The trend is proving consistent....

The weakening in demand that we have been reporting for several months is now showing up in the monthly sales numbers:

The monthly sales rate is now just over 9,000, well below last year when it was over 10,000.

Although the monthly sales rate has only declined for the last 5 weeks, our Cromford® Demand Index has been anticipating this since the end of the first quarter. This is because the CDI uses data from listings under contract to compute demand, not just closed listings.

Currently demand appears to be stable and still above normal, but nowhere near as impressive as it was during the second half of 2020. If demand had stayed as strong as last year, I have little doubt that supply would not be rising as it is now. Having said that, supply is only rising at a modest rate and nothing like as fast as it did back in the summer of 2005.

The summer of 2005 looked exactly like a bubble bursting with prices continuing to rise even as demand plummeted and supply soared. In those days the bubble was primed by rampant, mindless speculation and the widespread belief that prices only ever went up. In 2021 we have a very different situation with widespread caution, largely because so many people vividly remember the lessons of 2005. This caution will keep the rate of price increases lower than 2005 and we are already seeing a significant slowdown in appreciation. This is a healthy sign and a per-requisite to avoiding a painful period of declining prices. The latter still looks unlikely based on the current market readings.

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The thing we have to keep reminding ourselves in comparing this year with last year is the aberration caused by the spring lockdown (April -May) followed by the summer recovery from pent-up demand that was sustained throughout the balance of the year.

This is not to contradict the Cromford Daily Observation, just to add (again) that today's sales numbers (9,137) are almost identical to this time in 2019 (9,140) - a very strong year.

Talking Point: To the extent demand is moderating some and prices stabilizing it's a good thing.  We are NOT mirroring 2005 (as pointed out in the last paragraph in the above Daily Observation) and potential buyers should NOT anticipate price reversals. It's steady as she goes...