Last month, October, something very odd was in the air. We had exceptional weather not typical of ‘Fall weather’, our National Government shutdown and homesales took an odd turn. So we have a couple good things and a big issue sprinkled in there as well but at least the weather was nice. Realistically, SLO has always had great fall weather but it seems that last month high 70’s and 80’s was the way it was going to be. Perhaps the pure joy of great weather is why homebuyers and sellers decided to list and buy substantially more homes than they did a year before.
Last month 130 homes were for sale (68 new listings) and 45 sold homes in San Luis Obispo alone, county wide there were 1,115 homes on the market and 298 sold homes. In SLO these numbers account for a 25% increase in marketed homes for sale and nearly a 10% increase in sold homes from one year ago. The greatest oddity that we saw last month was a month-to-month 47.8% increase in new listings (September-to-October.) When I took a look at the data this morning I was trying to make sense of this peak in what should have been an otherwise slow month and the only explanation I have is that the market is actually equalizing. Looking at the chart below we can actually see what’s going on with home sales.
You will notice that the number of sold homes actually dropped 4.3% in October yet the number of new listings and for sale homes increased substantially. As that blue line increases and the dark green columns decrease we are creating excess inventory on the market unless the pending home sales increases (red line) to match that supply. If we look at the basics of supply and demand, we hit an equilibrium in May of ’13 where our new supply of homes and buyers putting homes into contract was the same but after that we saw a decline in pending sales and sold homes while supply continued to increase. The question then becomes, “Why did demand decrease, there are still a lot of interested buyers on the market looking to buy a home?” I think the next graphic sums it up pretty well.
Notice how the price of new listings continued to increase without any relief? At the same time the price of sold homes stayed considerably lower. The dramatic increase in pending transaction sent sellers into a frenzy of listing for more and it appears to me that the buyers won’t go for it, they simply are not buying overpriced listings. As such, the market is adjusting and for sale prices are coming back down to levels that buyers are willing to agree on. The real estate market dances on!