Whats going on with the Hugo housing market?

Despite the more than doubling of interest rates (3% in 2020 to 7.50% today), the housing market has been on solid footing in Hugo. However, I think that is about to change….at least for the rest of this year. I’ll explain what I see.

Buyers have definitely pulled back because of those rate increases from 1 year ago (288 sales last year to 177 this year). See the chart below of the last 10 years of closed sales in Hugo. A big pullback from 1 year ago but still historically a solid buyer market.

What is keeping the market functioning is the pullback in Seller’s as well. The chart below is the number of non-new construction homes for sale in Hugo in the last 10 years. As you can see there is a slight uptick in the past year but inventory levels are still historically extremely low.

So, its a low Buyer and low Seller market. Which for a market, is just fine. Instead of 10 Sellers and 5 Buyers, its 2 Sellers and 1 Buyer. And until we get more inventory, the market dynamic isn’t going to change much.

But what about new construction you say….The below chart shows the closed new construction sales in the past 10 years. Despite a decrease from last year, sales are still historically very high.

Right now 17 of the 25 pending sales in Hugo are new construction. About half of the homes for sale on the market are new construction. So, the takeaway for a seller is that new construction is your biggest competition. Some of it is good, some of its very cheap. There is not a lot of inventory(competition) in the existing home market - the least expensive home for sale in Hugo right now is about $400k. If your sale price is below that, I would still expect a strong Seller’s market. If its over that, you need to be competitive with new construction.

Now for the bad news from a Seller’s standpoint. As I write this, there are 46 single family homes on the market. Its actually more than that because new construction has extra homes for sale but lets just say for sale on the MLS. There are only 2 of those sales that have a contingent offer on them (either contingent inspection or some other contingency). That is very, very low buyer activity. By looking at contingent sales, that is a more up to date way to look at the current market than even pending sales. So, in the past 2 weeks, buyers have basically disappeared. Would you want to be one of 45 houses on the marekt and have only 2 sell in 2 weeks?

7.5% or higher interest rates together with prices that have continued to rise have put a big damper on Buyer activity. So, inventory should continue to rise this fall and into the winter and a more balanced, if not Buyer market may begin to take shape. Obviously a lot is driven by what happens with interest rates. Projections are for a slight decline next year but nothing drastic so I think the Buyer pullback will continue.

This fall and winter for sure and maybe next spring could be a different market than what we have seen in quite a few years….