New Year, new market? Well, the calendar may have turned over, but it looks like 2021's real estate market is sticking around. Last year saw a surge in buying activity across the market, constrained only by lower inventory levels of homes for sale. While we typically analyze market activity by quarter, the start of a new calendar year provides a good opportunity to step back and consider the market over a longer time frame. Of course, we still track data quarterly to keep you up-to-date so you can find links to both the full 2021 Annual Market Report and Q4 Market Report here, or in the links below.
As was anticipated in our Q3 report, low prevailing mortgage interest rates, plentiful remote work opportunities (and the resulting influx of buyers to Louisville), and high residential construction costs have continued to fuel record-setting activity across Louisville's market for existing homes. With only modest interest rate increases anticipated this year and few changes on the horizon for the remaining key factors, it appears Louisville's housing market is positioned to keep the same pace in the near term over the coming quarter(s). Amidst double-digit price appreciation and 40-year record inflation, buyers appear to be more concerned about missing out as housing prices continue to climb rather than worrying about buying the top and continue to snatch up homes in multiple-offer situations, particularly at the lower-end of the price scale.
The Overall Louisville Market
With only a 4.7% decrease in available homes for sale, listing inventory stabilized keeping home sales close to last year's levels with 19,780 closed transactions, a respectable 4.7% increase year-over-year (YOY). Despite the annual increase, it appears likely that the transaction count will dip in the near-term due to lack of inventory as the two most recent quarters have shown decreasing listing inventory which led to slightly fewer transactions in the second half of 2021. The market is currently averaging 0.79 months (3.4 weeks) of homes available based on last year's market absorption, which is a historically low level and favors home sellers (for reference, the National Association of Realtors assumes 6 months of inventory to be a balanced market). This continues the downward trend in inventory levels seen throughout our quarterly 2021 reports.
The constrained supply, coupled with a nearly 5% increase in transactions, led to solid price appreciation with the median sold price per square foot increasing by 11% YOY. The high buyer demand cut marketing time required by 46% with sellers receiving an acceptable contract in an average of 27 days after listing. The increases in both the number of transactions and home pricing led to a 15% overall growth in the value of the Louisville market with nearly $5.5 billion dollars of homes sold through the Greater Louisville MLS in 2021.
High-End Louisville Market
Louisville's high-end market (homes $400,000 and above) continued to gain momentum in the 4th quarter, buoyed by slight growth in the inventory levels for homes in this price range (a 1.5% increase YOY). As anticipated in our prior reports, the relative availability of homes for sale in this segment fueled an impressive 24.2% increase in existing homes sales. This growth should taper in the upcoming quarters as we've seen two consecutive quarters of declining listing inventory with the market currently averaging just 1.29 months of homes for sale, a 23% decrease from the levels at the end of Q3 which will likely constrain sales activity, but should lead to further price appreciation.
Speaking of pricing, this segment saw the median sold price per square foot increase by 9.4% YOY. While not quite the double-digit gains noted above, it was still a tremendous performance for the Louisville market which often posts low single-digit gains. Of course, the gains were not evenly distributed and we saw values ranging from 2.7% to 12.3% depending on the submarket so make sure and check out the full 2021 Annual Market Report to see how your neighborhood performed.
"If you have inventory, they will come", or so it seems for Louisville's highest-end real estate. This market segment continues to benefit from (relatively) plentiful inventory with 4.6 months of homes currently available. While this is significantly below the 2-3 years of inventory that are typically available at $1M+, it was still plenty of fuel for explosive growth with 184 transactions occurring in 2021, an increase of 116% over the prior year! Putting this incredible number in perspective, last year's performance nearly doubled the previous record of 96 transactions that was set in 2019. Not only did Louisville's highest-end homes outperform the overall market in transaction growth, but this segment also posted the strongest price appreciation with the median sold price per square foot increasing by 13.5% to $297.55. As we've noted in the past couple quarterly reports, this relatively high inventory level should continue to fuel strong performance in this segment in the near-term as interest rates stay low and luxury real estate remains an attractive asset in an inflationary environment.
As has been the case since mid-2020, the buyer demand remains historically strong at all price levels with market activity primarily driven by the availability of homes for sale. Thinking of selling and curious what all this means? Contact us to find out how the market conditions impact your home and what it means for your next home purchase.