Demand for homes is growing significantly while supply continues to decrease. As a result, homes are selling faster than ever in Spring 2017, which record high process in many markets across the United States. Eager buyers are not only on the lookout for properties which are becoming increasingly scarce, but are also keen to take advantage of the lowest mortgage rates of 2017 so far.
In March this year, home prices rocketed by almost 9%, compared to March of last year. This happened in spite of the fact that the number of homes available for sale dropped by 13%, according to figures from a Redfin report.
The sheer amount of demand in the housing market increased competition throughout the housing market, creating the fasted average sales pace in 7 years. This year, the average home goes under contract within 49 days, compared to 60 days from March last year.
The Housing Market
The chief economist of Redfin, Nela Richardson, told CNBC that at some point, consumer budgets will begin to fall behind price appreciation. She also explained how “the combination of low inventory, high process and strong competition” is expected to pose a particular challenge to those making their first move on the housing ladder, which is significant given how important they are to the housing market as a whole.
While the demand and short supply is causing house prices to go up, and posing a challenge to first time buyers, home builders are reaping great benefit. The lack of supply means that the market will pay well for new homes. Furthermore, mortgage applications for people who are intending to purchase newly-built properties rose by 6.7% in March over March 2016, showing a significant interest in purchasing new properties. The rise in mortgage applications for brand new homes is the highest it has ever been, ever since these figures were tracked by the Mortgage Bankers Association.
The vice president of economics and research for MBA, Lynn Fisher, wrote in a monthly report that the pickup from a modest February shows that developers are finding new ways to supplement low property inventories. New homes are being built quicker and more frequently than in a long time.
While the number of mortgage applications for newly-built homes has increased, the average size of these loans has remained largely unchanged. This seems to indicate that builders are attempting to keep their prices down in order to ensure there is plenty of interest in the properties they build. However, the average size of loan applications for existing properties has grown significantly. In fact, the average loan size is the highest on record so far, meaning that starter homes remain inexpensive, and first time buyers will find it difficult to find low cost properties that are already built.
Take Charlotte, North Carolina for instance. The supply of existing homes has dropped around 20% compared to March 2016, whereas sales still rose by 11.5% – according to the Charlotte Regional Realtor Association. Interest in homes, however, meant that it took 18 days fewer than normal to sell a home, compared to the same time last year.
The situation is similar in Washington, D.C., where the median price of homes sold in March hit a new high, with property sales increasing by almost 20%. Supply remains low in the region, however. As a result of high demand and low supply, homes in March only remained on the market for 12 days before they were purchased – according to statistics from Greater Capital Area Association of Realtors.
What does this mean? Those looking to sell their home should consider starting soon. Interest is higher than ever right now.