Housing inventory in 35 key markets overall was down 35% year-over-year in January, 8% year-on-year in March and is now up 79% year-on-year, according to market watcher Bill McBride of the CalculatedRisk blog.
August is about the same, he said. According to McBride’s first early look at local markets in August, “we are seeing a sharp decline in closed sales and inventory is increasing significantly year over year.” He said new listings were down as the “sellers’ strike” continued.
Added McBride, all major statistical categories point to a slowdown in the market. Days in MLS in July are up 120% since this time last year, and the close price-to-current price ratio fell below 100% for the first time since July 2020, at 99.41% .
Meanwhile, the median sale price fell 2.54% from the previous month.
Highest home inventory since November 2020
Similarly, reported last week by Marcus & Millichap, there is no shortage of homes available to buyers without being hampered by rising borrowing costs. Inventory hasn’t been this plentiful since November 2020, according to Marcus & Millichap.
Home purchases in July fell 19% year-on-year, also marking the sixth consecutive month of decline.
The median price of an existing home fell for a second consecutive month in July to $394,400 as sellers adjust their prices – translation: lower them.
The Fed is expected to raise rates again in 2022, creating a more short-term impact on the housing market as a whole.
“This will support the rental sector as increasing numbers of residents go homeless,” according to the report.
The home improvement and self-storage sectors could also benefit from this lack of mobility, Marcus & Millichap said.
What’s not attracting attention is the new home market, which is becoming oversaturated, according to the report.
Single-family homes under construction listed on the market soared more than 30% year-over-year, while homes sold fell 40% from a year earlier.
Correctly calculate the supply in “months”
John Hunt, principal and chief analyst, MarketNsight, disputed the report, telling GlobeSt.com that the authors only looked at new homes instead of the total market when calculating months of supply.
“The ultra-low number of homes completed can have a constraining effect on the closing number, which can make the ‘months of supply’ number look high,” Hunt said. “The Census Bureau exacerbates this problem by adding homes not started and homes under construction to their total inventory.
“You can’t look at new homes in isolation from the whole pipeline, since ‘new’ is only 10%.
The bottom line is this: if all of the 312,000 new homes under construction today were to hit the market as completed at one time, it would only take the total number of “months of supply” in the country to 3 ,8. That would still be well below the industry’s six-month breakeven.
NYC lacks new inventory
Scott Harris, one of Brown Harris Stevens’ senior production agents, told GlobeSt.com, regarding the New York market: “There’s still a shortage of inventory here relative to historical trends. At worst, we seem to be getting back to the mean.
“[What] we don’t see any new housing stock. There are not enough new constructions in the five boroughs.
Louise Phillips Forbes, a 30-plus-year industry veteran and Brown Harris Stevens’ top agent in New York, told GlobeSt.com, “The Fed is desperate to target the housing market because it represents 32% the consumer price index (CPI).
“The spring’s steep interest rate increases spurred significant rental market activity and absorption, particularly creating urgency among buyers who found themselves out of the more affordable sale market.”
Forbes said stock market volatility and interest rate increases won’t have the same drastic impact in cities like Manhattan, where the price of admission is significantly higher than the national average.
“These buyers will get creative with their banking relationships, whether it’s buying down the rate, looking for 20-year mortgages, etc.,” she said. “Additionally, banks will begin raising lending limits in 2023 and increasing debt-to-income ratios for well-qualified buyers to complement and satisfy the times.”
ARMs an option for homebuyers
David Druey, regional president of Centennial Bank Florida, told GlobeSt.com that while specific markets in Florida are apparently unaffected by rising interest/mortgage rates, such as South Florida, affordability can be a barrier to buying homes.
“For those looking to become homeowners in the current economic climate, adjustable rate mortgages (ARMs) may be a better choice to offset higher than usual interest rates. ARMs offer the ability to lock in a lower introductory interest rate and lower monthly payments. This can be an attractive option as the borrower can usually qualify for a higher loan amount.