IS JANUARY'S SOFTNESS SIGN OF A TURNAROUND?

The latest REINZ sales data release (January 2022) shows median house prices dropping nationally by $20,000 vs December; in Wellington and Auckland Region even by $74,000 and 80,000 respectively. In some markets, this actually continued a December decline.

While this will make for great headlines of a market turnaround, or even the start of 'the downturn', drawing this conclusion would still be premature. Changes in median prices may just be driven by a shifting mix of starter vs premium homes sold in that month, rather than an actual price 'decline' across properties. In Wanaka township, the median sale price in January actually grew (likewise in Wanaka 'Ward', ie including the surrounding townships). More striking here are actually two other statistics - number of homes sold, and median days to sell:

1) Number of Homes Sold: About 50% fewer homes sold in January than in December, yet this was not due to fewer homes being on the market - quite the contrary. Anec-dotally, several of the factors outlined in our January newsletter were at play here. From prospective buyers simply not getting the required finance due to tighter lending rules, to increased listings tilting the ratio of supply vs demand towards the former: both make buyers more discerning & patient - a far cry from the frenzied demand in 2021. Facing them: sellers whose price expectations have been conditioned by an unprece- dented price growth over the last 12-18 months & who are now reaching for the stars.

2) Median Days on Market: not only did fewer properties sell in January, these properties also took a median twelve days longer to sell, likely for the same reasons stated above.

So what does this mean? Will properties now sit on the market 'forever' and eventually have to be sold at a discount? No. Though the market is certainly more competitive now than in 2021, demand will remain, and sellers with reasonable price expectations will always be first in line to get their homes snapped up, without discounting, by eager buyers.