If you have a pulse and are on the internet, you already know that the housing market is white hot, with bidding wars in more cities than ever. So why in the world are home sales stagnating?
Pending home sales rose only 0.4 percent in March, according to the National Association of Realtors’ (NAR’s) Pending Home Sales Index (PHSI), decreasing 3.0 percent on an annualized basis – the third consecutive month of annual dips.
Despite a strong economy, NAR points yet again to “unrelenting inventory constraints” which they recently said would only be relieved by builders stepping up production, more homeowners putting their home on the market, and/or investors releasing inventory.
NAR’s Chief Economist, Dr. Lawrence Yun says contract activity is moving sideways and not breaking higher despite the strong job-creating economy.
“Healthy economic conditions are creating considerable demand for purchasing a home, but not all buyers are able to sign contracts because of the lack of choices in inventory,” said Dr. Yun.
He continued, “Steady price growth and the swift pace listings are coming off the market are proof that more supply is needed to fully satisfy demand. What continues to hold back sales is the fact that prospective buyers are increasingly having difficulty finding an affordable home to buy.”
Dr. Yun forecasts that existing home sales will hit 5.61 million this year (up slightly from 5.51 million last year), also forecasting the national median home price will rise 4.4 percent.
He notes that affordability and availability are holding back home sales, combined with price appreciation outpacing incomes, and mortgage rates rising, sales will soon peak.
“Much of the country is enjoying a thriving job market, but buying a home is becoming more expensive,” said Yun. “That is why it is an absolute necessity for there to be a large increase in new and existing homes available for sale in coming months to moderate home price growth. Otherwise, sales will remain stuck in this holding pattern and a growing share of would-be buyers – especially first-time buyers – will be left on the sidelines.”
This story originally published on April 30, 2018.