Demand for homes grew for the second month in a row in August. The Redfin Housing Demand Index, based on thousands of Redfin customers requesting home tours and writing offers, increased 1.7 percent from July to a seasonally adjusted level of 93 in August.
The boost in homebuyer activity was driven by a surge in the number of Redfin customers making offers on homes, up 9.8 percent from July. The increase in overall demand would have been higher if not for the fact that the number of customers who requested tours fell by 3.6 percent. Redfin agents report that there is still a very large pool of people in the market to buy a home right now, but there simply aren’t enough homes for them to take action on. The number of homes for sale across the 15 markets covered by the Demand Index fell 9.4 percent from a year earlier in August, which marked the 15th month in a row of declines.
The Demand Index posted its largest year-over-year decline so far this year in August when it fell by 17.9 percent. Although the Demand Index is much lower than it was last year, and its August reading of 93 is below the “normal” level of 100, it’s worth noting that 100 level is benchmarched to represent the average demand level over three very intense years for homebuyer demand from 2013 through 2015. The market still feels quite strong, though not as hot as it was at most points during that three year period.
“Now we’re seeing the market catch a new breath after pausing briefly this summer,” said Redfin chief economist Nela Richardson. “Buyer demand strengthened for the second month in a row, signaling that the market has some wind in its sails going into the fall. At the same time, the 2016 homebuying season has been less ferocious than it was the past three years. Bidding wars are a tad less frequent, price growth is moderating and even in hot markets homes are sitting on the market a bit longer. All told, this is not a market in decline, it’s a market finally finding its normal.”
Year over year, the number of Redfin customers requesting tours was up 5.3 percent, the lowest level of tour growth recorded in two years. The number of Redfin customers making offers fell 6.7 percent in August, the 12th-consecutive month of year-over-year declines.
Metro-Level Demand
Denver was home to some of the most notable changes in August, when its Demand Index increased 92.2 percent month over month to 86, which also marked a 36.6 percent decline from a year earlier. San Francisco posted the biggest monthly decrease in demand, with its Demand Index down 33.6 percent in August. San Diego saw the biggest year-over-year jump in its Demand Index, up 6.8 percent.
“We had a very strong spring; I can’t remember a time as busy as the market was from March through July. Some of that intensity was driven by buyers coming from Washington, D.C., where prices are unaffordable for many people, driving some to make the move into Baltimore. In August, things started settling down and now buyers are getting in that last push mode. People want to get a home and get settled before the holidays and the winter. If they don’t find the right home soon, they’ll hang it up and get back out there next year.” – Chris Calabretta, Redfin real estate agent in Baltimore
“Inventory in August is always slow in New England, since everyone is either vacationing in the Cape, or was on the market early in the summer to sell before school starts. But in September, I’m seeing quite a few homes coming on the market, at a variety of price points, everything from fixer-uppers in the $700,000s to new construction just completed and asking $1.6 million. And competition remains strong. I recently saw a bidding war with 22 offers, another with nine and another with eight. People who are renting in the school district of their choice are still trying to get into a home before the holidays.” -Sandy Rosen, Redfin real estate agent in Boston
“The more popular areas in the city are seeing a healthy amount of competition and buyer interest. But the suburbs are seeing homes sit on the market for a very long time; buyer interest is very slack in many suburbs. For example, two of my current clients who are interested in buying in the city are having trouble selling their suburban homes first. It just goes to show that location, even within one metro, is very important when talking about buyer demand.” -Alex Haried, Redfin real estate agent in Chicago
“Buyers aren’t as interested as they have been. Noticeably fewer buyers are touring each listing and showing up at open houses, especially for homes over $400,000. For example, homes that would have gotten about 30 showings in a weekend earlier this year are getting just a handful. Yes, there still aren’t many homes for sale, but the frenzied activity over new listings has come to a screaming halt, in part because a lack of licensed appraisers are adding weeks to closing times.” -Michelle Ackerman, Redfin real estate agent in Denver
“Across the board Redfin agents in L.A. saw a slowdown in August. It seemed as though a lot of buyers were traveling, out of town, or had gotten a home under contract earlier in the summer. Other buyers who hadn’t bought by the time August came around expressed concern about the election, and some dropped out of the market entirely. A slowdown in August when kids head back to school is not unusual. This year’s slowdown felt more pronounced, and I think that’s due to the election and other economic factors.” -Alec Traub, Redfin real estate agent in L.A.
“Although I have not seen a huge shift in demand from July to August, the market just feels less competetive than what we’re used to, which includes seeing multiple offers in the double digits and homes going under contract extremely fast. While those bidding wars are still happening, now we’re getting a handful of offers rather than a bucketload. There seems to be a lot of uncertainty right now — it may have something to do with the election. Last year the Oakland market was busier in November, relatively late in the year for real estate, than it was this August.” -Tom Hendershot, Redfin real estate agent in Oakland
“A lot of the slowdown right now is seasonal. We had a particularly competitive spring and early summer, and many who were unable to find the right home are hanging it up until next year, now that school’s back in session and the holidays are right around the corner. Inventory is growing, a much needed change, but it’s a bit concentrated in the higher price points. Detached homes under $650,000, or condos under $500,000, both of which qualify as inexpensive for the market, are still very competitive. We’re hoping that inventory growth continues across all price points into next year’s spring season. Otherwise it’s hard to see it becoming a buyer’s market next year.” -Keith Thomas, Redfin real estate agent in Orange County
“Normally from the middle of July until the end of August, there’s a lull in the Phoenix real estate market. Not only is that ‘monsoon’ season when it’s unusually hot and muggy, but it’s when kids head back to school. This summer, however, we actually saw a fairly big bump in demand going into August. Even though supply remained low, a lot of buyers found the market favorable because mortgage rates were so low. We’ve also been seeing some additional demand from buyers who are finally able to enter the market after having been hit hard during the recession. We are continuing to see that nice homes that are priced fairly well are getting multiple offers.” -Wayne Graham, Redfin real estate agent in Phoenix
“A very slow July gave way to a more normal feeling August. Still, Redfin agents have noticed that the market is changing. For example, a home that was put on the market in April could expect upwards of 15 offers. Now we are seeing five or three offers at best; they are still really good offers. So while there are still a lot of buyers in the market, there’s just not the masse of offers we saw during the busiest part of the year. Earlier this year, it seemed that buyers would settle for anything just to get a house. In the past few months there’s been a fundamental shift; buyers are much pickier about the homes they are willing to make offers on and homes are starting to sit for longer periods.” – Michael Morris, Redfin real estate agent in Portland
“There’s definitely been a bit of a slowdown in San Diego. One example of this is that in August, listing agents started calling me to see what my buyers thought the homes they’d recently seen, asking if they were interested in making an offer. This would have never happened three months earlier when the market was so hot listing agents didn’t need to or have time to look for such feedback. Even though Redfin agents are still seeing biddign wars, we are noticing that homes are tending to sit for longer too. One reason for this slowdown is the start of school. Many schools in San Diego start in August, which means if people haven’t bought by July they are going to drop out of the market at least for a month or two while there kids get started with the new school year.” -Chris Priola, Redfin real estate agent in San Diego
“It’s difficult to describe San Francisco’s drop in demand — buyers are still making multiple offers and many homes continue to sell for more than their asking price. It’s just not happening as extremely as it was before. But the drop in demand from July to August is telling — it used to feel like demand would never decline, certainly not this early in the year. But this August felt like a shift into winter while we were still feeling like a hot market in July. Homes sat for much longer, which was actually good news for buyers who had more to choose from and more leverage to get a fair price.” – Saleem Buqeileh, Redfin real estate agent in San Francisco
“Every offer that we won in August we had to fight tooth and nail for, especially for any home that had easy access to downtown. Condos with no rental restrictions and single-family homes in highly rated school districts are as in demand as ever, and it appears as though this fall will be even more competitive than summer.”
“The broader metro area has been cooling down for the past few months. Parts of Virginia and Maryland are slow and prices have even retreated in some places. The District is still competitive, but homes are sitting on the market just a little bit longer now. Many buyers are waiting it out to see if a home sits for a few weeks and they can offer a little less. Interestingly, I’ve been in a few situations recently where we’ve made an offer on a home that has been on the market for a few weeks only to find out that the home has just received another offer. So despite a longer lead time, buyers may still find themselves in a competitive situation.” -Katie Scire, Redfin real estate agent in Washington, D.C.
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