Lack of home listings puts pressure on builders, buyers
As spring selling season kicks off, buyers are hitting a wall when it comes to finding a property thanks to a historic undersupply of listings on the market, according to Bloomberg, citing new data from real-estate listing website Trulia.
For-sale housing stock is moving the fastest in Denver, Seattle and Oakland, CA, due in part to the expansion of the technology industry and related job growth there. Meanwhile, buyers in Boise, ID, Madison, WI, and Omaha, NE, are facing some of the most acute inventory shortages.
- While housing starts have yet to reach the level seen before the last recession, developers have turned their attention to higher-end, multi-unit developments that are unaffordable to many prospective buyers, especially the growing first-timer segment.
Despite February’s uptick in housing starts, which signaled inventory growth in the first part of this year, analysts are concerned that the downturn in building permit authorizations — an indicator of future activity — could be a drag on creating much-needed supply in the next six to 12 months.
The threat of rising mortgage rates is another factor playing into potential buyers’ concern around entering the market. Just as rates hit their highest levels for the year earlier this month, the Federal Reserve, in turn, upped its benchmark interest rate by a quarter basis point — a move that is expected to back higher mortgage rates and could slow housing market activity in the near future.
A recent Zillow survey reported that the average monthly mortgage payment took 15.8% of median household income in the fourth quarter of 2016 — an increase of more than one percentage point from the year-ago mark.
As rental prices soar and rate hikes make a home purchase unaffordable to more potential buyers, the market is feeling an acute squeeze from pent-up demand on one end and tight inventory on the other. New-home sales were up 5.5% year-over-year in January while inventory dipped to a 5.7-month supply. Existing-homes, the category typically tapped by new buyers for its lower cost to entry, posted its best month since February 2007 in January, up 3.8% year-over-year, while inventory fell for the 20th-consecutive month to a 3.6-month supply.
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