This article¹ in Builder Online feels a bit like real estate clickbait. The headline sounds scary – “Typical Home Sold Below List Price In June For First Time Since 2020” – but the details are much less interesting, and there are much better ways of measuring the balance between supply and demand anyway.
What is a better way? We like Months Supply of Homes for Sale (slide 1) (which shows a distinct shortage in most markets), but it takes a few sentences to explain that metric. Everyone understands price changes, though. If there are too many houses, prices go down (usually), and if there aren’t enough houses, prices go up. Simple. Guess what is happening to prices? They are hitting new all-time highs² across the country.
Despite the scary headline, the body of this Builder article is full of qualifiers – “For certain types of homes in certain regions of the country, there is more inventory than demand. New listings are up 8.2% year over year nationwide at the same time pending sales are down 4.3%, according to Redfin.” That sounds like cherry-picking to me.
For example, in the Minneapolis metro market where we have a number of development and lending projects doing new construction, the % of list price for sales looks like the chart in slide 2.
You can see that in this area, excluding what looks like some seasonality in the data, we don’t see the same drop as noted in the article.
So, I like the article at a high level as it gives me one data point that causes me to at least raise an eyebrow and be aware of a POSSIBLE trend. But the detailed data doesn’t yet support any cause for concern.
Sources:
- Builder Staff. (2024, July 28). Typical Home Sold Below List Price in June for First Time Since 2020. Builder Online.
- S&P CoreLogic Case-Shiller Index Breaks Previous Month’s All-Time High in April 2024. S&P Dow Jones Indices. (2024, June 25).
