Monthly Archives: August 2016

Low Inventory Holding the Housing Market Back

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Pending homes sales ticked upward in July, but the latest data shows that trend was unable to sustain itself in August. For the third time in the last four months, pending sales numbers fell month-over-month, with July the lone exception.

The Pending Home Sales Index (PHSI), a predictive index tracked by the National Association of Realtors (NAR), also dropped from July to August and is at its lowest point since January 2016. The index is 0.2 percent below the level it was at during the same period of 2015.

Industry watchers hoped that July?s gains were a sign of a new trend in the market. With actual sales numbers and the PHSI both dropping back down in August, a decline definitely seems to be the bigger overall trend throughout most of 2016.

What?s Hurting Pending Sales?

NAR?s chief economist says low housing inventory is playing a key role in the wind going out of the sails of the market. Apart from the Northeast, where Yun says higher inventory is giving potential homebuyers more options and better success in signing contracts, the rest of the nation is dealing with a tight supply of available homes.

According to NAR, a growing percentage of prospective homebuyers appear to be either experiencing doubt due to steeper prices or put off by the level of competition for the relatively small number of listings that fit their budgets.

Considering that the housing inventory in America is on a 15-month streak of year-over-year decline, it should come as no shock the market is in need of an infusion of new home construction. Yun and other experts agree, without that, the housing recovery may stall.

The latest data shows that home prices are on a 54-month streak of year-over-year increases. August numbers revealed more than a five percent increase in that month alone. But, can it continue with the current conditions?

The NAR economist said the expected seasonal listing decline throughout the winter months ahead could intensify the price and inventory problems of the marketplace. In other words, Yun believes it could get even worse for buyers.

A Bright Spot

The outlook isn?t gloomy for buyers everywhere. As mentioned earlier, inventory in the Northeast part of the country is at a higher level. Thanks to that fact, the PHSI for that region rose to 98.1 in August (a 1.3 percent increase). Prices and inventory are expected to remain stable throughout the winter.

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U.S. Home Sales Hit Highest Level Since 2007

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Newly built home sales rose in July to the highest they?ve in almost a decade, signaling continued momentum in the U.S. housing market.

Momentum Building in the Housing Market

July?s seasonally adjusted annual rate of 654,000 new single-family home sales was a 12.4% increase over June, marking the highest level since October 2007, according to the Commerce Department.

Ralph McLaughlin, an economist at real estate website Truila, noted that the increase in new home sales displays continued strong demand in the current low-interest rate, low unemployment environment.

The Wall Street Journal surveyed a group of economists who had predicted home sales to slide in July down to 580,000. June sales were revised from an initially estimated pace of 592,000 down to 582,000.

When compared to the first seven months of 2015, new home sales also rose 12.4% through the first seven months of 2016.

Strong Fundamentals Support the Housing Market

Recovering income growth, steady job creation, and historically low mortgage interest rates have supported purchases of both new and existing homes, and the housing market has been a bright spot in the economy so far this year.

At the end of July, the average rate for a 30-year fixed rate mortgage was 3.48%, down a half percentage point from 12 months prior, according to Freddie Mac.

While new home sales account for roughly a tenth of total U.S. homebuying activity, June?s sales of previously owned homes are also close to a decade-long high, according to the National Association of Retailers.

The National Association of Realtors? numbers show sales of previously owned homes rose to their strongest pace in nearly a decade in June.

More Room to Grow

Sales of new homes in July were up 31.3% over July 2015, bringing the figure back to the level recorded when the recession began. The pace, however, remains well behind the peak level of 1.39 million in July 2005. July 2016 was the first month with a rate over 600,000 since early 2008. Pre-recession, the last time the rate was so low was 1991.

At the end of July, there was a 4.3-month supply of newly built homes, the smallest supply in three years. The median sale price for new homes sold in the month was $294,600, down slightly from July 2015?s median of $296,000.

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