According to the latest Existing
Home Sales Report from the National
Association of Realtors (NAR), the inventory of homes for sale this
year compared to last year has increased for the last four months, all while
sales of existing homes have slowed compared to last year’s numbers.
For over three years leading up to this point, the exact opposite was true;
Inventory dropped as sales soared.
NAR’s Chief Economist Lawrence Yun shed some light on what could be contributing to this shift,
“This is the lowest
existing home sales level since November 2015. A decade’s high mortgage rates
are preventing consumers from making quick decisions on home purchases. All the
while, affordable home listings remain low, continuing to spur underperforming
sales activity across the country.”
Let’s take a deeper look:
Interest Rates
Since January, 30-year fixed mortgage interest rates have increased nearly
a full percentage point (from 3.95% to 4.9%). Fannie Mae, Freddie Mac, the National Association of Realtors, and the Mortgage Bankers
Association are all in agreement that rates will continue to
increase to about 5.2% over the next 12 months.
“The rise in [mortgage]
rates paired with this very strong price appreciation absolutely is slowing
housing,” said Fannie Mae’s Chief Economist Doug Duncan.
Even though rates are higher than they’ve been in a decade, they still
remain below
the average for the 1970s, 80s, 90s, and 2000s!
Mismatch of Inventory
Elizabeth Mendenhall, President of NAR, said it best, “Despite
small month over month increases, the share of first-time buyers in the market
continues to underwhelm because there are simply not enough listings in their
price range.”
Prices of starter and trade-up homes have appreciated faster than their
higher-priced counterparts. Over the last 5 years, the lowest-priced homes have
appreciated by 47% while the highest-priced homes have appreciated by only 24%.
According to the Institute
of Luxury Home Market’s Luxury Market Report, the $1M-and-up price
range is now experiencing a buyer’s market. This means that supply (inventory)
has finally caught up with demand and buyers are in the driver’s seat when it
comes to negotiations. Additionally, many listings in this price range have
experienced price cuts in order to entice buyers to put in offers.
Natural Disasters
Although not fully to blame for the national shortage in sales and
inventory, natural disasters like Hurricane Florence, Hurricane Michael, and
the wildfires on the West Coast have certainly had an impact.
Bottom Line
Additional inventory coming to market could help
normalize the housing market and allow incomes to catch up to home prices. For
more information about sales and inventory in our area, let’s get together so
we can help you make the best decision for you and your family. The Militello Team has been selling real estate North of Boston in Essex County on the North Shore for over 40 years. Call me today (978) 500-1480.
THE MILITELLO TEAM
Vice-President / Realtors
Keeping Current Matters