The message from the market of the past 12 months has been of a shortage of listings. The NZ Property Report back in May of last year foreshadowed this situation by stating that the market has reached a turning point, subsequent months have only reinforced this perspective, as property sales have remained strong with a consistent 20+% year-on-year growth as evidenced by the chart below which tracks the % growth / decline of the market over the past 4 years.
In the space of 12 months the inventory of property on the market (measured by the equivalent rate of sale in weeks) has gone from 47 weeks down to 36 weeks, a fall of over 20%. In actual numbers, the stock of property on the market in June last year was 47,738 whereas today it sits at 43,917 – the key difference is that this time last year around 161 properties were being sold a day whereas now it is up over 200.
The key question though has been, when would inventory start to rise, when would homeowners take note of the market signals and create a steady flow of new listings coming onto the market driven by this strong sellers’ market that has been present for close on a year. Back in February an analysis was undertaken to identify the likely trend for sales and new listings through 2012. At that time there was a belief borne of analysis that identified a 6 months lag between the trend of sales and the response of listings – sales being the demand leading indicator and listings being the supply lagging indicator.
The analysis foretold a picture of steadily rising new listings through this year as represented by the chart below (listings being represented by the red line measured off the left hand axis, sales being represented by the blue line measured off the right hand axis):
The forecast at that time anticipated that new listings would rise steeply from around 10,500 per month to around 12,000 per month on a moving average basis as the year progressed, thereby providing a match to the rise in sales which were anticipated to rise from 4,600 a month to just under 6,000 per month, again on a 12 month moving average basis.
However with 5 months of activity under our belt for the year it is valuable to see how the forecast is tracking. As far as sales are concerned the rise since the start of the year has tracked exactly as forecast and by the end of the year sales will likely slightly exceed the forecast of 6,000 a month on a 12 month moving average basis as shown int he chart below. However when it comes to listings things are not tracking to the forecast – the red line below shows a revised forecast reflective of recent levels of new listings and seasonal trends out to the end of the year.
This revised forecast now looks more like a year end position of just over 11,500 listings a month on a 12 month moving average basis.
This continued lag in the trend of new listings is likely to see a continued pressure on the market with continued shortages in specific local markets. That means the message appears to be the same as at the start of the year – if you are thinking of selling then now would look like a good time to get your property on the market. However I hear a lot of people saying – isn’t that the message the industry always wants the market to hear? – well of course; but I can assure you I am not speaking from the motivation of the real estate industry, I am purely trying to share insight from the available data and analysis which we derive from the website.
Part of the extrapolation of this revised forecast is the seasonal trend of new listings. This data which has been shared before (in fact 2 years ago in an article titled “Is summer really the best time to sell a property?“) is that the variance by month of new listings is more extreme than that for sales through the year. This fact is best showacsed in the chart below which tracks the % each month represents of annual sales and annual listings (based on 6 years worth of data).
The chart shows very clearly through the green bars those months when sales proportionally are higher than listings – the winter months; and in the red bars the months when listings are proportionally higher than sales – the summer months. The take out of this data is that potentially to list a house over the winter allows you to compete in a less cluttered market in which buyers are still active. This period extends from May through to August before that classic spring surge of new listings occurs.
So just maybe the smarter sellers and smarter agents can benefit from this insight and help homeowners choose the right time to sell and profit from greater insight based on data.