You’ve seen our home sales reports and you are out experiencing the market firsthand, but what does Chief Economist, Ryan Price, think about the current market competitiveness and where could it be headed?
A quick definition of market competitiveness is how difficult it is to purchase and/or sell a home in an area. According to Ryan, a few key factors when determining the competitiveness of the housing market are how long it takes to sell a home, what the close price is relative to the asking price, the number of bids on the home, and other contingencies.
When examining these data points, he noticed a recent pivot in some of these metrics. “The competition in the market has eased quite a bit from where it was six months ago,” Ryan explains. “For the first time in nearly two years, since January 2021 to be exact, the average sold-to-list price ratio (ratio of the last list price on a home in comparison to the close price) dipped below 100% in October. Two months in a row, we have dipped below that number state-wide, which to me is a signal that buyers have a little more power than they did earlier this year when it was well above 100%.” He continued to say that though this shows the competition is loosening up slightly, the 99.8% average sold-to-list price ratio is still high and reflects continued tightness in the market; it’s still competitive, just a little less so.”
Another thing to note is the days-on-market average has been trending upward for three straight months. “We compare this year-over-year because of seasonality,” Ryan states, “but the last time this sequence happened was spring of 2015. This shows us it’s taking longer to sell homes on average, therefore a bit less competition out there for buyers than say this past spring.”
Lastly, there continue to be fewer bids, on average, and fewer instances of bidding wars. Ryan notes, “One really interesting trend we’ve seen emerge in our monthly Virginia REALTORS® Confidence Survey results is that the average number of contracts on a property has gone down significantly in just one year. Last November for example, the survey suggested that there were about 3 bids, on average, for each sale, but this November it’s down to 1.5 bids, so half the level it was. Now, we know there is a lot of variability by market area, but overall, the trend has been fewer bids, which suggests to me that competition among buyers has eased.”
Though happening gradually and at a different pace in each local market, our Chief Economist believes all these signs point to a continued shift in market conditions, specifically competition among buyers. Ryan concludes, “While it’s still very much a seller’s market when we look at overall inventory levels, buyers that are active in the market are in a little better position than they would have been earlier this year.”