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Crystal ball: what will home sales do for the rest of this year?

(REAL ESTATE DATA) NAR’s Chief Economist lays out his predictions for home sales in the coming year.

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NAR Midyear forecast

Last week at NAR’s annual REALTORS Legislative Meetings and Trade Expo (NAR Midyear) in Washington, key economic leaders took to the stage to forecast home sales for the coming year.

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What to expect

NAR’s Chief Economist, Lawrence Yun, presented a midyear economic forecast. When it comes to existing homes, according to Yun’s report, the first quarter sales hit 5.62 million, the highest since 2006 and a 3.5 percent increase from last year. He said that these figures “exceeded expectations” and attributed the sales increase to “record highs” in the stock market, “16 million new jobs created since 2010… and rising consumer confidence.”

However, Yun also noted that the number of new homeowners remains somewhat suppressed.

That suppression is largely due to lack of listings in the low- and middle-market range. Pricing growth in many metropolitan areas has caused overall existing-home prices to rise by 5 percent, making many existing homes unaffordable to first time buyers and young families. “Prices are still rising too fast in many areas and are outpacing incomes,” Yun explained.

Low ownership rate

Unfortunately, new home construction may not make up for the difference. Yun explained that the “building industry’s ability to produce more single-family homes” was being thwarted by “limited lots, labor shortages, tight construction lending and higher lumber costs.” Yun predicts that 1.5 million new homes will need building, an increase in housing construction of 8.4 percent.

Yun believes that sales will increase when “there’s a meaningful bump in new and existing inventory.”

Yun was also joined onstage by Jonathan Spader of the Joint Center for Housing Studies at Harvard University. Spader added to Yun’s analysis of the low homeownership rate, adding that older adults are foreclosing, while younger homebuyers are delaying their purchase in hopes of an economic upturn. Nonetheless, he anticipates reaching over 60 percent homeownership by 2025, with increasing diverse family structures, races, and ethnicities represented amongst homeowners.

#NARCrystalBall

Ellen Vessels is a Staff Writer at The Real Daily, and is respected for her wide range of work, with a focus on generational marketing and business trends. Ellen is also a performance artist when she's not writing, and has a passion for sustainability, social justice, and the arts.

Real Estate Big Data

With housing demand so high, why are sales stagnant?

(REAL ESTATE NEWS) The housing market is on fire, yet some serious constraints are holding back sales levels – let’s discuss.

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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.”

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Real Estate Big Data

Home sales surge in half of the nation, slump in the other half

(REAL ESTATE NEWS) Home sales rose last month, despite challenging inventory and affordability conditions – but not in all markets.

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Talk about mixed signals. We ended last week with alarm bells that affordability is restricting the housing market, yet home sales in March actually surged in the Northeast (up 6.3 percent) and Midwest (up 5.7 percent) compared to just one month prior.

Meanwhile, home sales slipped 0.4 percent in the South, and a whopping 3.1 percent in the West. Sales levels in all four regions are lower than they were at this time last year, reinforcing the supply and demand challenges, putting homeownership out of reach for a growing pool of potential buyers.

NAR Chief Economist, Dr. Lawrence Yun has indicated that the only way to loosen the noose is a combination of more current homeowners opting to sell, builders increasing new home production, and investors releasing inventory.

In the last year, the median existing home price rose 5.8 percent to $250,4000 with March as the 73rd consecutive month of annual gains.

The average number of days on market decreased to 30 days from 37 in February and 34 in March of 2017. Half of all home sold were on the market for less than a month, and in some cities, bidding wars and immediate sales are common.

“Although the strong job market and recent tax cuts are boosting the incomes of many households, speedy price growth is squeezing overall affordability in several markets – especially those out West,” said Dr. Yun.

That said, there is a silver lining.

NAR President Elizabeth Mendenhall, a sixth-generation Realtor® from Columbia, Missouri and CEO of RE/MAX Boone Realty notes, “First-time buyers continue to make up an underperforming share of the market because there are simply not enough homes for sale in their price range.”

Supply conditions improve in higher up price brackets,” concluded Mendenhall, “which means those trading up should see considerable interest in their home, as well as more listings to choose from during their own search.”

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Real Estate Big Data

Housing prices rise, outpacing wage increases

(REAL ESTATE NEWS) A new joint report from NAR and realtor.com reveal that affordability conditions are eroding and there are very few cures to this problem.

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Good ol’ economics – housing demand continues to outpace supply, and bidding wars are now common in many cities. On a national scale, affordability is increasingly threatening many peoples’ ability to buy, based on their income.

The realtor.com and National Association of Realtors joint report, the Realtors Affordability Distribution Curve and Score, examines affordability conditions compared to income levels for active inventory in local markets. Higher scores suggest a particular market has more affordable homes in proportion to local income levels.

It’s no surprise that in March, the report indicates the least affordable (in proportion to income) is Hawaii, California, Oregon, the District of Columbia, Montana, and Rhode Island. In these states, households at the median income level can only afford 19 to 23 percent of the active housing inventory.

In contrast, the most affordable states are Ohio, Indiana, Kansas, Iowa, and West Virginia, where a a typical household can afford 54 to 62 percent of all active inventory.

The report also indicates that more local markets are seeing worse affordability conditions compared to last year, with L.A., San Diego, San Jose, Ventura, and San Francisco leading the pack. In these markets, the typical household can only afford 3.0 to 11 percent of homes available for sale in their markets.

The typical household can afford nearly 75 percent of homes for sale in Dayton, OH, Toledo, OH, and Scranton, PA.

NAR’s Chief Economist, Dr. Lawrence Yun stated, “The survey confirms that the lack of entry-level supply is putting affordability pressures on too many buyers – especially those at the lower end of the market, where demand is the strongest.”

The report makes even more apparent why first-time buyers “struggle finding affordable properties to buy and are making up less than a third of home sales so far this year,” said Dr. Yun.

Although wages are on the rise, housing prices are outpacing these increases, and Dr. Yun points to the solution being “more homeowners selling, investors releasing their portfolio of single-family homes back onto the market and more single-family housing construction.”

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