September 2016 Sales Continue to Slow
Last month I reported that 2016 sales volume was nearly identical to 2011 which was the weakest of the recovery years with the exception of 2010 when the recession officially ended. Disappointing sales in August dropped us even fu;rther below 2011 numbers. The housing recovery began in 2010, peaked in 2013 and has been slowing ever since. This may come as a surprise to those buyers still struggling to get an offer accepted on a home, or to sellers who are still fortunate enough to have multiple offers and a purchase price higher than expected. A surprise because prices continue to rise. In this case, however, rising prices are not the result of a hot market, but rather a symptom of the continued supply/demand imbalance.
Months of inventory demonstrates the correlation between inventory and sales volume. When sales are slow, inventory tends to build-up - in the absence of economic or political conditions causing seller to hunker down and stay put. Sales price however has little to do with sales volume. It responds to the basic economic factors of supply and demand. When supply outweighs demand, prices go down. An increase in demand and/or decrease in supply and prices rise. Median price demonstrates prices have increased since 2013 despite diminishing sales volumes. As of the end of August, 2016 sales volume is off 25% from 2013 levels while the median price is up 25%.
The best short-term predictor of price movement is the Absorption Rate - the rate at which listings are sold at a given point in time. This rate is obtained bhy dividing the number of closed sales by the number of listings available for sale. A low rate of 20% or less, like we had during the recession, indicates a strong buyer's market resulting in lower prices. The higher rates of 40-70% since 2012 indicate a strong seller's market with resulting price increases.
I will, of course, continue to track the market for you.
December 2016 Market Report
8 Experts predict what the 2017 housing market will look like - what the next 12 months will hold in store for housing.
"The kind of rates we were getting earlier this year, down to 3.5 percent - those days are over" - Steve Cook, Editor of Real Estate Economy Watch
"Even the best-case scenario suggests that the historically low rates that have been in place for the last few years are firmly in the rear-view mirror. The forecast is for the 20 year fixed rate to rise above 4.5% by year's end, and word case scenario, knock on the door of 5 percent."