Why Listing Now Equals More Money!

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Listing your home in the winter makes you more money.  We talk about this all the time and this year is no different.  While there was an 18% increase from January 2018 to January 2019 when the inventory of homes for sale had never been lower, January 2019 to January 2020 saw a monumental decrease of 21.2%, breaking the previous record low from 2018.  In fact, this year has 930 fewer homes listed than 2018, the lowest we’d seen at that time.

This graph shows January inventory over the last 25 years:

As you can see in the graph above, this is the first time in the history of inventory data that we’ve seen such a decrease in the number of homes on the market. Inventory is likely though to follow the same path that it always takes: lowest in winter, increases in spring until it peaks in mid to late summer and then by fall, it drops dramatically.  See below.

This graph shows weekly inventory YOY going back to 2014: 

As you can see in the graph above in red, 2020 inventory, which was at 9,951 homes on February 3, 2020, is at a significantly lower point than any start to recent years.  Though this year the path has started at such a low point, it’s likely to follow the same trends that we’ve seen for the past few years.  Inventory levels directly correlate to the seller’s market vs buyer’s market phenomenon, when the market shifts in and out of favor depending on the season.  We explained this deeper in May in the blog Don’t Worry Buyers, This Won’t Last Forever which addresses buyer frustration in a seller’s market.

Why Does This Happen?

Inventory and the number of buyers translates to supply and demand, and in real estate, the rules are the same as anywhere else.  The more supply there is, the more buyers have to choose from and the more they can negotiate on price terms, making it a buyer’s market which we tend to see in the last months of the year.

Less supply and more buyers give the sellers the upper hand which is exactly the state of the current market and the supply of buyers will only grow larger in the weeks ahead. Buyer activity is strong despite it being winter. The mild weather has perpetuated this activity as well as low interest rates, which give buyers more spending power despite the rising prices. Buyers always come out earlier than the majority of sellers and that is exactly what creates this imbalance of supply not keeping up with demand, a market condition we have named the “Pac-Man” Effect.

This explains that when homes placed under agreement in the late winter/early spring end up with higher sales prices than if they go under agreement in the late spring/early summer.  Buyers are willing to pay more to secure a home when inventory is low and competition is high.  In the graph below, you see in previous years how prices slightly fall in early spring, increase from there through summer, and drop in fall when sellers need to be the ones to compete for buyers. 2019, however, required sellers to make fewer price adjustments because demand remained high throughout the year with inventory consistently being consumed by avid buyers who were willing to pay what sellers wanted, so prices stayed relatively steady throughout the year.

This line graph illustrates the average home sale prices per month for the last 12 years.  You can see that the clear peak from June to July:

Home sellers, particularly New Englanders, tend to think that selling in the spring or summer when flowers are blooming, and the sun is shining makes their home more appealing.  But that’s not how it works- a home is more appealing when it’s the only one available in the neighborhood in the buyer’s price range.  That is what sells homes.

Take a look at the increase in inventory from January 15th to May 15th in the towns below for both 2018 and 2019: (click to enlarge)

What should I do?

If selling in the first half of the year is your plan, we strongly urge you to consider to begin to prepare your home for a Winter sale now.  The optimal time to list every year is usually anywhere between January 20th and March 15th when inventory is the lowest.

As recently predicted in our Housing Predictions for 2020,  inventory levels are going increase as the year progresses and buyers are going to have more control in the market. We are also heading toward one of the strongest seller’s markets we’ve seen, giving buyers a lot more to choose from. As explained in our recent market update video that with historically low inventory, NOW is truly the best time to sell. This increased inventory will soon begin to show its face, so sellers should take our advice: take advantage of the lowest inventory we’ve ever seen and sell for more money!

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