Starting Soon - Webinar: 10 Ways to Win in a Multiple Offer Situation

Fewer Listings or Velocity of The Market?

       

You learn something new every day in real estate. Even after 31 years in this business, I'm still learning.

I learned something fascinating this morning based on a study from Zillow:

In the last half of 2020, the number of listings taken week by week were about even with 2019.

There's a sense that there's a lot less listings in the market as a result of of us not taking as many listings, but it's just not true.

In the last half of 2020, we've taken as many listings as a nation as we did in 2019. But it doesn't feel like that.

So why doesn't it feel like that?

It's like if you own a grocery store and had a delivery guy come every Friday to fill your shelves with the same order. But what has changed is the number of buyers walking into your grocery store and how many products they're buying each time they come in.

If more buyers are coming into your store and buying more products from your shelves, it's going to seem like there's not as much on the shelves — even though there's the same amount of inventory arriving every Friday.

In real estate, what's changed is the velocity of how fast you're turning over those homes in your market.

When you look at the number of homes that are on the market today, it's the lowest ever recorded — about a million units for sale today.

And here's part of the reason why:

In 2019, 60% of the homes on the market had been on the market for over four weeks. In 2020, that number dropped all the way down to just over 40%. Homes are selling much faster than in 2019.

Another way to look at this is the overall days on market:

In June 2020, homes in the market had a median time of 16 days — that's down from 21 days in June 2019.

By December, the median market time dropped to 17 days in 2020 — which is 25 days FASTER than December 2019.

The market velocity (or speed of the market) has increased. And sales have increased.

There's 20% more pending sales in 2020 than 2019, so the market has had a huge run-up in pending sales.

So what does this mean for you?

It means we're entering a new normal when it comes to the speed of the market. It will take years and years to get out of this bottom in the industry. In terms of inventory, we may never see 6 month level inventories again -- which is historically considered a healthy market -- because the velocity of the market is so fast.

Now what could change the velocity of the market?

The number of new buyers entering the market.

If the number of new buyers into the market slows down, that velocity could also slow down.

But a lot of economists are predicting the opposite — that we could see a permanent speed up of velocity where things happen much faster for a long time.

So how do you adapt to that?

The best way to adapt to this is to ask yourself what you can do to help your clients get in position of finding homes? And the best way to do this is to find listings before they hit the market.

That's why you need to dig deep into your relationships with other REALTORS so you can  find out about those "coming soon" properties before they hit the market.

You also have to market into the neighborhoods, areas, and the property types to get to the listings before they hit the MLS so you can put your clients in position to win.

And then when you do have properties in the MLS, you have to be ready to act with your buyers ready to go. They need to be fully trained on escalation clauses. And they need to be able to structure their offers so they're appealing in a multiple offer environment.

When velocity changes, your strategies have to change too.

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