US home sales soar as inventory dives
02 July 2015 - 01:04AM
Property
Photo credit: Cyndie
Sales of US homes are soaring, as buyers return to
an increasingly stable market. The strengthening American economy
has boosted optimism among house-hunters, while improving financial
conditions have also helped first-time buyers to step onto the
housing ladder.According to the National Association of Realtors,
sales are now at their highest level in more than nine years, with
gains in the Northeast and West offset by small decreases in the
Midwest and South. The Pending Home Sales Index climbed by 0.9 per
cent from April 2015 and is now 10.4 per cent higher than the same
month in 2014. The index has now risen year-over-year for nine
months in a row.Lawrence Yun, NAR chief economist, says this
increases the likelihood that home sales are off to their "best
year since the downturn". "The steady pace of solid job creation
seen now for over a year has given the housing market a boost this
spring," comments Yun. "It’s very encouraging to now see a broad
based recovery with all four major regions showing solid gains from
a year ago and new home sales also coming alive."First-time buyers
are increasingly active, with 32 per cent of all buyers purchasing
their first home, up from 27 per cent one year ago. Yun notes in
his mid-year outlook report that there "is no massive shadow
inventory" that can disrupt the market. Indeed, the number of
distressed home sales has been steadily falling, now accounting for
only one in 10 of all transactions.The stabilising market, though,
has another obstacle to overcome: a lack of inventory."Housing
affordability remains a pressing issue with home-price growth
increasing around four times the pace of wages," cautions Yun.
"Without meaningful gains in new and existing supply, there’s no
question the goalpost will move further away for many renters
wanting to become homeowners."The principal reason for the
inventory shortage is the cumulative impact of homebuilders not
being active for five years. Builders typically put up 1.5 million
new homes annually, but have only managed to reach 1 million once
in the past six years.As a result, in places like Denver and
Seattle, the situation is "unreal", says Yun, with under
one-months’s supply of homes. In Palm Beach, Florida, May’s
inventory of single family homes in Martin County has dropped 35
per cent in the past year, while the median number of days a home
spends on the market fell 25 per cent (from 56 days to 42
days)."The refrain we’re hearing from Realtors in many markets is
there’s not enough for-sale inventory to meet the demand from
buyers," says 2015 Florida Realtors President Andrew Barbar, a
broker with Keller Williams Realty Services in Boca Raton."That’s
putting upward pressure on prices and also leading to properties
selling at a quicker pace. [Statewide] single-family existing homes
in May spent a median of 49 days on the market, down 9.3 per cent
from a year ago; median days on market for townhouse-condo
properties was 52, down 5.5 per cent from May 2014."For first-time
buyers fearing an unhealthy and unsustainable price rise, though,
there is some good news in that investors are "slowly stepping out"
from the US market overall, as rising prices make potential returns
less attractive. Nonetheless, sales in Florida rose 7.7 per cent
year-on-year, as the state remains both a strong hotspot for both
local and international buyers.
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