Existing home sales increased in March for the second consecutive month, however as inventory shortages persist, home sales continue to fall below last year’s levels, according to the latest release from the National Association of Realtors.
Total existing home sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 1.1% to a seasonally adjusted annual rate of 5.6 million sales in March. This is up from 5.54 million sales in February, but down 1.2% from last year.
“Robust gains last month in the Northeast and Midwest – a reversal from the weather-impacted declines seen in February – helped overall sales activity rise to its strongest pace since last November at 5.72 million,” NAR Chief Economist Lawrence Yun said.
“The unwelcoming news is that while the healthy economy is generating sustained interest in buying a home this spring, sales are lagging year ago levels because supply is woefully low and home prices keep climbing above what some would-be buyers can afford,” Yun said.
But one expert explained that at this point, any increase is good news, and shows there’s still life in the housing market.
“With the market as tight as it is, this result shows that there’s still some life in the housing market rally,” said John Pataky, EverBank chief consumer and commercial banking executive. “Coupled with the strong housing starts data from earlier this month, it’s good to still see plenty of ‘sold’ signs on Main Street. As supply continues to tighten and rates rise, we should enjoy these good numbers while they last.”
The median existing home price for all housing types increased 5.8% from $236,600 in March 2017 to $250,400 in March 2018. This marks the 73rd straight month of annual increases in home prices.
“Although the strong job market and recent tax cuts are boosting the incomes of many households, speedy price growth is squeezing overall affordability in several markets – especially those out West,” Yun said.
Housing inventory did see an improvement in March, increasing 5.7% from the month before to 1.67 million existing homes available for sale, however this is still down 7.2% from 1.8 million last year, and has fallen annually for 34 consecutive months. Unsold inventory is currently at a 3.6-month supply at the current sales pace.
“It’s hard to sell homes in large numbers when there’s so few available to buy, and that raises the question of whether the market has reached or surpassed its peak sales volume given current conditions,” Zillow Senior Eonomist Aaron Terrazas said. “But unlike last decade, when prices began to plummet as sales volumes stagnated and the air was let out of the market, prices today keep rising.”
“This speaks a lot to sound fundamentals of strong demand and a good economy, but it’s not at all clear how long this pattern of lackluster sales volumes but consistently rising prices can realistically be expected to continue,” Terrazas said.
And perhaps due to this high level of competition, homes flew off the market at a much faster pace of 30 days in March, compared to 37 days in February and 34 days in March 2017. About 50% of homes sold in March were on the market for less than a month.
“Realtors throughout the country are seeing the seasonal ramp-up in buyer demand this spring but without the commensurate increase in new listings coming onto the market,” Yun said. “As a result, competition is swift and homes are going under contract in roughly a month, which is four days faster than last year and a remarkable 17 days faster than March 2016.”