Housing Inventory Slowly Disappearing

Housing Inventory Slowly Disappearing

Housing Inventory Slowly Disappearing | Keeping Current Matters

The price of any item is determined by the supply of that item, and the market demand. The National Association of Realtors (NAR) released their latest Existing Home Sales Report this week.

Inventory Levels & Demand

Amidst reporting on the fact that sales of existing homes rose 1.2% from January, and outpaced year-over-year figures for the fifth consecutive month, was the news that total unsold housing inventory is at 4.6-month supply.

This is down 0.5% from last February and remains below the 6 months that is needed for a historically normal market.

Consumer confidence is at the highest level in over a decade. Pair that with interest rates still under 4%, new programs available for down payments as low as 3%, and you have an attractive market for buyers.

Buyer demand for housing remains twice as high as this time last year.

Prices Rising

February marked the 36th consecutive month of year-over-year price gains as the median price of existing homes sold rose to $202,600 (up 7.5% from 2014).

So What Does This Mean?

The chart below shows the impact that inventory levels have on home prices.

Impact of Inventory on Home Prices | Keeping Current Matters

NAR’s Chief Economist, Lawrence Yun gave some insight into the correlation:

“Insufficient supply appears to be hampering prospective buyers in several areas of the country and is hiking prices. Stronger price growth is a boon for homeowners looking to build additional equity, but it continues to be an obstacle for current buyers looking to close before (interest) rates rise.”

Bottom Line

If you are debating putting your home on the market this year, now may be the time. The amount of buyers ready and willing to make a purchase is at the highest level in years. Contact a local professional in your area to get the process started.

Underwater Homes Continue to Lose Value

Owners of underwater homes– where the amount owed on the home exceeds the home’s value– aren’t seeing a break.  Despite the upswing on the market, underwater homes aren’t seeing an increase in value.  This is because these homes remain the lowest valued on the market, and as we continue to recover, these homes do not attract much interest from buyers.

Nationally, about 17% of homes with a mortgage are in negative equity (or underwater).

Renters Feel Heat from Rising Housing Costs

According to the National Association of Realtors, rising housing costs and a lack of income growth are making feel renters feel squeezed.  In cities like New York, Seattle, and San Jose, rent costs are growing faster than household incomes, and new construction can’t keep up.  Increasing the amount of housing available– through new construction– will help to offset these rising costs.  Builders, however, have been hesitant to start new construction due to rising construction costs, limited access to credit, and concerns about the future market.