This Is the Worst ‘Housing Drought’ Ever

The number of homes for sale is at the lowest level on record, according to the National Association of REALTORS®, who began tracking inventory 18 years ago. That means many home buyers likely will find fewer options this spring, and the homes that are being listed tend to sell fast and at a premium.

The lack of new-home supply is one culprit. Housing starts are only at about 75 percent of their historical average. Builders are focusing on pricier segments of move-up buyers, leaving a big void in the demand for lower cost homes that appeal to first-time home buyers. Builders blame the higher costs for land, labor, and materials as forcing them to concentrate on the higher end of the market.

Builders aren’t the only ones to blame, however. Investors purchased about 4 million distressed properties—mostly in the lower-priced starter home segment—during the housing crash. They have been holding onto these properties, continuing to rent them out rather than selling.

Source: “This Is What’s Behind the Severe Housing Drought,” CNBC (March 23, 2017)

Good News to Buyers: ‘Affordability Improves’

Low interest rates are helping to boost housing affordability. Nearly 67 percent of new and existing homes sold between January and the end of March were affordable to families earning the U.S. median income of $65,800, according to the latest National Association of Home Builders/Wells Fargo Housing Opportunities Index.

The national median home price fell from $215,000 in the fourth quarter to $210,000 in the first quarter. Meanwhile, average mortgage rates dropped from 4.29 percent to 4.03 percent in that time period.

“Now is a great time for consumers to buy homes,” says NAHB Chairman Tom Woods. “Both first-time and move-up buyers can take advantage of these favorable market conditions and start building their American Dream.”

Source: National Association of Home Builders

Ready to Buy or Sell: ‘Move-Up Buyers Return’

As home equity levels improve, the move-up buyer is back on the market. More move-up buyers are selling their current properties to replace them with pricier homes, according to the latest report from FNC, a real estate data firm.

The move-up buyers are coming with larger down payments on new homes as recent improvements in home equity levels have allowed them to move.

“An important sign of a healthy and sustainable recovery is increased housing turnover driven by trade-up buying, which is more or less discretionary spending,” says Yanling Mayer, FNC’s director of research. “These buyers are typically more responsive to market conditions and financial incentives.”

Rising mortgage rates are driving the higher demand because move-up buyers are wanting to take advantage before mortgage rates rise any more, brokers say.

Plus, more move-up buyers are in a better position to move. Forty percent of all home owners now have at least 20 percent or more of equity in their homes now, according to RealtyTrac data.

Also, 8.3 million additional home owners are expected to have at least 20 percent equity within the next 15 months if home prices continue to appreciate at the same pace, says Daren Blomquist, vice president of RealtyTrac. Blomquist adds that if 5 percent of these home owners decide to sell their homes, that would amount to an additional 415,000 homes for sale in the coming months.

Source: “Move-up buying activity rises with home equity gains,” HousingWire (Sept. 12, 2013)