Why An increase in Inventory As Homes Sales stall?
The National Association of Realtors (NAR) recently released findings in the latest Existing Home Sales Report that the supply of homes for sale and condos for sale in 2018 as compared to last year has increased each month for the last four months, while at the same time, existing home sales have slowed down.
During the last three years, the opposite was true, Sales climbed as inventory fell.
Lawrence Yun, Nar's Chief Economist shared his thoughts on why the change. Yun believes, "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 under-performing sales activity across the country."
Interest Rates - Since the end of January, interest rates for a 30-year fixed mortgage have increased almost a full percentage point (from 3.95% to 4.9%). Freddie Mac, Fannie Mae, NAR and the Mortgage Bankers Association all agree that rates will continue to climb to approximately 5.2% over the next year. Fannie Mae's Chief Economist Doug Duncan said, "The rise in mortgage rates paired with this very strong price appreciation absolutely is slowing housing." Even though rates are higher than they've been in 10 years, they still remain well below the average rates during 1970s and the 2000s.
Inventory Discrepancy - NAR's president, Elizabeth Mendenhall said, "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."
Starter home and trade-up home prices have appreciated quicker than higher priced homes. Over the last five years, lower price homes have appreciated by 47% while higher priced homes have appreciated by just 24%.
According to a report out by the Institute of Luxury Home Market's Luxury Market REport, Homes priced at One Million and more are considered to be in a buyer's market environment. This means the amount of inventory for these priced homes has caught up with buyer demand and buyers are leading negotiations. Additionally, many luxury listings have experienced price adjustments in order to attract offers from willing buyers.
Natural Disasters - While not directly the reason for slowing sales, natural disasters such as Hurricane, Florence, Hurricane Michael and the wildfires on the west coast have certainly had an impact.
Additional supply of inventory added to the real estate market could help normalize the housing market and allow incomes to pair up to home prices. For more information about real estate for sale in Fort Lauderdale, including home sales and supply, contact me today.
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