The National Association of Realtors latest Existing Home Sales Report reveals only a 3-6 month supply of homes for sale. There has been a 7.1% inventory reduction since this same time last year. Continuously for the last 20 months we have seen existing homes for sale drop.
For a normal market we would need to have a 6 month supply of inventory. When the demand for homes exceeds the supply of existing homes for sale it becomes a sellers market. This leads to a hike in home prices, which lowers the existing home sales.
Since August 2012 it has been a sellers market in the United States. The below chart shows the decline of inventory, with this last month reaching a new low.
Are there homes on the market that buyers are looking for? Trulia revealed that in fact there are not a lot. So not only is there a lack of homes for sale but the ones available are not meeting buyers needs.
There are customarily three groups of homes by price: starter, trade-up, and premium.
Trulia’s inventory mismatch chart below shows the search buyers are interested in versus market availability . For instance: lets say 60% of buyers are looking for starter homes, however 40% of current homes for sale are starter homes, the mismatch score is 20.
Listing availability for starter and trade-up homes in the United States is low. It makes for a very competitive sellers market in these categories. On the other end of the spectrum, premium home buyers have less competition because there is more for sale. This leads premium buyers into a buyers market with this category having an 11 point surplus, which heightens existing home sales.
“It leaves Americans who are in the market for a home increasingly chasing too fewer options in lower price ranges, and sellers of premium homes more likely to be left waiting longer for a buyer.”
Lawrence Yun, NAR’s Chief Economist doubts there will be an upswing any time soon:
“Competition is likely to heat up even more heading into the spring for house hunters looking for homes in the lower- and mid-market price range.”
Real estate is local. If you are thinking about buying OR selling this spring, let’s get together to discuss the exact market conditions in your area.
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