NAR: Housing inventory growing at woefully slow pace
After Freddie Mac predicted this spring to be the healthiest in six years, the National Association of Realtors confirmed by saying February existing-home sales and prices point towards a healthy housing spring.
According to NAR, sales have been above year-ago levels for 20 consecutive months, while prices show 12 consecutive months of year-over-year price gains.
One of the primary reasons for the strong housing demand is the general lack of prime properties available to homebuyers. The inventory is at low levels not seen in nearly 10 years. However, that number of available homes are inching up, but not at a rate for many homebuyers to capitalize on the historic affordability of today.
NAR reports the housing inventory is up 9.6% to 1.94 million existing homes available for sale. This represents a 4.7-month supply at the current sales pace, compared to 4.3 months in January.
The January numbers marked the lowest supply since May 2005. Year-over-year, listed inventory is down 19.2%, when there was a 6.4-month supply.
Lawrence Yun, chief economist of NAR notes the limited housing inventory varies from region to region.
In a classic case of supply-and-demand, the national median existing-home price for all housing types jumped 11.6% from February 2012, reaching $173,600 last month.
Housing has not seen 12 consecutive months of year-over-year price increases since June 2005 to May 2006. In fact, the February gain marks the strongest gain since November 2005, when it was 12.9% higher year-over-year.
Total existing home sales were up 0.8% to a seasonally adjusted annual rate of 4.98 million in February compared to January’s 4.94 million. Existing home sales rose 10.2% above the 4.52 million-unit level seen one-year prior.
Sales in February reached the highest level since the tax credit period of November 2009, NAR noted.
"Job growth in the improving economy and pent-up demand are causing both home sales and rental leasing to rise. Though home prices are rising much faster than rents, historically low mortgage rates are still making home purchases affordable," said Yun.
"A strong rise in home values is contributing to housing wealth recovery, which has risen by $1.4 trillion in the past year and looks to top that increase this year," Yun added. "The extra consumer spending arising from growth in housing wealth is expected to be $70 billion to $110 billion this year."
While distresses homes accounted for 25% of total sales in February, it is still below the 34% total in February 2012.
The 30-year, conventional, fixed-rate mortgage remains below average, according to Freddie Mac, although it did jump to 3.53% from January’s 3.41%. Last February rates were at 3.89%.
NAR President Gary Thomas said interest rates remain extraordinarily low. "In the history of mortgage interest rates since 1971, the 30-year fixed rate has been below 4% in only 15 months, and those have all been in the past 15 months," he said.
Thomas adds that even with rising home prices, affordability remains historically favorable because home prices over-corrected during the downturn. This means there is still great value for buyers in the current market, he says.
Jed Kolko, chief economist at Trulia, said, "This year, inventory is likely to rise now through the summer because of seasonality, bringing some relief to buyers and helping boost sales activity. On top of that, the big seasonally-adjusted inventory increase in February is an early hint that the inventory crunch may finally be easing for good."