Home sales plunge as summer ends in Lawrence; city on track to post its third straight year of declining sales
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It has been a brutal end of the summer for Lawrence’s real estate industry, with sales in July and August falling by 35% from a year ago, according to the most recent statistics.
Home sales in Lawrence were down 45% in July and then were down 23% in August, according to numbers compiled by the Lawrence Board of Realtors.
You can blame the heat, if you want, and you might be figuratively correct. Potential homebuyers are undoubtedly feeling heat from rising interest rates that have risen to more than 7% for many 30-year mortgages. Compared to rates in the 3% range that were common a couple of years ago, the difference in interest rates adds about $700 per month to a 30-year mortgage payment on a $300,000 home.
Those economic conditions have the head of the Lawrence Board of Realtors talking a bit differently about the market now than in the past. For the last couple of years, the primary trend in the Lawrence home market has been an extremely low inventory of homes. Demand has been strong but inventory has been weak, which has led to a fast-moving home market that often involved bidding wars for the homes that were available.
By any normal metric, Lawrence’s housing market is still tight. It has a 1.6-month supply of homes for sale — meaning if no new homes were listed for sale in the market, we would be out of homes to sell in about one and a half months. A more normal market would have a five- to six-month supply of homes.
That said, though, Lawrence Board of Realtors President Brian Johnson said in the organization’s monthly report that he is seeing a true “softening” of the market.
“Existing home sales have faced some headwinds, with a noticeable drop both in terms of the number of homes sold and their average prices,” Johnson said in the report. “This could be attributed to various factors, including changes in buyer preferences and economic conditions.”
That last part about prices falling is notable. Home prices rising at a much higher rate than normal has been a trend in Lawrence for the last couple of years. Indeed, there are some signs that some home prices are starting to decline, but you have to look pretty deep to find those signs, and it is unclear how enduring they will be.
The latest report from the Board of Realtors provides more in-depth home price information than normal. It looks at not just the average selling price for all homes in Lawrence, but breaks those prices down for existing homes versus newly constructed homes. The numbers show that in August, the average selling price for existing homes — i.e., older homes — fell by 4.7% to $334,629. If that trend continues, it would be big news, as many homeowners have seen their property values — and thus their tax values — increase by 10% or more in the last couple of years.
However, the August figures are pretty limited and imprecise. They are just one month’s worth of data, and there’s no guarantee that the data is comparing apples to apples. If fewer large homes, for instance, sold in August 2023 than in August 2022, the average selling price would go down, just based on the differences in the houses rather than a true change in the market.
There are some other signs that might point to the beginnings of a change in the market. The average number of days a home sits on the market before it sells was 19 in August, which is up from 13 days in August 2022. I generally prefer the statistic that measures the median days on market. It was at five days in August, down from seven days in August 2022. So, those numbers are contradictory. But, if you are rooting for a slowdown in housing prices, you at least have something to grab hold of.
In sum, we might be on the verge of a change in the market, but it is a little soon to say for sure. What is clear is that it is an interesting time in the local real estate market. (Interesting as in: How many pints of plasma can I sell a month to make the mortgage?)
Here’s a look at some other statistics from the August report:
• For the year, home sales are down 26% compared with the same period a year ago. Through the first eight months of the year, there have been 609 home sales in Lawrence, compared with 823 through the first eight months of 2022. It seems almost certain at this point that Lawrence will experience its third consecutive year of declining home sales. This year, though, is on pace to be the biggest decline yet. In 2021, homes sales declined 3.5%. Last year, sales declined 13.2%. So, if you are keeping track at home, Lawrence is on pace to have a decline twice as large as a year ago, from a percentage standpoint.
• An uptick in home sales doesn’t appear likely in the next couple of months. The number of contracts written in August — i.e. sales that have been made but not yet finalized — were down 30% from year ago levels. That’s usually a sign that home sales will fall in the coming month.
• In some years, Lawrence has experienced a decline in home sales, but the local real estate industry has grown in a key way. The total dollar value of home sales increased because even though the number of homes sold declined the price per home was up significantly. This year, the real estate industry is taking a big hit as home sales decline. The total dollar value of home sales is down 25% year to date to $204 million. In other words, home sales have been $68 million less than a year ago. You may not care much about that statistic, but people who make their living off commissions from home sales likely do.
• Year to date, the median selling price of a home in Lawrence is $302,500. That’s up 2.5% from a year ago. Again, if you are rooting for housing prices to come down, this is a number to take note of. The 2.5% increase is much less than we have seen recently. At this point last year, median selling prices were up 11%, and at this time in 2021, they were up nearly 13%.