Depleting property inventories, which continue to take a toll on the average value of housing across the United States, have modestly decreased new home sales in March. According to the National Association of Realtors (NAR), “total existing home sales (completed transactions that include single-family homes, townhomes, condominiums, and co-ops) declined 0.6 percent to a seasonally adjusted annual rate of 4.92 million in March from a downwardly revised 4.95 million in February.”
The recent decrease witnessed in existing home sales is being attributed to the drastic increase of potential buyers compared to a modest supply of available houses. Lawrence Yun, a chief economist associated with the NAR, acknowledged that the market is currently saturated with more demand than supply. “Buyer traffic is 25 percent above a year ago when we were already seeing notable gains in shopping activity,” he said. As a result, housing prices continue to rise as home buyers are competing for a limited supply of inventory.
March was the beneficiary of a 1.6 percent increase of total housing inventory, a mark that represents a 4.7-month supply at the current sales pace. However, expectations are tempered when these numbers are compared to this time last year. Listed inventory remains 16.8 percent below a year ago when there was a 6.2-month supply.
According to Yun, “The inventory improvement last month results from a seasonal gain, but conditions continue to broadly favor sellers. We need a housing supply of over 6 months to have a generally balanced market between home buyers and sellers, but it’s unlikely we’ll get there without greater increases in housing construction.”
The increasing rate of inventory displacement has caused prices to rise at an exponential rate, creating a sellers market. In March of this year, the average price for all housing categories was approximately $184,300. This figure reflects an 11.8 percent increase from March of 2012. Subsequently, the increase witnessed over the past year was the highest we have experienced since November 2005, when it rose 12.9 percent from a year earlier.
Despite the increase in price, sales of existing homes are occurring at an unprecedented rate. During February, houses lasted on the market for an average of 74 days, whereas homes only lasted on the market for 62 days in March. In comparison, these numbers are significantly lower than the 91-day average seen in March of 2012.
While skewed supply and demand generously favors existing home sales, market analysts remain optimistic. Housing development is currently on the rise. The current market trend places existing home sales 10.3 percent higher than this time last year, affirming that a healthy recovery is underway in the housing sector. Recent sales have surpassed those of three years ago for 21 consecutive months. Similarly, prices show 13 consecutive months of year-over-year price increases.