Home values are up, home sales have slowed, and distressed sales (foreclosures and short sales) have fallen to their lowest points in years.
However, there is one thing that is causing the industry to tap the brakes: a lack of housing inventory. Buyer demand has remained strong throughout the year, but supply has not kept up despite more listings coming to market.
Here are the thoughts of a few industry experts on the subject:
World Property Journal
“The slow pace of growth has thus far done little to reverse the long contraction in inventory that took place from January 2015 to August 2018. In July 2017, inventory was falling at its fastest pace since 2014 of 12.8 percent year-over-year.”
Robert Dietz, Chief Economist for the National Association of Home Builders
“A shortage of housing inventory, a deepening construction labor shortage and high land costs are fueling the crisis”.
Aaron Terrazas, Senior Economist at Zillow
“For four years it felt like homebuyers couldn’t catch a break as for-sale inventory became tighter with each passing month…Homebuyers are not out of the woods yet, but there is a glimmer of light on the horizon.”
Danielle Hale, Chief Economist at Realtor.com
“For buyers, there is going to be more inventory. So that’s a bright spot… The downside of that bright spot is it might not be in their price range.”
If you are thinking of selling, now may be the time. Demand for your house will be strong at a time when there is less competition. That could lead to a quick sale for a great price.
We have all seen the headlines reporting that buying a home is less affordable today than it was at any other time in the last ten years, and those headlines are accurate. But, have you ever wondered why the headlines don’t say the last 25 years, the last 20 years, or even the last 11 years?
The reason is because homes were less affordable than they are today 25, 20, or even 11 years ago.
Obviously, buying a home is more expensive now than during the ten years immediately following one of the worst housing crashes in American history.
Over the past decade, the market was flooded with distressed properties (foreclosures and short sales) that were selling at 10-50% discounts. There were so many distressed properties that the prices of non-distressed properties in the same neighborhoods were lowered and mortgage rates were kept low to help the economy.
Low Prices + Low Mortgage Rates = High Affordability
Prices have since recovered and mortgage rates have increased as the economy has gained strength. This has and will continue to impact housing affordability moving forward.
However, let’s give affordability some historical context. The National Association of Realtors
(NAR) issues their Affordability Index each month. According to NAR:
“The Monthly Housing Affordability Index measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national and regional levels based on the most recent monthly price and income data.”
NAR’s current index stands at 147.6. The index had been higher each of the last ten years, peaking at 197 in 2012 (the higher the index the more affordable houses are).
But, the average index between 1990 and 2007 was just 123, and there were no years with an index above 133. That means that homes are more affordable today than at any time during the eighteen years between 1990 and 2007.
Home prices have started to slow their growth to more historic norms as interest rates have held steady. Both are indicators that affordability will remain steady or improve. Buying a house is an attainable goal in most markets, since it is less expensive to buy today than it was during the 18-year stretch immediately preceding the housing bubble and crash.