Let's Talk Price Reductions

[Russell Brazil]

Let's talk price reductions.

Price reductions are up dramatically currently. 14.9% of listings nationally are experiencing price reductions. This sounds scary....but is it really?

2021 saw 11.9% of listings experience reductions and 8% in 2020.

But how does that compare to a normal market?

2017-2019 was a normal sellers market. Hot, but not insane. And in those years we saw 18%, 16%, and 20% of listings experience price reductions. The normal range for price reductions in sellers markets is for between 15% and 22% of listings to have a price drop.

So at 14.9%, slightly under the nornal range what we are seeing is the market normalizing after 2+ years of insanity.

Many people will interpret whats going on in the market and sensationalize it, including the media. In fact this came up because of some terrible information I saw in the BP Facebook group. Year over year stats are going to look scary. But if we compare just about any stat currently to 2015-2019, we are going to see numbers today are right in line with a normal sellers market still. (Not even a market at equilibrium or a buyers market).

So instead of 25 offers on a property, we are seeing 5 offers on the good properties.(This is my market on offers, not a national or actual number)
 

The markets still competitive, just not insane.

And we should start to see different markets experiencing different trends going forward which is normal. It's normal for Vegas to be in a buyers market while LA to be in a sellers market at the same exact time. (Im not saying either is, or will be, just that local market conditions can be different in different locations)

[Russell Brazil]

Quote from @Chris Seveney:

@Russell Brazil

The one thing I will add is you may see a sudden rise in inventory which will set off alarms but reality is next several months you will see the wishful sellers list (those who will list homes which may be overpriced to see if they can get it that for their house.

 Inventory has no where to go but up. 

The other thing is the measurement of inventory in months as traditional, is going to skew things quite a bit. I'll use some fake numbers to illustrate.

lets say in 2010, 6 months of inventory, which is at an equilibrium was 6,000 houses for sale. 

In 2021, inventory is at 1 month of inventory....but 1 month today is 300 homes, instead of 1,000 homes in 2020. This number has compressed as out housing shortage, with lower sales, drastically reduced the number of units for sale and selling.

Now let's say inventory tripples to 900 units. Thats a rise of 200% in inventory, and has moved inventory from 1 month to 3 months. But it is still substantially less by 10%, of what 1 month if inventory would be in a market with equilibrium.

This is going to happen acroas all kinds of stats. Large increases from small numbers will sound alarming, when the fact is, we still have a housing inventory crisis.