Home sales take off as buying season begins
Sales of existing homes in the U.S. rose 4.4 percent in March compared to the previous month, logging the fastest pace in such sales seen in more than 10 years. According to data on home sales from the National Association of Realtors, this high rate of turnover in the market means that most homes are only on the market for around 34 days on average. Looking only at sales of properties that were not foreclosed or considered "distressed," the typical property was sold in just 32 days in March, the shortest amount of mean sales time since the NAR began recording this figure in 2011.
The strong showing in the March home sales data suggests that the spring buying season is off to a good start throughout most of the U.S., according to NAR Chief Economist Lawrence Yun.
"The early returns so far this spring buying season look very promising as a rising number of households dipped their toes into the market and were successfully able to close on a home last month," he said. "Although finding available properties to buy continues to be a strenuous task for many buyers, there was enough of a monthly increase in listings in March for sales to muster a strong gain. Sales will go up as long as inventory does."
Housing inventory has indeed been a point of frustration for homebuyers and real estate professionals for the last several years. While improvements are being made in the number of homes for sale, reports suggest it is still negatively impacting purchase activity. The NAR found total housing inventory increased 5.8 percent in March, but was still 6.6 percent lower than at the same point one year ago. In addition, housing inventory tracked on an annual basis has now fallen for 22 months in a row.
A high demand yet short supply of housing has continued to drive average prices up. The median list price for existing homes was $236,400 in March, 6.8 percent higher than at the same time last year. This month marked 61 months of consecutive home price gains. While this may be good news for current homeowners, prospective buyers remain pinched.
"Last month's swift price gains and the remarkably short time a home was on the market are directly the result of the homebuilding industry's struggle to meet the dire need for more new homes," Yun said, according to the NAR. "A growing pool of all types of buyers is competing for the lackluster amount of existing homes on the market. Until we see significant and sustained multi-month increases in housing starts, prices will continue to far outpace incomes and put pressure on those trying to buy."
Mortgages may ease buyer struggles
While the cost of housing continues to grow throughout the U.S., March's strong sales numbers confirm the suspicions of many economists that consumer confidence and earnings are effectively balancing out this issue. Much of this can likely be attributed to continually low mortgage rates. For the month of March, average interest on a 30-year fixed-rate loan inched up to 4.2 percent, but remained volatile on a weekly basis. For example, Freddie Mac reported the average 30-year rate quote fell below 4 percent on April 20. While rates remain above the all-time low of 3.65 percent - the average 30-year rate for all of 2016 - these are still some of the lowest mortgage rates on record.
This might help explain why new homebuyers are entering the housing market at a faster clip than recent years. The NAR reported first-time homebuyers comprised 32 percent of March sales, up slightly from 30 percent in March 2016. According to California real estate agent William E. Brown, first-time buyers remain enthusiastic about jumping into the house-hunting fray, even though it is still challenging to find an affordable deal.
"Realtors in most markets are saying interest from first-timers is up this year, but competition is stiff for listings in their price range," he said. "The best advice is to lean on the guidance of a [real estate professional] throughout the home search and be careful about stretching the budget too far. Don't get frustrated by losing out on a home and know the right one will eventually come along in due time."
Real Estate News brought to you by 2M Realty, a true expert in the online real estate market.