Should I Wait Until Spring to List My Home?

Sometimes we start a market analysis project looking for one thing and end up discovering something else entirely. Recently we decided to dig into the data to see if it supported our feeling that winter is the best time to buy, and the worst time to sell. However, when we got the results we discovered that our assumptions were dead wrong.

As we roll through the holidays and into winter, many would-be sellers will be holding off on listing their home, waiting for the spring “selling season” to put their home on the market. But if you’re ready to sell your home now, is waiting until spring the best strategy? Not according to the data, it isn’t.

We pulled a year’s worth of data on three quarters of a million homes listed across the country and analyzed sales statistics by season. Here’s what we found:

• Homes listed in winter sell faster: 46 days in winter vs. 55 days in summer
• Homes listed in winter are more likely to sell: 59.2% sell in winter vs. 53.1% sell in summer
• Homes listed in winter sell closest to their original price: a 2.7% drop from the final price in winter vs. a 5.2% drop from the final price in summer, worth more than $7,000 on a $300,000 home

Yup, you read that right: Overall, homes listed in winter sell best. 5.8% more homes listed in winter eventually sell (compared to the overall percentage of homes listed throughout the year), and they sell 1.4 percentage points closer to their original list price than the median—that’s $4,900 on a $350,000 home.

Spring wins in one category: Speed. Homes listed in spring sell the fastest, sitting on the market for 15% less time than the median. Winter comes in second in this category though, at six percent below the median, while homes listed in summer and fall both sell slower than the median (12% and 16%, respectively).

Apparently not many sellers are on to this pattern, because winter has twenty percent fewer listings added than the spring.

Of course, not all markets are alike, especially when it comes to the weather. In addition to the national roundup, we also pulled this data for most of the cities Redfin serves: Washington DC, Boston, Queens, Atlanta, Chicago, Austin, Phoenix, Las Vegas, San Diego, Los Angeles, Irvine, San Francisco, Sacramento, Portland, and Seattle. Click your city on the list to see the breakdown there.

Keep in mind that we’re measuring correlation here, not causation. Listing in the winter won’t guarantee that your home sells faster, for more money, or that it will sell at all. That said, the data does seem to indicate that winter gets a bad rap for no good reason.

Why do you think most sellers are afraid to list their homes in winter? Should they be? Let’s hear your opinion!

What day of the week should I list my home?

With home sales in the gutter, anyone thinking of selling a home today can use all the help they can get, starting with what day of the week to debut.

Serious sellers know that it is important to make repairs, stage well, and showcase their home online with professional photos, but there isn’t a consensus about which day of the week you should list your home for the best results. This is evidenced by the fact that new listings on the market are spread pretty evenly between Monday and Friday, with each day getting between seventeen and nineteen percent of the total share of listings (Saturday and Sunday are much lower at five to seven percent).

Since you only get one chance to make a first impression with your listing, we decided to dig into our data to find out whether putting your home on the market on a certain day of the week is correlated with sales success. We pulled the data on over a million listings spread throughout the nation over the last twenty-one months, and here’s what we found:

• Homes listed on Sunday get marginally more online views.
• Homes listed on Friday are toured 19% more.
• Homes listed on Friday or Thursday sell for slightly closer to original list price.
• Homes listed on Friday are 12% more likely to sell in 90 days.

The difference in views and sale-to-list ratios were not very dramatic across the week, but in the tours and sales categories, Friday was the clear winner. For the most tours and the best chance of selling your home, list it on a Friday. If you are the kind of seller that is more interested in online views than actually selling your home for a good price, listing on Sunday is a great plan. But since we’re pretty sure that kind of seller doesn’t exist, we’re confident in recommending Friday as the seller’s best day to list their home.

So why would Friday be such a great day to put your home on the market? Our theory is that since home buyers tend to tour homes on the weekends (Saturday and Sunday have 2.5x as many tours per day than Monday to Friday), homes listed on Fridays are the freshest in buyers’ minds when they’re making their weekend plans. It also seems likely that many home buyers sort their weekend “must see” lists by date listed, going to see the freshest homes first so they have the best chance of getting in on a potential good deal before other buyers. These factors put homes listed on Friday in front of more touring buyers on the weekend (which our touring data bears out). More tours leads to more offers, and more offers leads to a better price and a better chance of selling.

That’s our theory, now let’s hear yours! Also, for your viewing enjoyment, we have compiled our findings into the convenient chart form below. Note that while the sales data is based on all listings, the data on views is based only on views at Redfin.com, and the touring data is based only on homes that our agents took our customers out to see.

If U.S. real estate inventory is so “overwhelming,” where is it all hiding?

While some housing pundits are talking about demand being “overwhelmed by supply” and others are throwing out estimates of an “excess supply” of over 3 million homes, buyers that we are serving across the country keep telling us the same thing over and over this spring: “Selection stinks!”

Worse yet, when they do finally find a home that they want, they often submit an offer only to find that theirs is one of multiple offers that the seller has received—increasingly our agents are reporting bidding wars and multiple offers in numerous markets.

So what’s going on? How can inventory be high but buyers are hitting slim pickings and multiple offers? Well, for starters, although listings may be up from January—which is true every year due to the annual winter hibernation of the housing market—on-market inventory and new listings aren’t actually all that high for this time of year. In fact, in every Redfin market except Las Vegas, new listings are down from last year:

Not only that, but new listings of non-distressed homes, which are more frequently well-kept and owner-occupied (i.e. the kind of home that most non-investor buyers are interested in), are falling over twice as fast as bank-owned (REO) listings:

This result isn’t suprising at all if you’ve spent any time talking with home owners lately. Anyone who doesn’t absolutely need to sell seems to have decided to wait out the market, either hoping for a better opportunity to list their home next year or just renting it out to take advantage of a supposedly increasingly hot rental market.

Of course, if we’re trying to figure out what’s going on in the market today, and where we’re headed, we can’t just pretend that the distressed listings don’t exist.

When it comes to pricing, REOs are selling for 20% to 50% less than similarly-sized non-distressed listings, but the price trends of the two have been moving in the same general direction over the last year (click any of these charts to enlarge):

The overall price trend (both for REOs and non-distressed homes) has been down in most markets over the last year (Boston and Washington DC’s flat prices are two notable exceptions). Meanwhile, sales are slowly clawing their way out of the post-tax-credit gutter, but a decent recovery in sales is currently being held back by a serious lack of quality inventory.

Allow me to illustrate today’s market dynamics by way of a Venn diagram (because who doesn’t love Venn diagrams?):

If we don’t start to see more listings from owners who have the equity to put their homes on the market, prices of increasingly rare non-distressed listings seem likely to stop falling soon, just due to basic supply and demand. Of course, that claim leads to the big question: how soon?

Ultimately, supply and demand are the primary drivers of the real estate market, but prices seem to react to these inputs about as fast as a three-toed sloth. While the bubble was inflating, it took over a year of declining sales and increasing inventory before prices peaked and began to fall. Although on-market inventory has been declining since mid-2008, the slow recovery of sales along with a shift in psychology away from home ownership has delayed the turnaround of prices (oh yeah, there was also that delightful government meddling in the form of a giant handout that paused a true price correction for over a year as well).

As Calculated Risk recently pointed out, home prices are not far above their historic lows, although it’s a pretty safe bet that we’ll have a bit of an overshoot on the downside, followed by at least a few years of flat prices (which is down when inflation is factored in).

Foreclosures are still quite high and will likely take three to five years to work through, but growth in both the beginning and the end of the foreclosure pipeline seem to be backing off their 2010 peaks. The worst seems to be behind us on that front.

Every region has different dynamics, but with generally lousy selection, slowly recovering sales, and years worth of foreclosures to work through, where does that put us today, and through the end of this year? Barring some unforseen economic black swan, most of us here at Redfin think prices in most regions will probably stop falling by this time next year, while the more optimistic among us expect prices to end the year higher than where they are today. Sales will continue their sloth-like increases, foreclosures will be slowly but surely absorbed (many by all-cash investors), and hopefully, non-distressed sellers will begin to return to the market.

Is this a bottom call? Not really. Nobody is able to perfectly time the market, including us. No matter where we think the bottom is, we’re probably wrong (just like certain other recent high-profile predictions). Is buying a home today less risky than it was five years ago? Absolutely. Will buying a home ever be a risk-free proposition? Sorry, nope.

Buying from a Bank? Get Ready to Play Hardball.

If you’ve been shopping for a home lately, you’ve probably encountered more than a few listings that are either bank-owned (REO) or short sales. In some of Redfin’s markets (Las Vegas, Phoenix, and San Diego) distressed sales make up more than half of what’s selling these days:

With prices that are often considerably lower than non-distressed homes, this plentiful distressed inventory can certainly seem attractive to homebuyers looking for a deal in today’s market.

Of course, we’re never satisfied just to bring you flashy top-ten lists (or top-sixteen lists, as the case may be), so we wanted to dig a little deeper into the data. What kinds of things could we learn about distressed sales that would really help a buyer who is thinking of making an offer on one? As it turns out, the data was happy to talk to us on that subject, providing us with some juicy insights to share with you.

To generate the chart below, we dug into our database to analyze nearly half a million sales that closed between the beginning of 2010 and the end of Q1 2011. The two bars for each market represent the average sale to list price ratio for distressed sales to the average ratio for non-distressed sales. A 100% ratio means that on average, that type of home is selling at exactly its list price. Below 100% means buyers are negotiating discounts, and above 100% means that the sellers are typically getting more than their asking price.

In every single market we looked at, REOs and short sales consistently sell for closer to their list price than the non-distressed homes. This held true across every price band, although the volume of distressed sales is certainly weighted toward the low end. Note that we are using the final list price in this analysis, not the original list price. It is also worth mentioning that we were originally only going to discuss REOs in this post, but the sale-to-list ratios for short sales were so similar that we decided to include them in our analysis as well.

Marcus Fleming, a Redfin Agent in Phoenix has seen this phenomenon first-hand. “Banks are very careful about getting a number of BPOs before listing a home,” explained Marcus. “When it goes on the market they are so confident the price is right that for the first 2 weeks they will accept nothing but offers at 100% of list price.” According to Marcus, even when the home has been on the market for months, banks won’t consider any offers for less than about 95% of list price.

As we were looking at the chart above, we wondered why some markets have a much larger difference between the distressed and non-distressed ratios. For example, in Austin they’re fairly close at 96.7% and 96.5%, while in Las Vegas they’re quite different, coming in at 99.6% and 96.3%. Why might that be?

In order to dig even deeper into the data, we created the scatter-plot below using the difference between the two ratios (i.e. the height of the red bar minus the height of the blue bar) as the Y-axis and the percentage of sales that are distressed (the numbers from the first chart) as the X-axis. The results tell an interesting story:

In general, the more distressed a market is, the bigger the difference between the two sale to list ratios. In other words, in a highly distressed market like San Diego, buyers are a lot less likely to get a bank to negotiate on price than they are in a less-distressed market like Denver. Admittedly, the correlation isn’t incredibly strong, but there is definitely a clear trend in that direction.

In some markets, banks are being especially aggressive with their listings, putting homes up for sale at well below the market value, leading to multiple bids and average sale prices that are higher than the list price. Across the entire data set we analyzed, distressed listings were more than twice as likely to sell for over list price than non-distressed listings (see a chart with the market-by-market breakdown here).

Anna Nevares, a Redfin agent in San Diego has definitely seen this at play in her market (where 41% of distressed sales are closing above list price). “Banks are pricing in line with the market, and sometimes even below in order to drive activity. Buyers are looking for a bargain and the banks know it. Their strategy is working,” said Anna. “Banks price their listings so well that buyers shouldn’t expect much of a discount, if any at all.” On the other hand, Anna points out that non-distressed sellers “typically list their homes with some degree of negotiability built in to the price. Many buyers won’t even look at an over-priced listing, so it doesn’t serve the seller well to price too high.”

So what does this mean for you if you’re thinking about trying to buy a distressed home? Here are our two takeaways:

• “Distressed” doesn’t mean “pushover.” Don’t expect to negotiate much of a discount from the bank. Even in Queens, where buyers of distressed homes are getting the biggest discounts, they’re only averaging 5% off the list price.
• The more distressed your market is, the better the banks are at pricing homes compared to their owner-occupied competition. If you’re seeing a lot of bank-owned homes for sale in your market, your chances of talking down the bank is going to be pretty slim.

The tide of foreclosures and short sales doesn’t look likely to recede soon, so if you’re thinking of jumping into the market, plan your offers accordingly!

Insider Report Roundup: A Chilly January for Sellers & Buyers

Earlier this week we published another round of Insider Reports on our local blogs in Seattle, the Bay Area, Washington/Baltimore, Chicago, and new this month: Boston. Our local experts around the country combined a look into Redfin’s vast database of market data with the read from our agents in the field to bring you the best insight about what’s going on in each market. Plus—spreadsheets chock-full of market data all the way down to the neighborhood level.

Here are the biggest factors that stuck out to us across our markets:

Sellers in Hibernation: Although the new year usually means a steady stream of new homes on the market, buyers in Seattle, Washington/Baltimore, and parts of the Bay Area saw their choices shrink in January. Where are the sellers? Our thinking is that many homeowners who may be thinking about selling are still sitting out the market because they know they won’t be able to get the price they really want or need. If prices start to increase again, that could get many of these sellers off the fence and back into the market.

Buyers Calm Before the Spring Storm: While closed sales were down from January 2010 almost everywhere, early-stage indicators such as Redfin’s tour volume and pending sales metrics seem to be pointing to a sharp increase in buyer activity over the next few months. We’ll definitely be keeping our eye on this as the story progresses into spring.

No Big Price Recovery Yet: Prices on the West Coast dropped in January, while prices in Chicago and on the East Coast were more mixed. The one consistent factor seems to be that nobody is seeing any big price recovery just yet.

So what are you seeing out there in your market? Are you buying or selling a home and running into interesting market dynamics? Share your story below.