A sharp drop in auction sales rates (quantity demanded) and average bid- to-value ratios (price demanded) in late 2022 preceded a correction in retail home prices in mid-2023. Those same demand metrics started rising again in early 2023, even as retail home prices were continuing to slide, and preceded the rebound in the retail market that came later in 2023 and into 2024 (see Fig. 3).
WHAT TO EXPECT IN EARLY 2025
The slide in auction demand metrics in the second half of 2024—excluding the sharp divergence from that trend in December—indicates a sluggish retail housing market in the first quarter of 2025. “First-time homebuyers have been waiting for interest rates to fall,” wrote one survey respondent. “Rising taxes and insurance are impacting them also.” This sluggish first quarter may be when many existing home sellers finally start to go through the uncomfortable process of realizing their homes won’t sell for as high a price as they hoped. There is already evidence of this happening, with six consecutive months through December where median listing prices have decreased from a year ago, according to Realtor.com data. But if the rebound in auction buyer demand seen in December continues— and there is early evidence in the January numbers that it will —that could foreshadow a rebounding retail market in the prime selling seasons of spring and summer. “Going into the New Year, I do feel that the market will improve and as such if the home can be bought at
Source: Auction.com, NAR
Despite the market optimism surrounding the election outcome, most buyers still consider market conditions a headwind to their investing rather than a tail wind. More than one-third of buyers surveyed (35%) said the market environment is making them less willing to buy distressed properties at auction compared to 24% who said market conditions are making them more willing to buy. “You know, it is a day-by-day market pulse,” wrote one buyer in the survey. “I feel better about the coming (months) but other world issues could change things.”
in late 2024 continues into early 2025, it would bode well for the 2025 spring and summer housing markets. That’s because the local community developers who represent the majority of buyers at auction often know their local markets as well as anyone and are proficient at anticipating future market trends. Their continued success as real estate investors hinges on them accurately anticipating what the market will look like about three to six months in advance—the typical time it takes to renovate a distressed property purchased at auction and return it to the retail market as a rental or resale. “I look mostly at the local market, without paying attention to the entire market,” wrote one survey respondent. “I’m a little less aggressive than I was several years ago, but that is determined by my local market.”
AUCTION TRENDS AS MARKET PREDICTORS
If the optimism among auction buyers— both in word and deed—that emerged
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