Year-End Slowdown Begins with Sluggish Tours & Offers in October as Record-Low Inventories Continue

The 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.

November 2012 Redfin Real-Time Demand Pulse (October data)

As is typical this time of year, the housing market began to lose some steam in October, according to tour and offer data in Redfin’s Real-Time Demand Pulse.

The month-over-month change in the number of Redfin clients touring homes and writing offers in October 2012 was nearly the same this year as last. Offers fell 3.8 percent from a month earlier, nearly the same as the 3.7 percent drop over the same period a year earlier. Tours decreased 3.0 percent from the prior month, compared to a loss of just 0.5 percent in 2011.

Based on these data and the fact that record-low inventory across most of the nation continues to put a damper on sales, we expect sales to slow in November and December, possibly falling slightly below last year’s levels in some parts of the country by December, but mostly coming in at or slightly above 2011 volume.

“We always see significant declines in demand in the final three months of the year, but demand slipped a bit more this October than last year,” said Redfin CEO Glenn Kelman. “We have been bullish about the U.S. real estate market overall, but in October demand among home-buyers took a step backwards. This trend will be even stronger in November due to Hurricane Sandy, but it isn’t just the time of year or the weather. Many markets are intensely competitive and inventory is very low, so plenty of our home-buyers are taking the rest of the year off.”

Buyers Making Offers to Buy a Home

The number of buyers making offers on homes typically declines in the last few months of every year, and 2012 was no different. While the Demand Pulse for August and September offers both showed softer declines in 2012 than 2011, the drop in October this year (-3.8 percent) was nearly identical to last year (-3.7 percent). This suggests that sales will not be as strong in November as they have been in the last few months.

Although October ended on an upward week-over-week trend this year compared to a decline last year, the number see-sawed throughout the month, so the month-end uptick is not significant.

In contrast to the better-than-expected sales we forecasted last month for October, we expect national sales volume in November to come in weaker than October, although still slightly above last year’s levels in most markets. (Note: Redfin’s own business is growing at a faster pace than the market as a whole.)

Buyers Touring Homes for Sale

The number of buyers touring homes fell steadily throughout the month of October, most likely because there were simply very few new listings to see—new listings were down 30% nationally in September.

Compared to the month before, the number of touring customers fell 3.0% in October 2012. Last year, tours dropped just 0.5% over the same period.

Until inventory begins to climb again, tours will most likely continue be relatively weak. The good news is that our latest Seller Survey suggests that sellers are gaining confidence in the market, which may lead to an uptick in home listings next spring. Until then, we expect that touring volume will continue to be held back by low inventory.

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.

Be on the lookout tomorrow for the Redfin Real-Time Home Price Tracker, the industry’s earliest report on what happened to real estate prices around the nation in the month of September.