Is the Housing Market Shifting in Buyers’ Favor?
After years of a housing stock shortage, inventory is finally on the rise. At the end of January, there were 1.59 million homes available for sale. This was up from a supply of 1.53 million homes a month ago and 1.52 million a year ago. At the current sales pace, the housing stock will last 3.9 months, an improvement from the 3.7-month supply in December and the 3.4-month supply in January 2018. Despite the improving numbers, however, there still exists an inventory shortage, particularly at the lower end of the market. More home construction is needed, according to Lawrence Yun, chief economist for the National Association of Realtors. He advises, “Taking steps to lower construction costs would be a tremendous help. Local zoning ordinances should also be reformed, while the housing permitting process must be expedited; these simple acts would immediately increase homeownership opportunities and boost local economies.”
More Affordable Prices
One sign of a housing supply shortage is rising home prices. For the past 83 months in a row, home prices increased year over year. The median existing-home price climbed to $247,500 in January, an increase of 2.8 percent from the year before. However, this was the slowest year-over-year price growth recorded since February 2012, due partly to the improving inventory numbers. This should be welcome news for home buyers, especially first-timers.
Home Sales Down but Expected to Rise
Home sales were down slightly in January with only 4.94 million homes sold by the end of the month; sales haven’t been this low since November 2015. While sales were weak, NAR economists expect that they have reached their cyclical low, and sales should rebound in the coming months. Housing affordability is expected to improve, due partly to stabilizing home prices and recent gains in household income. This will entice more buyers to enter the market, and home sales should increase in turn. In addition, the recent decrease in mortgage rates has not yet been factored into home sales figures. According to Yun, “Lower mortgage rates from December 2018 had little impact on January sales; however, the lower rates will inevitably lead to more home sales” in the coming months.
Northeast – Existing-home sales annual rate of 700,000; an increase of 2.9 percent from December, but a slight decrease of 1.4 percent from January 2018.
Midwest – Existing-home sales annual rate of 1.16 million; a decrease of 2.5 percent from December and 7.9 percent from January 2018.
South – Existing-home sales annual rate of 2.08 million; a decrease of 1 percent from December and 8.4 percent from January 2018.
West – Existing-home sales annual rate of 1 million; a decrease of 2.9 percent from December and 13.8 percent from January 2018.