If you’re following the news, there are lots of headlines about conditions of the current housing market. You might be asking if the boom is over, or if there might a market crash pending.
Compared to activity the previous two years the housing market is beginning to moderate. What’s important to note, is that those previous two years were record-breaking in nearly every way. Record-low mortgage rates and millennials reaching peak homebuying years led to an influx of buyer demand. At the same time, there weren’t enough homes available to purchase thanks to many years of underbuilding and sellers who held off on listing their homes due to the pandemic.
This combination led to record-high demand and record-low supply, neither of which was sustainable. The latest data shows early signs of a shift back to the market pace seen in the years leading up to the pandemic – not a crash nor a correction. As realtor.com says:
“The housing market is at a turning point. . . . We’re starting to see signs of a new direction, . . .”
Home Showings Then and Now
The ShowingTime Showing Index tracks the traffic of home showings according to agents and brokers, serving as a rough indicator of buyer demand. Here’s a look at that data going back to 2019 (see graph below):
The 2019 numbers give a good baseline of pre-pandemic demand (gray). As the graph indicates, home showings skyrocketed during the pandemic (blue). And while current buyer demand has begun to moderate slightly based on the latest data (green), showings are still above 2019 levels (though this only reflects one month).
As 2019 was a strong year for the housing market, this helps show that the market isn’t indicating a crash – just at a turning point moving back toward more pre-pandemic levels.
Existing Home Sales Then and Now
Headlines are also mentioning that existing home sales are declining. Here’s a look at existing home sales going all the way back to 2019 using data from the National Association of Realtors (NAR) (see graph below):
The peak pandemic year’s numbers (in blue) beat the more typical year of 2019’s home sales (in gray). And, according to the latest projections for 2022 (in green), the market is on pace to close this year with more home sales than 2019 and meet 2020’s numbers.
While comparing recent activity to the preceding months and years is important, doing so in a silo paints an incomplete picture. Adding 2019, and even looking further back at more normal years, show that the current housing market is still strong. First American sums it up well:
“. . . today’s housing market looks a lot like the 2019 housing market, which was the strongest housing market in a decade at the time.”
Bottom Line
If recent headlines are generating concerns, looking at a larger sample may help to reduce your clients’ worries. The market is beginning to resemble more typical, pre-pandemic levels. Touchbase with your client now to ensure them real estate is still a strong investment.
