The effects of rising interest rates and declining equity markets are beginning to be felt across the Louisville housing market with the second quarter marking the first time that the decline in number of sales outpaced the decline in inventory levels since the pandemic started. In other words, after adjusting for these slightly lower inventory levels, the overall market experienced its first quarterly year-over-year decline in sales activity since mid-2020. However, this was not the case for the high-end market (see below) and its impact on the overall market has been minimal with homes still posting double-digit price appreciation and sales activity continuing at levels that would otherwise be considered phenomenal based on historical market data.
Anecdotally, the days of automatic bidding wars and price escalations across the market seem to be numbered with many submarkets reverting to traditional marketing methods and multiple-offer scenarios reserved for only the truly exceptional properties at a given price level. While rising interest rates have increased the cost to service debt, long-term mortgage rates are still nearly half of the current 9.1% CPI rate, making life-cycle ownership costs very reasonable after adjusting for inflation. As a result, buyer demand, while dampened somewhat, has remained resilient thus far.
As always, your mileage may vary depending on your neighborhood and price range and this is especially true in changing market conditions so let's dig into the numbers for a closer look.
The Overall Louisville Market
As noted above, inventory levels continued their downward trend with a 2% decrease in available homes for sale, while the number of sales dipped by 8.1% in the quarter. Overall, supply remains constrained with just 1.37 months of homes available based on the pace of sales YTD. While this is a large percentage increase in inventory levels from the 3.4 weeks noted at the beginning of the year, it continues to favor sellers since it remains far below the 6 months' supply that the National Association of Realtors considers a balanced market. Record inflation and strong sales activity continue to push prices higher with the median sold price per square foot increasing by 12.2% YOY. These higher prices led to 2% increase in the value of the Louisville market despite the dip in sales activity with a total of nearly $1.5 billion in residential real estate changing hands in the second quarter.
High-End Louisville Market
Constrained inventory levels in the lower-end market and record inflation in all markets keep pushing buyers further up the price scale resulting in an impressive 20% increase in existing homes sales for Louisville's high-end market (homes $400,000 and above). Inventory in this segment remained more plentiful with 2.1 months' of homes available (a 15.3% increase YOY) which continues to fuel sales activity. As expected, an increase in sales which exceeded the rise in inventory levels has pushed pricing upwards with the median sold price per square foot increase by 9.1% YOY, which is the same pace that was maintained througout 2021. Of course, the gains were not evenly distributed and we saw values ranging from 3% to 18.2% depending on the submarket so make sure and check out the full Q2 Market Report to see how your neighborhood performed.
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.
Click to download the 2022 Q2 Market Report.