Hello and Happy 2025! I'm trying to stay up on my Blogs for you all now. Monthly Market Updates as well as yearly predictions. Here are my thoughts from January.
Reflections on 2024’s Real Estate Market Predictions.
How accurate was I, and what are my predictions for 2025?
TL,DR (Too Long, Didn’t Read) – For those of you who aren’t statistic dorks, this is the short story. Prices are UP 15% overall (average) for the YoY. Luxury and new-builds threw our market stats out of wack. But the end of the year saw a 7% price reduction in Median home sales prices by December 2024.
I was wrong about bidding wars this summer, interest rates staying too high and Sellers wanting too much for too little locked the market. Some bidding wars for properties in high-desire areas with complete updates if priced at the un-updated competition did happen. Buyers willing to pay top dollar for what they consider a “deal.” Deal is move-in ready and preferred neighborhoods.
Buyers who waited until the Summer 2024 were in better shape than those in the Winter 2024, so I was WRONG AGAIN! No dramatic drop in interest rates or flush of properties for sale meant properties sat on the market longer, and the prices are usually higher in winter up here anyway because of the ski industry and luxury homes.
Most Sellers who listed this summer sat around if they listed for the same prices they wanted too last summer. However, IF they did sell, they took a hit of 7% off LP/SP. Not too shabby considering the gain since 2020.
Prediction #1 – Buyers waiting around for interest rates to drop will have bidding wars against other Buyers once they do.
Reality – I hate to admit it, but on this one I was completely incorrect, to a certain extent. Buyers who waited around for interest rates to drop just had too long to wait, they missed the summer season completely, and if they bought they bought in the autumn, with prices higher than ever before for desired properties. In fact, the average price went up 15% YoY December to December. We just didn’t have enough inventory to give Buyers the freedom to choose the best house, and we are still persistently down by almost half of the “usual” inventory that was pre 2020: if an updated home came on the market and was priced about 8% less than the stagnate competition, likely everyone else wanted it too and it went to a bidding war. I had this happen 2 times in 2024. We also still have persistent data that throws the market off because of all the luxury building in Avon; those ultra-high priced luxury condo units are still being built and still being sold at a premium, which is in it’s 2nd year of messing with our market averages.
But just like the stock market, even though it’s up overall, there are areas where we are seeing a dip of almost 31% in sales price. That dip is in the MEDIAN sales price, and that’s almost my favorite way to truly measure the health of an MLS. Median removes the ultra-high luxury properties such as a $55 Million ski-in-ski-out chateau in Vail, and the ultra-low properties such as commercial rentals and mobile homes. It’s a better measure of the true feeling of the market, and if you felt like prices were super high this summer and needed to come down, you weren’t alone! Because the Fed’s took their sweet time to lower interest rates, by the end of 2024 Average Days on Market (DOM) was up to a staggering 136. Now, December every year is traditionally where we see properties racking up high DOM, as they were summer listings that were overpriced or didn’t sell for one reason or another. But let’s look at August DOM, shall we?
August DOM 2024 at 91 was pretty different from August 2023 (60); limited inventory and persistently high interest rates kept both Buyers and Sellers from making market moves. This is known in the industry as a “frozen market.” Yes, we have more inventory than we’ve had since 2020, but only by a small margin and almost 125 of those new homes on the market are unbuilt or in the process of being built. Check out the 10 year Chart here: (Insert Homes4Sale graphic)
Prediction #2 - If you are a Buyer waiting to buy this Spring or Summer 2024, you’ll look back at those Buyers who purchased homes from November 2023 through February 2024 and compare them to the lucky ones who bought in the summer of 2020.
Reality – Oh boy, it’s not looking good for me folks. Who would have thought that an Election year and high interest rates would just stagnate the market this much? Everyone with an economic degree I suppose. Statistically, my predictions were wrong by a long shot; buying anything in the summer is a heck of a lot cheaper than buying anything in the winter months, you’ll just have more competition. I’ll just stay in my lane of Real Estate and step away from predictions if I get all of these wrong, thanks so much. Our crazy market prices fluctuate almost 70% in average and median price yearly because of ski season, and luxury property sales. Here’s the statistic breakdown on my failure to factor in this case MLS-wide.
November 23 – February 24 = Median Price $1,807,946.50
May 24 – August 24 = Median Price $1,330,625.10.
So, what was that feeling we all had this summer, the stagnant and dreadful pause in the market. Was it real, or was it fantasy? Well, there were more homes on the market than ever this summer in the last 3 years of time, but the average asking price like I said earlier was up 15% YoY, Buyers were unable to swallow just 1 point lower interest rate with Sellers unwilling to negotiate below top-of-the market pricing.
Prediction #3 - If you are a Seller right now, and your house is sitting on the market, it’s overpriced for what Buyers are willing to pay at the moment. However, it'll turn around for you as soon as interest rates come down. Hold on! Or, lower your prices by 10-15% and let it go asap if you must.
The market isn’t coming down everyone! Houses are sitting on the market longer, that’s true, and there’s evidence that negotiating with a bona-fide Buyer at the moment is a win-win situation. The Buyer feels like they got a little something, and you the Seller are still making 35% more on the sale of your house than you would have 3 years ago!
Reality – Okay, I was…partially correct. For me to be wrong about this one would be super embarrassing. The statistics state that the average and median List Price to Sales Price ratio is 97%, so most Sellers on first look seem to be winning out. Sellers that list at what is perceived as reasonable for the age and upkeep and location of their home sell faster if they are willing to negotiate as well on line items. The age of no negotiations are over for resales.
Eliminating new builds, between all properties of all prices and in all locations and all various forms of updates, the ACTUAL LP/SP Ratio when accounting for the original list price, not price reductions, the difference is 7%. That’s a TRUE LP/SP Ratio of 93%. I wasn’t directly on the money, not nearly as dramatic as I predicted you would need to list to sell, but pretty close. And yes, our average DOM was up YoY from 129-138, and yes our DOM went from 68 in May 2024 to 138 in December of 2024 despite there being dramatically more inventory to choose from last year, but it doesn’t mean the market is slowing down.
Predictions for 2025 Market!
If you’ve read this far, congratulations and thank you! I’ll keep this short and sweet, because they are just predictions with no explanation.
1. Sale Prices will continue their steady 5-8% total decline for resales, matching the slow winter market we walked into and only settling when Summer 2025 hits as more inventory comes on the market.
2. We will have an Inventory of Active New Listings that is the highest in 5 years Summer 2025!
3. Insurance costs will be the most important factor to Lenders, costing some Buyers with a loan to continue to wait to buy their first and even second homes.