The housing market is changing quite a bit from a year ago. The number of homes up for sale is growing, reversing an inventory shortage trend that has plagued many markets over the last few years. The higher inventories are also driving greater price cuts, according to realtor.com®’s February housing report.
About 73,000 more listings are for sale this year compared to last year. Inventories have increased 6 percent year over year, according to realtor.com®’s analysis. The largest jumps in For Sale signs are out West, led by San Jose, Calif. (up 125 percent year over year); Seattle (up 85 percent); San Francisco (up 53 percent); San Diego (up 39 percent); and Portland, Ore. (up 36 percent).
“This is the fifth consecutive month that we’ve seen housing inventory increase, especially in large markets,” says Danielle Hale, realtor.com®’s chief economist. “As is often the case in real estate, the important trends are going on at the local level. We see large markets continue to cool, but some markets still have some strength. Additionally, we still see fewer homes priced under $200,000 on the market, so entry-level buyers won’t see the same availability of options as high-end buyers.”
The median list price rose 7 percent year over year in February to $294,800. But prices are showing signs of cooling. Thirty-nine of the 50 largest housing markets saw an increase in price cuts in February. The largest percentage of price cuts were in Las Vegas (up 19 percent); San Jose (up 9 percent); Phoenix (up 7 percent); San Francisco (up 5 percent); and Dallas (up 4 percent).
After inventory and affordability challenges in 2018, prospective home buyers may have better chances of scoring a property this year. Affordability will remain an issue in some high-priced markets, says realtor.com® Chief Economist Danielle Hale, but overall, the national market is looking brighter for buyers who have stayed on the sidelines. Here’s why.
More homes are for sale. For the last few years, a limited number of listings has given buyers fewer choices. But housing experts predict more robust inventory this year. “For buyers, there is going to be more inventory, so that’s a bright spot,” Hale says. “The downside of that bright spot is it might not be in their price range.” The supply of homes for sale under $300,000 may not grow significantly, but they’re also not decreasing, she adds.
Home price growth is slowing. Home prices will still rise but at a much slower pace than the last few years. Hale predicts a 2.2 percent increase in home prices this year, down from last year’s nearly 5 percent growth. “We do still anticipate rising home prices, particularly for below-median-priced homes, so buyers in that price range may have some incentive to buy sooner rather than later,” Hale says. On the flip side, “as rising costs raise the bar to homeownership, some would-be buyers will be knocked out of the market. [That means] remaining buyers may have less competition to contend with than they saw in 2018.”
Mortgage rates are lower. The 30-year fixed-rate mortgage has backed away from the 5 percent mark, decreasing early this year. That means lower borrowing costs for buyers. The 30-year fixed-rate mortgage averaged 4.41 percent last week. “That’s definitely a huge opportunity for buyers because it drastically improves affordability,” Hale says. “And I think that if these low rates persist for a little while, then we’ll actually see stronger sales than we originally forecast.”
Home shoppers will likely face less competition in their offers, and that may allow them more time during their house hunt.
A new report from Redfin shows that only 13 percent of offers written by agents on behalf of their customers faced a bidding war last month—down significantly from 53 percent a year ago.
“Buyers have heard the market has slowed, so now they’re trying to get all of their ‘wants,’ not just their ‘needs,’ ” says Kalena Masching, a Redfin real estate pro in Palo Alto, Calif. “They’re waiting until they find a home they can check more boxes—for instance, three bedrooms instead of two or a higher rated school. In general, they are being more judicious as they think through their purchase. Meanwhile, many sellers have not yet recognized that the market has shifted.”
The number of homes for sale has been slightly increasing in several markets, which has left fewer home buyers competing for each home. In December, the number of homes for sale had grown by 5 percent over a year ago.
Several West Coast markets continue to be among the most competitive, but many are seeing fewer bidding wars compared to a year ago. Portland, Ore.; Denver; and San Diego each saw less than one out of five offers face a bidding war, down from more than half of offers a year earlier, Redfin reports. San Francisco, Los Angeles, and Seattle posted the biggest year-over-year percentage drops in bidding wars.
Meanwhile, the least competitive housing markets in January that overall saw the fewest bidding wars were Miami (3 percent), Dallas (6 percent), and Houston (6 percent).
Source: REALTOR Magazine
A housing market defined by rapidly rising home prices, bidding wars, a lack of inventory, and sellers with the upper hand in negotiations may be changing. “The signs are pointing to a market that’s shifting toward buyers,” says Danielle Hale, realtor.com®’s chief economist. “But in most places, we’re still a long way from a full reversal.”
After all, home sales aren’t exactly tanking. Prices for existing homes were up 4.6 percent from a year ago in the National Association of REALTORS®’ latest housing report. The median home list price in August was up 7 percent from last year.
While these numbers are still higher than last year, economists point to a slowing growth in the percentage jumps. Last year, median home list prices increased by 10 percent from the previous year and by 9 percent the year before that.
A recent report from real estate brokerage Redfin showed that more than one in four home sellers dropped their asking price last month. The areas seeing some of the biggest decreases this year are Las Vegas; San Jose, Calif.; Seattle; and Atlanta.
“We’ve hit that tipping point in a lot of these cities where what sellers think they can get is just not possible for many buyers,” Daren Blomquist, senior vice president at ATTOM Data Solutions, told realtor.com®. “Now the pendulum is swinging away from sellers and back toward buyers.”
Economists point to housing affordability as a culprit for the slowdown. Mortgage rates are up 0.82 percent since a year ago; the 30-year fixed-rate mortgage averaged 4.65 percent as of Sept. 20. Each percentage point increase in rates can translate to about $143 more on a monthly mortgage payment, or nearly $51,500 over the life of a loan on a $300,000 priced home, according to realtor.com®.
“Home prices have just gone up too fast,” Blomquist says. “It doesn’t mean that all of a sudden it’s a market that’s going to crash. But it does mean there are limits to what people can afford.”
Contract signings rose in all four major regions across the U.S. last month, a sign that dwindling home sales—which have plagued the market at an unusual time of year this summer—will reverse course in the coming months, the National Association of REALTORS® reports.
NAR’s Pending Home Sales Index, a forward-looking indicator based on contract signings, increased 0.9 percent month over month in June to a reading of 106.9. “After two straight months of declines in pending home sales, home shoppers in a majority of markets had a little more success finding a home to buy last month,” says NAR Chief Economist Lawrence Yun. “The positive forces of faster economic growth and steady hiring are being met by the negative forces of higher home prices and mortgage rates. Even with slightly more homeowners putting their home on the market, inventory is still subpar and not meeting demand. As a result, affordability constraints are pricing out some would-be buyers and keeping overall sales activity below last year’s pace.”
Despite last month’s rise, contract signings are still down 2.5 percent compared to a year ago, NAR reports. Nevertheless, Yun says the worst of the supply crunch may now have passed. In June, existing inventory was up slightly on an annual basis, marking the first increase in three years. Several large metros saw year-over-year surges in inventory levels last month:
- Portland, Ore.: +24 percent
- Providence, R.I.: +20 percent
- Seattle: +19 percent
- Nashville, Tenn.: +17 percent
- San Jose, Calif.: +15 percent
“Home price growth remains swift, and listings are still going under contract at a robust pace in most of the country, which indicates that even with rising inventory in many markets, demand still significantly outpaces what’s available for sale,” Yun says. “However, if this trend of increasing supply continues in the months ahead, prospective buyers will hopefully begin to see more choices and softer price growth.”
Source: National Association of REALTORS®
Inventory of available homes on the market is the lowest it’s been in two decades, but the reasons may surprise you. Two of the likely culprits are baby boomers and homeowners who are simply satisfied with their home, according to realtor.com®’s Housing Shortage Study.
Baby boomers are showing a desire to age in place in their current homes, and their refusal to sell is creating a clog in the market, according to the study. Eighty-five percent of baby boomers surveyed say they are not planning to sell their home in the next year. That means 33 million properties—many of which are urban condos or suburban single-family homes—will stay off the market. Many of those properties would be popular choices for millennials, a generation still largely waiting in the wings to break into homeownership.
Read the full article on RealtorMag…
By now just about every would-be buyer out there knows there simply aren’t enough homes for sale these days to appease the hordes of competition. But despite the shortages, rising prices, and bidding wars, more homes are expected to be sold this year than in more than a decade.
In 2017, the number of sales of existing homes (which have previously been lived in) is expected to rise about 3.5%, to 5.64 million, according to the midyear forecast from the National Association of Realtors®. The group predicts that existing-home purchases will rise an additional 2.8% in 2018, to 5.8 million.
Read more on Realtor.com…