Strong selling season.

Inventory down, sales and prices up.

As of the end of January, there were only 4,419 homes for sale (single family and condos).  Compare that to the 5,779 homes for sale one year ago.  That equates to 25% less homes for sale in January 2020 vs. the same month last year.  Although there are less choices for buyers, sales are increasing.  In fact, although there were 25% less homes for sale, 25% more homes went under contract,  1,434 pended sales vs. 1,140 in January 2019.  Shrinking inventory equals less choices an opportunity for buyers.  Think about that:  Fewer homes for sale, but more homes went under contract.  It has pushed inventory, based on pended sales, to a 3.1-month supply, 40% less than the 5.1-month supply one year ago.  (Note:  Pended sales is a generally accepted predictor of closed home sales over the next 2 months.)  Naturally, how does it affect prices?  They’re appreciating.  The average sold price was $241 per square foot.  That is up 7.1% from last month and 11.1% compared to January 2019.  See the 2 graphs below.  They paint a pretty clear picture.

On a macro level, recent indicators provide signs that continued low inventory, increasing sales and increasing prices will continue.  This month, in its semiannual report to Congress, the Federal Reserve said risks of weaker than expected growth had declined, although possible spillovers from the effects of the coronavirus present a new risk.  The Fed held its benchmark federal-funds rate steady, between 1.5% and 1.75%, signaling little reason to change course.  Consumer spending and sentiment remains high.  There is continued strength in the services sector, and after 5 months of contraction, manufacturing rebounded in January.  The Labor Department reported a 17% increase in jobs,  211,000 a month on average for November – January 2020, vs. 175,000 for the same period last year.  The average hourly rate rose 3.1% from one year ago.  Unemployment increased to 3.6%, a good thing, as more people were looking for jobs.  The equity markets are pushing historic levels.  Mortgage interest rates remain low, at around 3.45% for a 30-year fixed conventional loan. China accounts for 17% of global trade.  I predict interest rates will go lower, as the Fed buttresses against the risk of any fall-out from a contraction of global growth and trade due to the coronavirus crisis weakening the Chinese economy.  Lower interest rates = more buying power.  More buying power will result in prices continuing to appreciate.