Question: I’ve noticed that the market has slowed down quite a bit these last few months. Is that a sign that the market is finally turning?
Answer: I hope everybody had a wonderful Thanksgiving. Last week, I asked everybody to vote on whether you should start eating your Thanksgiving meal before 5PM or 5PM or later. With 825 total votes, 77% of you said the meal should start before 5PM and 23% voted for 5PM or later. We aimed to start our meal at 4PM, but ended up starting at 5PM.
Will The Slow Market Continue into 2025?
Like clockwork, the second half of the year is slower than the first half (except when COVID flipped 2020 upside down) and it gets especially slow in the 4th quarter as focus shifts to holidays, family/friend time, and travel. This period of seasonal slowness consistently succeeds in lulling the market to sleep, resulting in predictions that whatever economic/housing headwinds exist at the time (high rates, rattled economy, affordability crisis, etc) will result in a down housing market the following year.
These predictions are consistently wrong, and the market usually proves that within the first few weeks of the new year.
The Data Says Prepare for a Rapid Increase in Demand
The data in the chart below is collected from Arlington sales going back to 2019, sans 2020 data and new construction. It shows market performance based on the week that properties go under contract based on the percentage of properties selling over the original ask, the percentage of properties selling at or over the original ask, and the percentage of properties selling within ten days on the market (my preferred measure of market speed).
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The highlight of the chart is how rapidly the market shifts in January, relative to the previous 1-2 months. By the third week of January, the market is moving faster than it has in over three months and by the fourth week of the year, the market is experiencing stronger performance than it has in nearly every week over the past six months.
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Only 27% of properties that go under contract in the second half of the year are over the asking price, but from the fourth week of January through May, an average of 45% of homes sell for over the asking price.
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For buyers in the market, it’s important to also prepare for just how quickly homes will start selling. In the last seven weeks of the year, only 33% of homes were going under contract in the first ten days, but that jumps to over 46% by the third week of January and by early February over 50% of homes sell within the first ten days on market and the pace hovers around 60%-70% through May.
These percentages will vary based on the market conditions of a given year, but the important takeaway is how quickly demand shifts in the new year relative to the end of the prior year. As a reminder, Q4 ’22 to Q1 ’23, a period many predicted would result in a continuation of a slow/down market, delivered us the most significant whiplash effect through a new calendar year we have seen.
You can see a similar shift in market conditions in this chart from Altos Research showing the percentage of properties in Arlington on market that have had a price decrease. The steep drops you see start when the calendar turns to January.
If you’d like to discuss buying, selling, investing, or renting, don’t hesitate to reach out to me at [email protected].
