Advisors Mortgage Group > Market Updates > Tight Housing Inventory, but Demand Rages On

The National Association of Realtors released their Existing Home Sales report, which measures closings on existing homes, and it showed that sales were down 7.7% in November. This number came in weaker than expectations, which were aiming for a 6% decline. Year over year, sales are down 35% as reported. When looking at housing supply, inventory continued to move lower dropping to 1.14 million units after peaking at 1.3 million in August. It should be known that housing supply is cyclical and drops this time of year after the normal seasonal build. This was the fourth month in a row where we saw a decline in inventory and this decline represents a 6.6% drop from the previous reported levels. Low levels of inventory make it harder for shoppers but will continue to help support home prices. It also sets up for a reacceleration in home appreciation once buyers who are currently on the fence, come back next year if rates fall further as expected.

1.14 million homes represent a 3.3 months’ supply when looking at the pace of sales. 3.3 months is seen as a very tight inventory level as 6 months is seen as more balanced. Digging deeper, only 66% of those labeled as “inventory” are active listings! Believe it or not there are only 751,000 active listings across the country, which means that 34% of the “inventory” or supply of homes in this report are under contract and not truly available. While this is bad news for the inventory picture, it also speaks to demand, as a normal market usually has about 25% of inventory under contract. So, demand is still very strong even in this very tight market with higher interest rates. When looking at the month’s supply of available homes for sale, it’s really 2.2 months.

Other parts of the report showed that homes remained on the market on average for 24 days which was up from 21 days in last month’s release. Also, 61% of homes were on the market for less than 30 days which means they are still moving quickly. First- time homebuyers made up about 28% of home sales which was 2% higher than last year, but unchanged from the previous report. Buyers who elected to purchase with cash accounted for 26% of sales. Real estate investors made up about 14% of the sales of homes, which is down from 16%. Foreclosures and short sales still haven’t budged and accounted for 2% of all transactions, which has basically stayed in this range for the last year.

While inventory is still very tight, demand is still very strong which is supporting home pricing. Both the Case Shiller and the FHFA, which report on home appreciation, released data showing that homes have appreciated over 9% over the last year.

Source : http://bit.ly/2MJU6mf

By: Jon Iacono