stats Highlights
Officially Hit a Balanced Market
Cromford Index Drops to 106
20% of Listings Have Price Reductions
Median Price Reduction is $10,000
14% of Closings Include Seller Concessions