Weekly real estate update 8/6/2021… price reductions are increasing as showings decrease

ShowingTime Stats 2021-08-04

While we were gone last week showings continued to slow down, very closely mirroring past years trajectory at this time… but lower. It seems like the early part of the year was fueled by deferred demand from Covid 2020, now settling back. Showings have been hanging below the last two years since the end of May.

Market Stats YTD – 2021-08-06

Nothing new with coming soon, new and pending listings but what I do find telling is the rise in price reductions. It isn’t unusual for price reductions to increase at this time of year, but they were persistently low the first half of the year and have now been rising. For comparison, I looked at the beginning of April through the beginning of August ten years apart… 2011 vs 2021. The number of price changes increased 17.1% over this period in 2011… but increased 102.2% in 2021!

price reductions

In spite of the drop in prices and a slight increase in inventory, there is still a housing shortage. Although this shortage is the result of many things, one of the driving forces has been the drop in new construction, as explained in the article below from our blog at Keeping Matters Current.


new construction2

A Look at Housing Supply

One of the hottest topics of conversation in today’s real estate market is the shortage of available homesSimply put, there are many more potential buyers than there are homes for sale. As a seller, you’ve likely heard that low supply is good news for you. It means your house will get more attention, and likely, more offers. But as life begins to return to normal, you may be wondering if that’s something that will change.

While it may be tempting to blame the pandemic for the current inventory shortage, the pandemic can’t take all the credit. While it did make some sellers hold off on listing their houses over the past year, the truth is the low supply of homes was years in the making. Let’s take a look at the root cause and what the future holds to uncover why now is still a great time to sell.

Where Did the Shortage Come From?

It’s not just today’s high buyer demand. Our low supply goes hand-in-hand with the number of new homes built over the past decades. According to Sam Khater, VP and Chief Economist at Freddie Mac:

“The main driver of the housing shortfall has been the long-term decline in the construction of single-family homes.”

Data in a recent report from the National Association of Realtors (NAR) tells the same story. New home construction has been lagging behind the norm for quite some time. Historically, builders completed an average of 1.5 million new housing units per year. However, since the housing bubble in 2008, the level of new home construction has fallen off (see graph below):A Look at Housing Supply and What It Means for Sellers | Simplifying The MarketThe same NAR report elaborates on the impact of this below-average pace of construction:

. . . the underbuilding gap in the U.S. totaled more than 5.5 million housing units in the last 20 years.” 

“Looking ahead, in order to fill an underbuilding gap of approximately 5.5 million housing units during the next 10 years, while accounting for historical growth, new construction would need to accelerate to a pace that is well above the current trend, to more than 2 million housing units per year. . . .”

That means if we build even more new houses than the norm every year, it’ll still take a decade to close the underbuilding gap contributing to today’s supply-and-demand mix. Does that mean today’s ultimate sellers’ market is here to stay?

We’re already starting to see an increase in new home construction, which is great news. But newly built homes can’t bridge the supply gap we’re facing right now on their own. In the State of the Nation’s Housing 2021 Report, the Joint Center for Housing Studies of Harvard University (JCHS) says:

“…Although part of the answer to the nation’s housing shortage, new construction can only do so much to ease short-term supply constraints. To meet today’s strong demand, more existing single-family homes must come on the market.

Early Indicators Show More Existing-Home Inventory Is on Its Way

When we look at existing homes, the latest reports signal that housing supply is growing gradually month-over-month. This uptick in existing homes for sale shows things are beginning to shift. Based on recent data, Odeta Kushi, Deputy Chief Economist at First American, has this to say:

“It looks like existing inventory is starting to inch up, which is good news for a housing market parched for more supply.”

Lawrence Yun, Chief Economist at NARechoes that sentiment:

“As the inventory is beginning to pick up ever so modestly, we are still facing a housing shortage, but we may have turned a corner.”

So, what does all of this mean for you? Just because life is starting to return to normal, it doesn’t mean you missed out on the best time to sell. It’s not too late to take advantage of today’s sellers’ market and use rising equity and low interest rates to make your next move.

Bottom Line

It’s still a great time to sell. Even though housing supply is starting to trend up, it’s still hovering near historic lows. If you are thinking about selling, let’s connect to discuss how you can list your house now and use the inventory shortage to get the best possible terms for you.

Written By

I love what I do! Highly insightful, analytical and creative, there is nothing I love more than helping you find the right solution for your real estate transition. My mission is to serve my clients with honesty and integrity, exceeding their expectations in service and support… and to help others by donating a portion of every transaction to Habitat for Humanity.

Related Posts

Powervent water heaters: beware of 2-inch vents

🖨 Print Article A powervent water heater uses a fan to get the exhaust gases out of the home. They’re great because there’s almost zero possibility of backdrafting, a common...

Weekly real estate market update 2/7/25… activity is on the rise, could a fixer-upper be for you?

🖨 Print Article New listings and multiple offers are on the rise in tandem. I can attest to that, as we reviewed 12 amazing offers on one of my new...

Subscribe to Our Newsletter for Market Updates & Mid-Century Modern Listings

Our weekly HomesMSP Update includes current local market information and a curated list of mid-century modern properties for sale, plus posts from an inspector, a lender, a stager, info about neighborhoods, life in the Twin Cities… even recipes!

This field is hidden when viewing the form

Blog Categories

Archives

Sharon and John Hensrud

About Us

The HomesMSP Team is committed to meeting you where you are and listening… really listening to understand you so we can use our extensive knowledge of the market and local neighborhoods to give you personalized service.