Housing Reports: 'Leftovers' Fill Inventory, But Mortgage Rates Improve Outlook
Zillow analysts say that growing inventory is due to "leftovers" on market, while Realtor.com attributes its improved outlook for 2019 to lower-than-expected mortgage rates. New home sales are picking up the slack.
While the total pool of for-sale inventory has increased, the number of new listings on the housing market has fallen year-over-year in each of the past four months, according to the March Zillow® Real Estate Market Report. Zillow concludes that inventory growth is fueled by cooling demand, not increased number of sellers.
Overall inventory in the U.S. is 1.2 percent higher than in March 2018, but new listings fell 6.1 percent over the same period. And homes are staying on the market for longer – the median time on market increased four days in February from a year prior, the first such increase in four years and the largest since 2011.
"There is a narrative that inventory is growing, which favors buyers," said Zillow Director of Economic Research Skylar Olsen. “But the how and why is important. There may be more homes available for sale over the course of the month, but that's because more leftovers from previous months are sticking around. In truth, fewer homeowners are putting their homes on the market and buyer demand is falling back. Buyers won't have as much competition this shopping season and can take more time finding the perfect match, if it's out there."
The Fed Effect
Meanwhile, Realtor.com has revised its forecast for 2019, based largely on a shift in the economic outlook, specifically, the Federal Reserve’s announcement that it didn’t expect to increase interest rates further this year.
Lower-than-expected mortgage rates should fuel higher home price growth of near 3 percent and stronger homes sales, realtor.com concludes.
"The 2019 housing market is different than what we predicted in fall 2018, primarily due to an unexpected drop in mortgage rates in January 2019," said Danielle Hale, realtor.com®'s chief economist. "We believe 2019 will be characterized by lower, but still increasing mortgage rates that will buoy home prices and sales by boosting buyers' purchasing power beyond what we initially projected. This will create a slightly hotter, but still cooling housing market relative to the initial forecast five months ago."
New Home Sales
Lower interest rates are also credited with boosting new homes sales to their highest pace since November 2017. Sales of newly built, single-family homes rose to a seasonally adjusted annual rate of 692,000 units in March after a slightly revised February report, according to data from the Department of Housing and Urban Development and the Census Bureau.
"These numbers indicate that builders who can produce housing at affordable price points will experience sales growth," said Greg Ugalde, chairman of the National Association of Home Builders and a home builder and developer from Torrington, Conn. "However, builders are still dealing with a shortage of construction workers and buildable lots, which limits housing affordability."
"We saw a large gain at lower price points where demand is strong. In March 2019, 50 percent of new home sales were priced below $300,000, compared to 39 percent in March 2018," said NAHB Chief Economist Robert Dietz. "These are the price points that are attractive for renters seeking to become homeowners."
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