What are prices doing? That’s the question I’m getting asked the most. Here are some thoughts about how to look at prices during the pandemic. I also have two brand new price visuals.
FIVE THINGS TO KEEP IN MIND ABOUT PRICES:
1) Eggs in one basket: I recommend watching multiple price metrics instead of putting all our eggs in one basket. So in addition to the median price we can watch the average sales price and average price per square foot.
2) Pure pandemic data: When May stats come out we’re likely going to see 80-90%+ of those sales having gotten into contract after mid-March when the pandemic began to affect us. Thus May sales will be a stronger indicator of pandemic trends than April sales.
3) Seasonal rhythm: It’s key to understand the seasonal rhythm of the market because it helps us spot what is normal and not. For example, the median price usually increases from March to April, but this year we saw the median price dip instead. What does this mean? We need time to understand it. For now we’re recognizing something has happened that is less common. It’s worth noting we often see the median price climax around May or so, which means if we see prices soften in coming months we’re going to have to ask whether it’s a seasonal thing, pandemic thing, or something else.
4) Prices are the last thing to change: We often obsess over prices and look to them first to understand a real estate market, but prices are usually the last thing to change. In other words, we experience a difference first in the listings and the number of sales happening before the trend eventually catches up to prices.
5) Weekly & monthly: I recommend looking at the market in monthly chunks, but it’s also worth watching prices by the week. The huge downfall of weekly prices is they shift dramatically depending on what sold that week. This is why it’s best to look to monthly data (but still get clues from weekly data).
CONCLUSION: Right now it looks like most price metrics have held fairly steady or even increased slightly, but the median price in the region dipped 1% recently. Some weekly price metrics have seemed to soften lately, but we’ll see what the stats show us in a couple weeks when reporting May data. Ultimately my sense is many neighborhoods feel flat and others at lower price points are still having upward pressure. The reality is we have a market with tight inventory and lots of competition. The temptation is to think home prices would be tanking during a pandemic, but that’s not what we’ve seen. For reference, this past week there were more pending contracts than before the pandemic began (I talk about this in my video). By the way, are any areas declining? Let me know what you’re seeing in the trenches.
New market video: Here’s my weekly video where I talk about climbing back to pre-pandemic levels. This is about 15 minutes. Check it out here (or below).
I hope this was interesting or helpful. Thanks for being here.
Questions: What are you paying attention to right now to gauge price movement? What did I miss? Anything to add?