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Realtor.com is reporting that home listings rose for the first time since June 2019 with an increase of 8 percent. While this trend is most welcome, it must be remembered that inventory is still less than half compared to pre-pandemic numbers.
Higher mortgage rates have removed some homebuyers from the market, thus giving those who remain greater choices. Andy buyers are still moving fast with homes selling a full 6 days faster than a year ago.
Realtor.com is estimating that current low levels of housing inventory will go even lower in 2020. New listings increased in January 2019 by 6.4 percent but have been declining every month since, with June seeing a decline of 2.3 percent compared to June 2018.
Analysts say there are several reasons for the low number of new listings: many baby boomers are choosing to “age in place” rather than downsizing; “rate lock”. which are homeowners who purchased their home at lower rates than are available today. Finally, there are growing concerns about the overall health of the economy.th
The latest home sales report from the California Association of Realtors should be strikingly familiar to anyone following Bay Area real estate over the last few years: prices up, inventory down.
To be specific, the median price for a single-family home in the nine-county Bay Area was $856,200 in August – an annual increase of 10.2 percent.
Eight of the nine Bay Area counties saw home prices increase from August, 2016. Only Solano County had a flat appreciation.
Inventory from August 2016 was down in all nine counties.
The California Association of Realtors reports that 420,100 single-family homes were sold in January, up 4.4 percent from January 2016. Analysts agreed that the the prospect of ever-increasing interest rates motivated many buyers to act.
Once again affordability reminds a problem in the Bay Area. In addition to higher mortgage rates, continued price appreciation without sufficient wage growth will push many would-be homebuyers to turn to inland, more affordable areas.
The good news is that more homes hit the market in the Bay Area in January with most counties now sporting a 2 to 2.5 month supply.
The National Association of Realtors reports that U.S> home sales increased by 15.4 percent on November over 2015 and is now the highest level in nearly a decade. Analysts agree that the strong sales were due to a robust job market and the realization that interest rates were likely to rise (as they subsequently did).
However, the big worry in the real estate market remains the low housing supply both nationwide but particularly in the Bay Area. Currently in the U.S. there is a 4.0 month supply of inventory (MSI) while in the nine county region of the Bay Area the MSI is much lower at 1.9.
Homebuilders are confident about the housing market going forward due primarily to the healthy economy and job market but also point to costly new regulations, a shortage of construction workers, and a general over-all caution from the most recent recession as limiting factors in 2017.
While the rest of the country continues to experience a decrease in housing inventories (Trulia reports a decrease nationwide for the fifth straight quarter) the good news is that markets in San Francisco and San Jose are showing an increase in available housing.
Low inventory adversely affects affordability with first-time homebuyers needed to a lot 38.5% of their monthly income to their new home – 1.7% increase from 2015. Traditionally, lenders such as Fannie Mae use a 36% debt-to-income ratio, which can make the mortgage approval process more challenging for first-time buyers..
On average, trade-up and premium home buyers require just 25.5% and 13.9% respectively of their income to buy a home so they are not nearly as affected by low inventory.
The lack of housing inventory in the San Francisco Bay Area was the biggest real estate surprise of 2014 according to an unofficial survey conducted by the San Francisco Chronicle.
For example, one agent pointed out that in Marin County there is typically a 4.5 month supply of inventory. In 2014, the high was 2.3 months in May and again in September meaning that, at best, inventory as at half of the normal amount.
Of course, low inventory means that many buyers are competing for the same houses, which only drives prices up, leaving many would-be home owners out in the cold.
many experts predict that low inventory will continue to plague the Bay Area in 2015.
