Fall is here and the leaves aren't the only thing changing. Market conditions continue to normalize across price points and submarkets as the aggressive growth seen over the last couple years softens (or in some cases, reverses). As we noted in our last quarterly report, the effects of rising interest rates and declining equity markets continue to ripple throughout the housing market, impacting pricing, inventory, and market depth. Despite these headwinds, the market still posted very respectable gains in pricing, but transaction counts and inventory levels varied by price segment (more on that below).
While it can be tempting to focus on year-over-year data, or even compare market conditions today to those as recent as six months ago, it's important to include a wider context as the last two years have been anything but normal for the Louisville housing market. Zooming out to look at this quarter's performance versus Q3 of 2019 (i.e. pre-covid) gives a much better perspective on the relative health of Louisville's housing market by comparing it to a more normal market time frame. In that time frame we've seen inventory levels for the overall market plummet by 28%, the number of sales decrease by 10% overall, and median sold prices increase by 30%. Compared to Q3 2019, the high-end segment has seen inventories dip slightly by 7%, median sold prices increase by 26%, and the number of sales increase by an astounding 68%! While our latest Q3 report shows a slowing of the frantic growth seen during the covid years, this trend represents a return to more normal market conditions which remain dramatically better than those seen before the pandemic.
As we forecast last quarter, automatic bidding wars, price escalations, and contingency-free contracts are now rare exceptions, rather than the rule, as submarkets revert to traditional marketing methods and time frames. In these changing market conditions, proper pricing, marketing, and execution have become critical for sellers as mismanaging the early phase of a listing's launch can result in extended days on market and lowball offers as buyers conditioned by the recent market frenzy sense opportunity for any listings that linger. Overall, the decreasing rate of price growth seems to indicate a reversion to the mean and we expect pricing to stabilize over the coming quarters.
The Overall Louisville Market
The number of homes for sale slipped by 6.6% in the quarter which, coupled with a 7.6% increase in median sale price per square foot, drove market activity lower with the number of sales down nearly 15% to the lowest absolute level we’ve seen since 2014. Relative supply remained flat from last quarter with approximately 1.4 months of homes available for sale which continues to favor sellers, although buyers are beginning to sense the change in market momentum and are acting accordingly. Persistent inflation continues to push prices higher, a phenomenon we expect will continue to buoy home values in the coming quarters, despite slowing activity.
High-End Louisville Market
With record inflation impacting real asset prices, $400,000 doesn't buy you what it used to! As home values inflate and inventory levels at the lower-end of the market remain tight, buyers have been pushed further up the price scale resulting in continued growth for this important segment with a nearly 9% increase in existing home sales in the quarter. Inventory in this segment eased somewhat from last quarter with 2.3 months of homes now available which should continue to fuel sales activity. Price appreciation remained flat from last quarter with the median sold price per square foot increasing by 9.1% YOY, a very healthy pace that the market maintained throughout all of 2021. Appreciation varied from 3.5% to 13.5% across the submarkets we tracked so make sure and check out the full Q3 Market Report to see how your neighborhood performed.
As market conditions change, proper pricing, marketing, and listing execution are back to being critical for sellers looking to realize their home's potential value. Thinking of selling? Contact us to see how these market shifts impact your home and what it means for your next one.
Click to download the 2022 Q3 Market Report.