Sellers are struggling with denial: Priced “right,” a home will sell, but “right” is where the buyers are, and they’re a lot lower.
Sales of all types of previously owned homes – houses, condos, and co-ops – fell by 5.9% in October from September, the ninth month in a row of declines, to a seasonally adjusted annual rate of sales of 4.43 million homes, just a hair above the lockdown-month of April 2020, according to the National Association of Realtors. Compared to the recent free-money peak in October 2020, sales were down 34%.
Year-over-year, sales fell by 28%, the 15th month in a row of year-over-year declines. Beyond April and May 2020, this was the lowest rate of sales since December 2011 (historic data via YCharts):
Sales of single-family houses plunged by 6.4% in October from September, and by 28% year-over-year, to a seasonally adjusted annual rate of 3.95 million houses.
Sales of condos and co-ops fell by 2.0% in October from September, and by 30% year-over-year, to 480,000 seasonally adjusted annual rate.
Investors or second-home buyers purchased 16% of the homes in October, down from the 17%-22% range in the spring and winter. In other words, their purchases plunged at an even higher rate than the purchases of regular buyers, as investors too are losing interest in buying at these prices.
This plunge in sales is a sign that potential sellers and buyers are in a standoff. Many potential sellers refuse to accept reality and lower their prices to where the sellers are; instead, they’re thinking, “and this too shall pass,” and they’re hoping or praying for a Fed pivot or for a miracle or whatever and don’t even put their home on the market, or pull it off the market after not getting any traffic at their aspirational asking price. And buyers have lost interest at the current prices.
Homes that are priced right – meaning priced down where the buyers are – are selling. But sellers don’t like to go there. And we see that in the active listings too. But there is some price-cutting going on, as more sellers figure this out.
Price reductions: In October, the number of homes listed with price reductions rose to 327,184 homes, the highest since October 2019, and just a tad below it (data via realtor.com).