Existing-home sales sputtered in February as lower-than-low inventory kept a lid on activity, the National Association of REALTORS® (NAR) reports. Existing-home sales totaled 5.48 million, a 3.7 percent slip from a decade-high in January and a 5.4 percent hike from one year prior.
“REALTORS® are reporting stronger foot traffic from a year ago, but low supply in the affordable price range continues to be the pest that’s pushing up price growth and pressuring the budgets of prospective buyers,” says Lawrence Yun, chief economist of NAR. “Newly listed properties are being snatched up quickly so far this year and leaving behind minimal choices for buyers trying to reach the market.”
Though existing-home inventory expanded to 1.75 million in February, supply is still 6.4 percent below one year prior—and last month marked the 21st month in a row of the downtrend, according to the report.
“The bad news is that February existing-home sales are down 3.7 percent from January, which more than eradicates the growth in sales we saw in January,” says Joseph Kirchner, senior economist at realtor.com®. “The good news is that sales are up 5.4 percent from a year ago.
“The culprits for the reported drop are declining affordability and lack of inventory,” Kirchner says. “There are plenty of buyers in the market, but they are unable to find the homes they want at the prices they can afford. These affordability challenges are the result of inventory shortages—which leads to bidding wars—and rising mortgage rates, resulting in higher monthly payments. We see the largest inventory shortages among the most affordable homes, which also saw the greatest decline in sales with homes under $100,000 down 15 percent from a year ago.”
“Our biggest challenge is lack of inventory in the entry and move-up price points,” confirmed Rei Mesa, CEO of Berkshire Hathaway HomeServices Florida Realty, in a recent interview for RISMedia’s soon-to-be-released 2017 Power Broker Report. “There is demand, but a great deal of it is pent-up. This is a challenge for all of us, not just my firm.”
“We are experiencing a frenzied market for homebuyers trying to get a home,” echoed Lennox Scott, chairman and CEO of John L. Scott Real Estate. “We are virtually sold out of inventory, so each new listing is receiving multiple offers. With such a severe shortage of inventory, it is now creating seller gridlock in the more affordable and mid-price ranges. Sellers are afraid to put their home on the market because it will sell instantly, and they are faced with trying to win in a multiple-offer situation to get their next home.”
Existing homes in February lasted just 45 days on the market, down substantially from 59 days one year prior. Forty-two percent were on the market for less than one month. Months supply of inventory is currently 3.8. Data from realtor.com show the markets with the shortest days on market were again San Jose-Sunnyvale-Santa Clara, Calif. (23 days), San-Francisco-Oakland-Hayward, Calif. (27 days), Vallejo-Fairfield, Calif. (33 days) and Seattle-Tacoma-Bellevue, Wash. (36 days), in addition to Boulder, Colo. (37 days).
Spurred by the shortage, the median existing-home price continued its ascent, up 7.7 percent to $228,400 from $212,100 one year prior. The median existing condominium and single-family home prices also grew, 8.2 percent to $216,100 and 7.6 percent to $229,900, in order.
Existing-home sales fell in every region but the South, where sales were up 1.3 percent. Sales in the Northeast landed 13.8 percent lower, while sales in the Midwest dropped 7 percent. Sales in the West slid 3.1 percent. The median price in the West was $339,900 (a 9.6 percent annual increase); the median price in the Northeast was $250,200 (4.1 percent); the median price in the South was $205,300 (9.6 percent); and the median price in the Midwest was $171,700 (6.1 percent).
First-time homebuyers comprised 32 percent of existing-home sales in February—a share a smidge lower than in January, which equaled 33 percent. All-cash sales comprised 27 percent, while distressed sales comprised 7 percent.
“Seek a preapproval from a lender, know what your budget is and begin discussions with a REALTOR® early on about your housing wants and needs,” advises NAR President Bill Brown. “Homes in many areas are selling faster than they were last spring. A buyer’s idea of a dream home in a popular neighborhood is probably the same as many others. That’s why they’ll likely have to decide quickly if they see something they like and can afford.”