Housing inventories drop as sales heat up
Monday, November 25, 2019
The seesaw ride that is the U.S. housing market appears to have no end in sight. After dipping in September, home sales rebounded in October.
At the same time, however, inventory levels fell to their lowest point in the year, causing prices to rise by their highest percentage increase in the year. With mortgage rates fluctuating and the winter months just around the corner, sales are likely to stagger in the final months of the year.
Sales of existing homes re-stabilized in October, rising 1.9% following a 2.2% drop in September, according to the National Association of Realtors (NAR). Sales are now up 4.6% compared to a year ago. However, the market is facing pressures due to decreasing inventories and rising prices.
Total existing housing inventory fell by 2.7% last month, said the NAR, and is down more than 4% from a year ago. Real estate firm RE/MAX stated inventory in the 53 metropolitan areas it tracks was 9.1% lower year-over-year, the lowest October reading in the survey’s 11-year history.
Fewer homes for sale means sellers can ask higher prices. Real estate brokerage website Redfin reports the median price of a home sold in October ($312,200) was up 1.4% from the previous month and 5.4% from a year ago, the largest year-over-year increase since July 2018. RE/MAX calculated the median price of a home in its survey at $254,000, up 8.4% from last year.
That may be good news for sellers, but it is bad news for the market overall, as much of the recent demand for homes has been at the lower end of the market. The NAR noted that prices had increased in October but reported that the median price of homes sold had dropped slightly from the month before.
For all homes sold, the median price was $270,900, down from $272,100 in September. The median price for a single-family home sold in October was $273,600, down from $275,100 the month before. It is these lower-price houses that are disappearing from the market as inventories shrink.
The ongoing struggle between demand and availability/affordability is stifling the market from gaining momentum. Lower mortgage rates helped to boost activity in late summer and early fall.
Now, with inventories down and prices on the rise would-be buyers are again taking a wait-and-see attitude. Fannie Mae announced that its Home Purchase Sentiment Index (HPSI) slipped 2.7 points from September to October, including a 7-point drop in the proportion of respondents who agreed that “Now Is a Good Time to Buy.”
The good housing news for the month was the uptick in new housing starts (up 3.8% from September and 8.5% year-over-year), along with permit requests (up 5% and 14.1% year-over-year) and completions (up 10.3% and 12.4% year-over-year).
The National Association of Home Builders related that its Housing Market Index, which measures builder confidence, remained stable (at 71) and at its highest point of the year for the second month in a row, with half of respondents reporting an increase in buyer traffic conditions.
Industry experts are hopeful that a surge in new homes for sale early next year will take some pressure off inventories and prices, drawing more buyers into the market. At present, although conditions look less favorable for the next couple of months, it appears the industry will end the year with a modest gain in growth.
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