US home sales stumble as supply stalls contract signings

Sales of US homes are stumbling this summer, as low supply levels see contract signings stall.

Pending homes sales stumbled in July for the fourth time in five months as only the West saw an increase in contract activity, according to the National Association of Realtors. The Pending Home Sales Index decreased 0.8 per cent month-on-month and fell 1.3 per cent year-on-year, marking the third time in four months it has fallen on an annual basis.

Lawrence Yun, NAR chief economist, attributes the decline to the staggering inventory woes throughout the country.

“With the exception of a minimal gain in the West, pending sales were weaker in most areas in July as house hunters saw limited options for sale and highly competitive market conditions,” he says. “The housing market remains stuck in a holding pattern with little signs of breaking through. The pace of new listings is not catching up with what’s being sold at an astonishingly fast pace.”

According to Yun, in the past five years, the national median sales price has risen 38 per cent, while hourly earnings have increased 12 per cent. This unsustainable trend is putting considerable pressure on affordability in some markets – especially for prospective first-time buyers – and is pricing out some households who would otherwise be looking to buy a home. Despite this growing obstacle, Yun says data and feedback from Realtors continues to confirm that the slowdown in existing sales since spring is the result of a supply problem and not one of diminished demand.

“Buyer traffic continues to be higher than a year ago, the typical listing has gone under contract within a month since April, and inventory at the end of July was 9.0 percent lower than last July,” adds Yun. “The reality, therefore, is that sales in coming months will not break out unless supply miraculously improves. This seems unlikely given the inadequate pace of housing starts in recent months and the lack of interest from real estate investors looking to sell.”

With autumn at the doorstep, Yun expects existing-home sales to close out the year at around 5.49 million, which is only an increase of 0.7 percent from 2016 (5.45 million).

An expected pause in activity in the Houston region because of Hurricane Harvey will also likely slow overall sales growth in the coming months.


US home sales suffer summer slip

14th August 2017

US home sales slipped this summer, as low supply continues to mute overall activity.

Total existing-home sales decreased 1.8 per cent to a seasonally adjusted annual rate of 5.52 million in June, down from 5.62 million in May. Despite the decline, June’s sales pace is 0.7 per cent above a year ago, but the figures mark the second lowest month for 2017 so far, after February (5.47 million). Only the Midwest saw an increase in sales last month.

Lawrence Yun, NAR chief economist, says the previous three-month lull in contract activity translated to a pullback in existing sales in June.

“Closings were down in most of the country last month because interested buyers are being tripped up by supply that remains stuck at a meager level and price growth that’s straining their budget,” he explains. “The demand for buying a home is as strong as it has been since before the Great Recession. Listings in the affordable price range continue to be scooped up rapidly, but the severe housing shortages inflicting many markets are keeping a large segment of would-be buyers on the sidelines.”

“The good news is that sales are still running slightly above last year’s pace despite these persistent market challenges,” he adds.

Heading into the second half of the year, Yun predicts that existing-home sales will finish around 5.56 million, which is an increase of 2.6 per cent from 2016 (5.45 million).

“Prospective buyers who postponed their home search this spring because of limited inventory may have better luck as the summer winds down,” comments President William E. Brown, a Realtor® from Alamo, California. “The pool of buyers this time of year typically begins to shrink as households with children have likely closed on a home before school starts. Inventory remains extremely tight, but patience may pay off in coming months for those looking to buy.”


US housing market “exceeds expectations”

22nd May 2017

The US housing market has “exceeded expectations” since the 2016 election, according to realtors, with sales on course for a 10-year high.

The multi-year stretch of robust job gains along with improving household confidence are expected to fuel sales of existing homes in 2017, despite low supply levels and worsening affordability.

Speaking at the 2017 Realtors Legislative Meetings & Trade Expo, Lawrence Yun, chief economist of the National Association of Realtors, presented his forecast for the year, revealing that the first quarter of 2017 was the best for sales figures in exactly a decade, with 5.62 million sales the highest recorded since 2006’s 6.47 million.

“The housing market has exceeded expectations ever since the election, despite depressed inventory and higher mortgage rates,” said Yun. “The combination of the stock market being at record highs, 16 million new jobs created since 2010, pent-up household formation and rising consumer confidence are giving more households the assurance and ability to purchase a home.”

Although sales are currently running at a decade high, Yun believes the healthy labor market should be generating even more activity. However, listings in the lower- and mid-market price range are scant and selling fast, and homebuyers are discovering they can afford less of what’s on the market based on their income.

“We have been under the 50-year average of single-family housing starts for 10 years now,” said Yun. “Limited lots, labor shortages, tight construction lending and higher lumber costs are impeding the building industry’s ability to produce more single-family homes. There’s little doubt first-time buyer participation would improve and the homeownership rate would rise if there was simply more inventory.”

The national median existing-home price is expected to rise around 5 per cent this year.

US home sales race to fastest pace in 10 years

24th April 2017

US home sales raced to their fastest pace in over a decade in March.

Figures from the National Association of Realtors show that total existing-home sales rose 4.4 per cent to a seasonally adjusted annual rate of 5.71 million in March from a downwardly revised 5.47 million in February. March’s sales pace is 5.9 percent above a year ago and surpasses January as the strongest month of sales since February 2007 (5.79 million).

Only the West saw a decline in sales activity in March, while severe supply shortages across the country resulted in the typical home coming off the market significantly faster than in February and a year ago.

Lawrence Yun, NAR chief economist, says existing sales roared back in March and were led by hefty gains in the Northeast and Midwest.

“The early returns so far this spring buying season look very promising as a rising number of households dipped their toes into the market and were successfully able to close on a home last month,” he explains. “Although finding available properties to buy continues to be a strenuous task for many buyers, there was enough of a monthly increase in listings in March for sales to muster a strong gain. Sales will go up as long as inventory does.”

Indeed, total housing inventory 3 at the end of March increased 5.8 percent to 1.83 million existing homes available for sale, but is still 6.6 percent lower than a year ago (1.96 million) and has fallen year-over-year for 22 straight months.

As a result, the median existing-home price for all housing types in March was $236,400, up 6.8 per cent from March 2016 ($221,400). March’s price increase marks the 61st consecutive month of year-over-year gains.

“Bolstered by strong consumer confidence and underlying demand, home sales are up convincingly from a year ago nationally and in all four major regions despite the fact that buying a home has gotten more expensive over the past year,” adds Yun.

“A growing pool of all types of buyers is competing for the lackluster amount of existing homes on the market. Until we see significant and sustained multi-month increases in housing starts, prices will continue to far outpace incomes and put pressure on those trying to buy.”


US supply shortage holds back buyers

24th March 2017

After starting the year at the fastest pace in almost a decade, existing-home sales in the US slid in February, but remained above a year ago, according to the National Association of Realtors.

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, retreated 3.7 per cent to a seasonally adjusted annual rate of 5.48 million in February from 5.69 million in January. Despite last month’s decline, February’s sales pace is still 5.4 per cent above a year ago.

Lawrence Yun, NAR chief economist, says a shortage in properties for sale and weakening affordability conditions stifled buyers in most of the country.

“Realtors are reporting stronger foot traffic from a year ago, but low supply in the affordable price range continues to be the pest that’s pushing up price growth and pressuring the budgets of prospective buyers,” he comments. “Newly listed properties are being snatched up quickly so far this year and leaving behind minimal choices for buyers trying to reach the market.”


Sales of US homes hit 10-year high

24th February 2017

Sales of existing homes in the US have reached their fastest pace in almost 10 years, according to the National Association of Realtors.

Existing-home sales got off to a speedy start in 2017, surpassing their recent cyclical high and climbing 3.3 per cent to a seasonally adjusted annual rate of 5.69 million in January. This is 3.8 per cent higher than a year ago (5.48 million) and top November 2016 (5.60 million) as the strongest since February 2007 (5.79 million).

Lawrence Yun, NAR chief economist, says January’s sales gain signals resilience among consumers even in a rising interest rate environment.
“Much of the country saw robust sales activity last month as strong hiring and improved consumer confidence at the end of last year appear to have sparked considerable interest in buying a home,” he says. “Market challenges remain, but the housing market is off to a prosperous start as homebuyers staved off inventory levels that are far from adequate and deteriorating affordability conditions.”

The median existing-home price in January was $228,900, up 7.1 per cent from January 2016 ($213,700). January’s price increase was the fastest since last January (8.1 per cent) and marks the 59th consecutive month of year-over-year gains.


US home sales hit 10-year high

26th January 2016

Sales of US homes hit a 10-year high in 2016, according to the National Association of Realtors.

Existing home sales dipped 2.8 per cent in December 2016 to be just 0.7 per cent higher than the same month in 2015. That was all the market needed, though, to close out its best year in a decade.

Total existing-home sales finished 2016 at 5.45 million sales, up from 5.25 million in 2015 and the highest level recorded since 2006 (6.48 million).

“Solid job creation throughout 2016 and exceptionally low mortgage rates translated into a good year for the housing market,” says Lawrence Yun, NAR chief economist.

The median existing-home price for all housing types in December was $232,200, up 4 per cent from December 2015 ($223,200). December’s price increase marks the 58th consecutive month of year-over-year gains.

Indeed, the rising price of US homes has made real estate in America increasingly unaffordable for buyers. Combined with rising mortgage rates, the climbing cost is weighing upon sales, causing transactions to fall in December.

Despite the softer note at the end of 2016, though, the market is in a healthy state, says the NAR. Total housing inventory at the end of December dropped 10.8 per cent to 1.65 million existing homes available for sale, which is the lowest level since NAR began tracking supply in 1999. Inventory is 6.3 per cent lower than a year ago and has fallen year-over-year for 19 straight months.

“Housing affordability for both buying and renting remains a pressing concern because of another year of insufficient home construction,” adds Yun. “Given current population and economic growth trends, housing starts should be in the range of 1.5 million to 1.6 million completions and not stuck at recessionary levels.”

However, “more needs to be done to address the regulatory and cost burdens preventing builders from ramping up production”, he observes.


US home buyers race to beat rising mortgage rates

3rd January 2017

US home buyers are racing to beat rising mortgage rates, with existing home sales up for the third month in a row in November.

A big surge in the Northeast and a smaller gain in the South pushed transactions up in the penultimate month of 2016, according to the National Association of Realtors. Total existing-home sales, which include single-family homes, townhomes, condominiums and co-ops, rose 0.7 per cent to a seasonally adjusted annual rate of 5.61 million in November from a downwardly revised 5.57 million in October. November’s sales pace is the highest since February 2007 (5.79 million) and is 15.4 per cent higher than a year ago.

“The healthiest job market since the Great Recession and the anticipation of some buyers to close on a home before mortgage rates accurately rose from their historically low level have combined to drive sales higher in recent months,” says Lawrence Yun, NAR chief economist, who hails the three-month run as “outstanding”

“Furthermore, it’s no coincidence that home shoppers in the Northeast — where price growth has been tame all year — had the most success last month,” he adds.

Mortgage rates are already climbing, boosted by the positive sentiment surrounding Donald Trump’s spending plans, as well as the Federal Reserve’s decision to hike interest rates for only the second time since the global financial crisis. House prices are also on the up: the median existing-home price for all housing types in November was $234,900, up 6.8 per cent from November 2015 ($220,000). November’s price increase marks the 57th consecutive month of year-over-year gains.

“First-time buyers in higher priced cities will be most affected by rising prices and mortgage rates next year and will likely have to stretch their budget or make compromises on home size, price or location,” continues Yun.

US home sales forecast for best year since 2006

19th December 2016

Sales of US homes are forecast to end 2016 at their highest level since 2006.

Existing-sales are expected to close 2016 3.3 percent higher than 2015 by the National Association of Realtors and reach around 5.42 million, the best total in 10 years, when 6.47 million sales were recorded.

This is despite a slight dip in buyer enthusiasm, as affordability declines in many parts of the country.

“Rents and home prices outpacing incomes and scant supply in the affordable price range has been a prominent headwind for many prospective buyers this year,” says Lawrence Yun, NAR chief economist. “Making matters worse, the unwelcoming reality of higher mortgage rates since the election is likely further holding back confidence. Younger households, renters and those living in the costlier West region — where prices have soared in recent months — are the least optimistic about buying.”

Existing-home sales are therefore forecast to muster only a small gain in 2017. Sales are predicted to grow roughly 2 per cent to around 5.52 million. The national median existing-home price is expected to rise to around 5 per cent this year and 4 per cent in 2017. By the end of next year, mortgage rates are expected to reach around 4.6 per cent, and the Federal Reserve is expected to raise the Fed funds rate a few more times to 1.25 per cent.

“Although the economy is expected to continue to expand with around 2 million net new job creations, existing home sales are expected to see little expansion next year because of affordability tensions from rising mortgage rates and prices continuing to outpace income growth,” adds Yun.

Despite these headwinds, Yun is hopeful that the continued job growth, any economic stimulus from the new administration and more millennials reaching their prime buying years will keep demand for the most part on solid footing. The key will ultimately come down to what the housing market desperately needs: more inventory.

Nonetheless, a majority of households still believes now is a good time to buy a home, reveals the NAR survey. However, confidence has retreated by a considerable amount amongst renters. 57 per cent of renters said now is a good time to buy, which is down from 60 per cent in September and 68 per cent a year ago. 78 per cent of homeowners think now is a good time to make a home purchase.


US to become a buyer’s market

13th December 2016

The US housing market is forecast to become a buyer’s market in the next three years.

Home values across the country have been rising for more than four years. Due to low inventory, buyers often face tough competition for the homes that are available. Less than half of buyers are successful in purchasing the first home they make an offer on, according to a new report from Zillow.

Despite unfriendly market conditions for buyers, housing experts predict things will change in the near future – the majority of experts surveyed in Zillow’s Home Price Expectations Survey say they expect the housing market to shift from a seller’s market to a buyer’s market in 2018 or 2019.

“The housing market has been favoring sellers for the past few years,” said Zillow Chief Economist Dr. Svenja Gudell. “Sellers in the current housing landscape often have the luxury of listing their home ‘as-is’ without fixing it up or with only minimal window-dressing since demand for homes has been high and inventory low. It’s common for sellers to receive multiple bids, and in the hottest markets, sell for over asking price, but these conditions will change in the future. As the number of homes for sale increases and home value appreciation slows, we expect the market to meaningfully swing in favor of buyers within the next two to three years.”

Indeed, the median home value in the US is now $191,200, up 6.2 per cent since last October, according to Zillow. Portland, Dallas and Seattle reported the highest year-over-year home value appreciation among the 35 largest metros across the country for the third month in a row. Home values in Portland rose almost 15 percent to a median value of $349,500. Dallas and Seattle home values have appreciated just over 12 percent since last October.

There are 6 per cent fewer homes for sale across the country than a year ago, with Boston, Indianapolis and Kansas City reporting the greatest drop in inventory among the 35 largest US metros. While lowering supply levels will underpin house prices, though, Zillow forecasts home value growth will slow to 3 per cent by next October.


US home sales hit nine-year high

22nd November 2016

US home sales reached their highest level in nine years this October, as pent-up demand from buyers was unleashed.

All major regions saw monthly and annual sales increases, according to the National Association of Realtors, with total existing home sales growing 2 per cent to a seasonally adjusted annual rate of 5.6 million in October 2016 – 5.9 per cent above October 2016 and the highest level since February 2007.

Lawrence Yun, NAR chief economist, welcomes the rising activity as a “convincing autumn revival” for America’s recoverying housing market: “October’s strong sales gain was widespread throughout the country and can be attributed to the release of the unrealized pent-up demand that held back many would-be buyers over the summer because of tight supply. Buyers are having more success lately despite low inventory and prices that continue to swiftly rise above incomes.”

The median existing-home prices for all housing types in October was $232,200, up 6 per cent from October 2015. This is the 56th month in a row of annual growth, with low supply levels continuing to fuel price increases. Indeed, housing inventory declined 0.5 per cent to 2.02 million existing homes available for sale, 4.3 per cent down year-on-year (the 17th month of annual decline in a row). However, improving employment figures and rising wages, both bolstered by the gradual expansion of the US economy, are helping to drive buyer demand for homes, boosted by the record low mortgage rates.

Yun, meanwhile, highlights rising construction levels as a hopeful sign that supply will steadily increase to help moderate price growth and, eventually, balance out the market.

First-time buyers drive up US home sales

25th October 2016

First-time buyers are returning with a vengeance this autumn, driving up home sales across the USA.

Existing-home sales rebounded strongly in September, according to the National Association of Realtors, with all regions seeing an increase in transactions.

Sales jumped 3.2 per cent to a seasonally adjusted annual rate of 5.47 million in September from a downwardly revised 5.30 million in August. After last month’s gain, sales are at their highest pace since June (5.57 million) and are 0.6 per cent above a year ago (5.44 million). This is despite the ongoing headwind that is a lack of supply.

Lawrence Yun, NAR chief economist, says the two-month slump in existing sales reversed course convincingly in September. “The home search over the past several months for a lot of prospective buyers, and especially for first-time buyers, took longer than usual because of the competition for the minimal amount of homes for sale,” he said. “Most families and move-up buyers look to close before the new school year starts. Their diminishing presence from the market towards the end of summer created more opportunities for aspiring first-time homeowners to buy last month.”

Indeed, first-time buyers were out in full force last month, reaching a 34 per cent share of activity, a high not seen in over four years.

“Inventory has been extremely tight all year and is unlikely to improve now that the seasonal decline in listings is about to kick in,” adds Yun. “Unfortunately, there won’t be much relief from new home construction, which continues to be grossly inadequate in relation to demand.”

“There’s hope the leap in sales to first-time buyers can stick through the rest of the year and into next spring,” he continues. “The market fundamentals — primarily consistent job gains and affordable mortgage rates — are there for the steady rise in first-timers needed to finally reverse the decline in the homeownership rate.”

Photo credit: Cyndie


Starter home supply falls in the US – but is that a bad thing?

27th June 2016

The supply of starter homes for sale in the USA continues to fall, but that may not be a bad thing.

First-time buyers are increasingly facing a tough time in the recovering US economy, despite record low mortgage rates, thanks to rising rents and rising prices making it more expensive to purchase a home and harder to save up to do so.

That decline in supply, though, is not always bad news, reveals research by Trulia. According to the site’s latest report, in many markets, demand for starter homes is falling too.

“In most markets, this drop is making homes more expensive and less affordable. However, low inventory need not always lead to a housing shortage and higher prices,” says the report, which takes into account both demand and supply to measure the market’s performance.

In the 100 largest US metros in the year to April 2016, the number of starter and trade-up homes continued to drop at double-digit rates annually. Inventory of all homes has dropped nationally by about 6 per cent over the past year, while starter homes fell 12.3 per cent and the share of starter homes dropped from 25.6 per cent to 23.9 per cent.

As a result, starter homebuyers today will need to shell out 1.3 per cent more of their income towards a home purchase than last year. That is not true of all markets, though. In 20 of the 74 metros where starter home inventory has fallen, waning demand has offset tightened supply, so prices have fallen. Trulia highlights several, such as Columbia and Charleston, S.C., where buyers for homes have dropped at a greater pace than the inventory.

A lack of starter home affordability is becoming problematic in places outside of California, adds Trulia. In the site’s last report, nine of the 10 metros experiencing the largest drop in starter home affordability over the past four years were located in the state. However, only four of the 10 metros experiencing the largest drop in starter home affordability in the year to April 2016 were located in California. Oakland, Calif. still tops the list, with starter homebuyers needing to spend 8.3 per cent more of their income on a starter home compared to last year.

First-time buyers an “endangered species” in the US

16th February 2016

First-time buyers could be an “endangered species” in the US, according to one new study, as home ownership continues to elude the grasp of many young house-hunters.

In the waking of the financial crisis, prices have been at historic lows, even with price increases in recent years. At the same time, mortgage rates are also low, making buying a home theoretically affordable. But City Observatory argues that they are far from a common species in the property world, thanks to a raft of headwinds against them.

Indeed, according to the National Association of Realtors, the share of house sales going to first-timers in the US is at a historic low of just 30 per cent.

One reason is the cost of rents that tenants are having to pay while they save up to climb the housing ladder. Some of the fastest growing metros had double-digit annual rental appreciation at the end of 2015, with renters in the hottest markets spending half of their income on rent.

Zillow expects rental appreciation will slow down in the coming year, particularly in Nashville, Tenn., San Francisco, Portland, Ore. and Denver. Rents in San Francisco are predicted to grow by half of their speed in 2015, which still works out at 5.9 per cent.

Indeed, even with the forecast slowdown, rents will remain unaffordable in many of the major markets, notes Zillow, especially on the West Coast.

Despite that, though, it is now cheaper to buy a home than rent, with buyers able to break even on a home purchase in under two years in 70 per cent of housing markets compared to the cost of renting the same – presuming, though, that they can afford to buy in the first place.

Other economic headwinds include higher college costs, more student debt and a poor job market, which hold back the personal finances of younger buyers, while a growing number of first-time hous-hunters from groups including Latinos and African Americans face the challenge of trying to save up money without the help of a wealthy family to support them. As a result, the Urban Institute predicts that between now and 2030, most of the net increase in home ownership will be from buyers aged 65 and older.

Zillow’s Stan Humphries highlights the different conditions facing young buyers of today and those in the 1970s: today’s are older, have been tenants for longer and have less income. At the same time, the homes they are trying to purchase are much more expensive; house prices have risen 60 per cent since the 1970s, while average incomes have declined.