If you’ve been following housing market news this year, you may have been surprised by the latest home sales numbers to come out this week. Sales of existing homes stalled at 4.92 million, dropping 0.6% in March from February.
But what about this hot spring we’ve all been anticipating? What about the great recovery and growth period we’re supposed to see in 2013? What’s going on here?
The problem is lack of homes. There’s plenty of demand from buyers, but just not enough to choose from on the market.
Some areas are experiencing multiple bids, which can frustrate buyers after they’ve been outbid a handful of times and turn them away.
And in some cases, we see sellers being affected as well. For those in tight markets, they may not feel confident enough to list their homes until they know for sure they’ll be able to find a new one to move into.
Despite the decline in March sales from February, home sales were still 10.3% higher than the same month a year ago, marking the 21st consecutive month of year-over-year increases. That’s good news, and a good indicator of how the market is trending in the big picture.
Demand is still strong, according to the National Association of Realtors, which reported buyer traffic is 25% above a year ago. But the drop in available homes has put upward pressure on prices. And some buyers are getting frustrated and priced out.
The national median home price was $184,300 in March, 11.8% higher than a year ago. The increase was the highest gain since November 2005.
Total housing inventory was up 1.6% to 1.93% homes for sale, representing a 4.7-month supply at the current pace. For-sale inventory was 16.8% below what it was a year ago, showing how lack of supply is truly impacting the pace of sales and overall market activity.
What happens next?
At the rate things are going, we can likely expect more price increases, driven by continued tight markets with some increases in new home building to balance supply.
At some point, prices will reach a tipping point where more sellers are able to sell because values will meet their needs.
Until then, buyers need patience and the ability to act fast; sellers need motivation or the right price points to get out from an underwater mortgage. We have an interesting second half of the year ahead!