The rate of growth of homes sales in the United States in the month of March rose at the fastest pace in ten years. Figures released by the National Association of Realtors showed that existing home sales went up by 4.4% in March. Such as rate of growth was last experienced in February 2007.
But while the stable economy has resulted in an increase in the demand for homes, there has been a decline in the number of property listings. This has led to a situation where incomes are lagging behind the appreciation in the prices of homes. The number of days that properties are being listed is also lower and thus the environment is one that is currently is in favor of buyers who act decisively and quickly.
Doubts are now being cast on whether there remains more room for more growth in home sales.
“The pace of sales we saw in March is unsustainable. Sales may be soaring, but inventory isn’t,” Nela Richardson, the chief economist of Redfin, a brokerage firm, said.
Part of the reason why there is a shortage in inventory is because of the housing bubble that occurred at the height of the global financial crisis close to ten years ago. Then, investors bought foreclosed properties and transformed them into rental units and thus the market was deprived of supply. Owners who were able to avoid their properties getting foreclosed went about refinancing their mortgages at rates that were extremely low and this increased their hesitation to acquire a new house in order to avoid increasing their monthly expenses.
Demand and supply mismatch
As a testament to the fact that there is a mismatch between demand and supply, sales have increased by 5.9% in the last one year while the inventory has decreased by 6.6% with 1.83 million properties currently available. With more buyers than properties available, the prices of homes have increased by 6.8% in the last one year to reach $236,400 and this has outpaced the growth in wages. Also, while it took 47 days to complete the sale process one year ago, it is now taking 34 days on average.
Some of the regions where growth in sales was observed was in the South, Midwest and the Northeast. Sales however fell in the West. Demand is expected to rise even more as a trend in the decline of mortgage rates becomes noticeable. The average mortgage rate on a 30-year home loan has now hit a five-month low for instance.