Dive Brief:
- The latest Redfin Housing Demand Index fell 5.3% in May to 114, the sixth month of consecutive declines.
- "Early stage" demand remained robust and was up 17.7% year-over-year but was slightly lower than April's increase of 19.8%.
- Frustrated by low inventory, potential homebuyers wrote 4.5% fewer offers year over year in May, the third straight month of declines, according to Redfin.
Dive Insight:
Redfin measured demand in 15 metro areas and found that home prices increased 4.7%, while sales increased 5.3%. Inventory, which has now fallen 13 consecutive months, fell 3.5% in May, and a 1.1% decrease in listings piled onto the scarcity of housing stock problem across the country. Redfin said 29% of all homes sold went for more than the asking price — an increase of 26.8% year over year — and that the sale-to-list-price ratio was 99.7%, a year-over-year increase of 0.2%.
While demand figures may be down, desire for housing is still strong. In fact, Redfin reported that the typical home in its 15-metro sample lasted only 15 days on the market in May, two days less than last year. However, because of the lack of inventory, the measured slip in demand is largely a result of fewer homes from which to choose.
The National Association of Realtors reported earlier this week that May pending home sales dropped 3.7% in May, also primarily due to a lack of housing stock. NAR Chief Economist Lawrence Yun said a busier-than-normal spring resulted in fewer homes to choose from in May and that supply could not keep up with demand.
Zillow also reported this week that first-time buyers are having a particularly rough time in the housing market. The real estate data company found the value of entry-level homes was growing at double the pace of their higher-end counterparts, a result of a 9%, year-over-year drop in inventory, which has put upward pressure on starter-home prices and, in many areas, has prompted bidding wars.