August Offers Decline Only 4%, Solidifying Housing Gains into the Fall

Here’s the latest Redfin Real-Time Demand Pulse: a monthly analysis of tour and offer activity from thousands of homebuyers across 20 U.S. markets, months in advance of completed sales, and the only report in the industry that analyzes offer and tour data.

September 2012 Redfin Real-Time Demand Pulse (August data)

Early signals from Redfin’s Real-Time Demand Pulse indicate that regardless of what’s happening in the broader economy, housing prices will keep getting better. The number of Redfin clients making offers fell just 4 percent in August–an improvement of nearly ten percentage points compared to the same period a year ago.

The number of offers placed by Redfin clients continued to outpace 2011 in August 2012, while tours followed roughly the same trajectory as last year. Taken together, these trends indicate that the strength the market has seen this summer will continue into the fall.

The overall economy continues to struggle, with Consumer Confidence at its lowest point since November and job growth hitting a “distressingly slow pace.” However, housing continues to be a bright spot, having flipped this year from being a drag on the economy to laying the groundwork for a steady but slow recovery.

“The fundamental question about the real estate market has been: will it last?” said Redfin CEO Glenn Kelman. “With the summer season now over, would the rise in demand and prices be more than just the kind of temporary rally we saw in 2010 and 2011? Would buyers frustrated by an inventory crunch keep looking for a home? And the answer now clearly is yes, the recovery will continue.The market isn’t booming, but it’s building steadily in ways that have surprised many economists. In the past few weeks, we got the first signal that the winter will be relatively strong, which in turn bodes very well for 2013.”

Home Offers

Overall home buying began to slow in June, as it does every year, but so far data from Redfin show this year’s decline to be much less dramatic than last year. Offers declined 31% between the peak week in late April and the last week of August in 2011, but so far in 2012 they have only fallen half as much—15%.

Last year offers declined sharply throughout August; this year they steadily increased after the first week. They were still down overall from the previous month (-4.3%) as expected, but the drop was not nearly as steep as it was in 2011 (-13.6%).

Based on this continued strength, we expect that sales volume in most areas will continue to be slightly above last year through at least September. (Note: Redfin’s business is growing at a faster pace than the market as a whole.)

Home Tours

Early-stage home-buying demand can be measured in two components: how many people are touring homes they want to buy, and how many are making offers to buy those homes. While offers performed better in August than a year ago, tours in August 2012 turned in a near-identical performance to August 2011.

Compared to the month before, tours fell 6.0% in August 2012. Last year tours fell almost the same amount, losing 6.2% in August.

The disconnect between the improved performance of offers and the flatness of tours is most likely attributable to two factors. First, there are far fewer homes on the market this year than last (inventory was down nearly 30% nationally in July), which means there is just less for buyers to see. Second, demand this year is proving to be deep rather than broad: buyers aren’t coming into the market in droves, but those who are home shopping are serious about it. This may be an artifact of credit being cheap but limited.

As long as we continue to see the trend in touring data on par with last year and the trend in offer data beating last year, we expect the housing market to continue to strengthen in 2012.

The full Demand Pulse index data is available for download in a spreadsheet, where you can check out the trends going back almost four years.

Stay tuned later this week for our Real-Time Home Price Tracker, the industry’s earliest report on what happened to real estate prices around the nation in the month of August.