Housing Inventory Showing Signs of Catching Up
Mike Sorohan firstname.lastname@example.org
Recent housing price reports suggest that the housing inventory crunch of the past few years is finally showing signs of subsiding, even as home prices continue to rise and sales drop.
Redfin, Seatle, reported U.S. home sale prices increased by just 2.1 percent in September compared to a year ago. The median home-sale price was $292,000 across 171 metros maked the smallest increase in home prices recorded since February 2012, when the median home price bottomed out at $168,000.
In a separate report, RE/MAX, Denver, reported fewer closings and stabilizing inventory continued through September, punctuated by a "surprisingly big" 11.6% year-over-year drop in home sales. At the same time, the RE/MAX National Housing Report for September said home prices rose for the 30th consecutive month to the highest September price in the 10-year history of the report.
"Rising mortgage rates, paired with already high home prices, are giving pause to homebuyers in expensive West Coast markets," said Redfin chief economist Daryl Fairweather. "Some of these places are finally seeing the number of homes for sale surge after years of a supply drought. But buyers who earlier this year would have put in a bid on any home in their target neighborhood are now being more choosy. With home prices growing slowly, buyers want to be absolutely sure that the home they buy is a home they will stay in for years to come."
The report said last month's low level of price growth was driven by sales slowdowns in some of the country's most expensive markets, including Seattle, Los Angeles and San Jose, Calif., posted double-digit declines in sales. As a result, inland metros with relatively affordable homes, such as Pittsburgh and Grand Rapids, Mich., contributed a greater share of sales to the nationwide total than they did last year, putting downward pressure on the national median sale price. Redfin said 136 of 171 metros it tracks experienced price growth greater than the national median of 2.1 percent, with half of those metros showing price growth at or above 6 percent.
Redfin said for the first time in nearly three years, the number of homes for sale increased year over year, albeit slightly, up 0.2 percent from last year. National inventory growth was led by surges in softening coastal markets such as San Jose (82.7%), Seattle (54.5%), San Diego (30.7%), and Boston (9.1%).
"The number of homes newly listed in September rose 3.6 percent year over year, but buyers seemed reluctant to make offers and purchase that new inventory, as September sales fell 4.8 percent year over year," Fairweather said.
The report said home sales declined in 50 of the 71 largest metro areas that Redfin tracks. In metros where high home prices have already pushed buyers to their financial limits, rising mortgage rates may be dampening demand. As of last week, the average interest rate for a 30-year fixed-rate mortgage had crept up near 5 percent for the first time since 2011. Last year at this time, rates were still below 4 percent. The biggest sales declines were again in West Coast metros, including Seattle (-27.7%), Los Angeles (-21.5%), and San Jose (-20.8%).
Across Redfin metros, the typical home that sold in September went under contract in a median of 40 days, two days faster than last year. The share of homes that went under contract within two weeks fell to 23.1 percent this September compared to 24.1 percent last September.
Other report highlights:
--Grand Rapids was the fastest market, with the typical home finding a buyer in just 13 days, down from 15 days from a year earlier. Omaha, Neb. was the next with 14 median days on market, followed by Indianapolis (16), Boston (16) and San Francisco (17).
--The most competitive market in September was San Francisco where 71.8% of homes sold above list price, followed by 58.8% in Oakland, CA, 58.1% in San Jose, 39.6% in Buffalo, N.Y., and 39.4% in Tacoma, Wash.
--San Francisco also saw the nation's highest price growth, rising 14.6% since last year to $1.425 million, followed by Las Vegas at 12.9%, Salt Lake City (11.7%), Worcester, Mass. (11.1%) and Philadelphia (10.4%). Three metros saw price declines in September: Honolulu (-2.2%), St. Louis (-1%) and Houston (-0.4%).
--Seattle saw the largest decline in sales since last year, falling 27.7%. Home sales in Orange County, Calif., and Buffalo declined by 23.6% and 22.0%, respectively.
--San Jose saw the highest increase in the number of homes for sale, up 87.2% year over year, followed by Seattle (54.4%) and San Diego (30.7%). Philadelphia had the largest decrease in overall inventory, falling 25.4% since last September. Montgomery County, Pa. (-22.2%), Indianapolis (-19.7%), and Rochester, N.Y. (-18.2%) also saw far fewer homes available on the market than a year ago.
Meanwhile, RE/MAX said the decline in home sales year-over-year was the largest since May 2011, as September became the seventh month of 2018 to record lower sales than 2017.
"The big drop in September closings catches your attention. The market is clearly rebalancing as buyers and sellers continue to process the increasing interest rate environment and what that means to them," said RE/MAX CEO Adam Contos. "The slower drop in inventory--a visible trend for nearly half a year--further illustrates the ongoing shift toward market equilibrium, and that's healthy in the long-term."
RE/MAX said active inventory dropped for the 119th consecutive month; the decline of 4.7% from September 2017 was the smallest year-over-year decrease since August 2014. In addition, the September year-over-year inventory drop marked the fifth consecutive month in 2018 to post single-digit percent declines rather than the double-digit monthly drops consistently seen over the previous three years.
"It's a little surprising to see prices staying so strong, but it's hardly shocking in such a tight market," said Contos. "The headwinds of rising prices and interest rates amid already tight inventory levels have been crimping affordability and slowing sales for most of the year, but it varies by geography. In circumstances like these, where the market is tricky to navigate, both buyers and sellers can benefit by aligning themselves with a professional agent - a local expert who can cut through the noise and advocate on their behalf."
Other report highlights:
--Home prices rose by 5.6% over September 2017, more than twice the year-over-year price increase of 2.3% from September 2016 to September 2017. That reversed a trend seen in the previous three months, when year-over-year price increases trailed 2017's rate of growth.
--Months' Supply of Inventory totaled 3.7, the second-lowest for September in report history, second only to 3.6 months in September 2017.
--Days on Market of 46 was a September record for the report--three days less than September 2017.
--Of the 54 metro areas surveyed in September, the overall average number of home sales is down 1.1% compared to August and down 11.6% compared to September 2017. Six of the 54 metro areas experienced an increase in sales year-over-year.
--The median sales price of all 54 metros was $241,000, down 3.2% from August and up 5.6% from September 2017.