Pandemic, Protests, and Presidents - What an Uncertain Year!
I'm sure I don't have tell you what an interesting year 2020 has been. With a confluence of the 3 "P's" (COVID pandemic, protests, and a presidential election) the market has been lurching from shutdowns to panic buying with the impact varying significantly by price point. Through October, the Greater Louisville market has seen a small, 1.2% increase overall in the number of homes sold compared to the same period in 2019. However, drilling down into the data reveals some surprising insights into the market dynamics at different price levels, so let's dig in as your mileage may vary depending on your price range!
Overall Louisville Market (all areas and price points):
The big story for the overall market has been an historic inventory shortage of homes available for sale. The National Association of Realtors defines a balanced market as one in which there are 6 months of inventory available. This time last year we had an uncharacteristically low inventory level of just under 3 months. That number has decreased by a shocking 45% to a current inventory level of 1.6 months! This is historic by any measure and has greatly constrained the number of transactions occurring which resulted in the aforementioned meager 1.2% increase in sales for the year-to-date. As expected, a limited supply with an increased demand has driven prices higher with average and median sale prices both increasing nearly 9% year-over-year (YOY).
Homes under $500,000:
The vast majority of the Louisville market (93.8% of all transactions) transacts below $500,000 so this price range has been most impacted by the inventory shortage. Across the price range there is a mere 1.07 months of homes available which has kept sales activity flat as a result.
This price segment has been the sweet spot for 2020 with ample supply and strong demand resulting in an incredible 39% increase YOY in the number of homes sold! Inventory levels remain very competitive at 3 months which tends to favor sellers, but still leaves enough homes available to absorb the considerable buyer interest.
The discretionary nature of many large home purchases makes them subject to large swings in demand based on any number of macro-economic forces, especially economic uncertainty - and 2020 has been nothing if not uncertain! As a result, the number of $1M+ home sales decreased 14% over the record pace that was set in 2019. Based on historical data, 2020 is still shaping up to be one of the best years on record for this high-end segment, but compared to the incredible results in the lower price brackets the slower activity has been disappointing for many sellers. Unlike what they read in the local press about inventory shortages, there are plenty of $1M+ homes for sale with over 1.4 YEARS of inventory currently available. Of course, not all inventory is created equally so it pays to properly prepare homes in this price range for market after fully considering the competitive landscape for each individual offering, but that's a blog post for another day...
Interested in seeing how your neighborhood is doing? Check out our 2020 Q3 Market Report for the latest stats by area.