September 1, 2021

Smaller homes catching on

Late summer housing data shows signs of positive change for homebuyers, as more homes are being listed for sale.

Inventory is still low overall, but the number of newly listed homes was up 6.5% in July from a year ago. The newly listed homes also tended to be smaller in size, leading to a noticeable price slowdown.

The median list price stayed the same for the month – about $385,000. But single-family homes between 750 and 1,750 square feet increased from 30.2% of total listings in July 2020 to 36.3% in July 2021, while inventory from 3,000 and 6,000 square feet decreased from 24.2% to 20.1%.

Earlier in the pandemic, buyers often shunned smaller abodes in favor of larger homes with space for offices, outdoor recreation and homeschooling. But affordability is now demand’s main driver.

As a result, condominiums are swelling in popularity, too. In June, condos were going under contract in an average of just 22 days from listing - the fastest pace on record.

With more than half of Americans vaccinated, the benefits of shared amenities like a gym or a pool are more attractive. Recreation and socialization are often provided, organized or subsidized by the Condo Association.

Beginning in May, the average condominium sold above asking price for the first time since 2012.

Nearly 42% of condos sold above asking price in June, another record. That’s more than double the 18.6% share in June 2020 and the 20.2% share in June 2019.

Overall, this means a rosier outlook for homebuyers. Single-family home sellers may need to set list prices more competitively, as well.

Cue the week ending Aug. 8, which saw nearly 5% of listed homes drop asking prices - the most since 2019. Homes are staying on the market a bit longer - a median 17 days. Despite the slowing price gains, bidding wars still result in nearly half of all sales. Mortgage rates remain near all-time lows. Scales are still tipped toward sellers, but not as dramatically.

The Mortgage Bankers Association reported that applications dropped 1.7% week-over-week during the week ending July 30, hitting their lowest level since May 2020.

Markets generally begin to cool when the benefits of low interest rates are overwhelmed by home prices rising too fast.