In my last post I talked about statistics and how we make decisions based off those statistics, so these are the numbers and this is how we make decisions based off the numbers.
Right now (4/28/2020) in Utah County there are 1,771 active homes available on the market. If you take out the new construction, there are only 923 homes available on the market, which tells us that there isn’t a lot of inventory on the market. What does that mean in the grand scheme of selling your house? Currently there are 2,396 homes under contract and in the last 30 days 655 homes have sold. What that tells me is that there are a lot of homes under contract, but that it probably a lot of new construction, which takes time. Average new construction is anywhere from 7-9 months right now depending on who you build with. If we just do those numbers, which are active divided by how many have sold in the last 30 days, that gives us 2.7 months of inventory. That doesn’t necessarily give us the most accurate information on what is going on in the market because any house that sold in the last 30 days probably went under contract before the corona virus happened. I like to use what went under contract in the last 30 days and take out new construction.
I am going to give you 3 numbers:
- Active homes divided by what has gone under contract in the last 30 days. That gives us 1.8 months of inventory. This indicates that it is a very hot sellers market. A sellers market means that there aren’t many homes for sale, but that there are a lot of buyers looking. When we are in a market like that a seller has more control over the process, meaning that they get to price their house more aggressively, do less in repairs and negotiations, and things tend to work out better for the seller. Why would a buyer want to buy in a sellers market? The main reason that causes a sellers market is that there are a lot of buyers, and why are there so many? Interest rates are fantastic, they are in the 3’s. I remember when we were in the high 4’s and I thought that we would never come back to 3, so the fact that we are that low is fantastic. We are in an election year which means that rates tend to stabilize, because no one wants to make policy changes that change the interest rates, affecting whoever would get elected. If you look at election years historically, interest rates tend to not do very much. People still need places to live, even with the corona virus, that will never change. Due to the lock down and time inside, people are starting to see the flaws in their homes and wanting to do more renovations. Renovations are typically the first sign that someone is going to sell, it is about 18 months from the time they start renovating to the time they sell, because their house after renovation still isn’t the house they want, random fact.
- The next number that we are going to look at is the actives based on solds. That gives us a 2.7 month inventory. Again, the number is slightly higher because we are talking about what went under contract before corona virus, not what went under contract after.
- This number, which I think is the most interesting is the active homes compared to the under contract in the last 30 days, if we are only talking about existing build and not new construction. Almost half of our inventory is new construction, meaning homes that are going to be built at some point. The reason we have so much new construction is because during the last recession a lot of builders didn’t build, so they are trying to catch up. We are about 10,000 units short in the state of Utah, meaning they should have built that many units during the recession, but they didn’t due to financing and other issues. If you look at those numbers that gives us 1.1 months of inventory, meaning that if nothing else were listed it would take 1.1 months to sell everything on the market. Does everything sell on the market? No. 30% of homes still don’t sell because they are either priced too high for their condition, in the wrong market entirely, or the seller isn’t motivated enough.