With housing market data sending myriad signals that sometimes can be difficult for real estate agents to decipher, there is some concern that the market is mismatched with today’s buyers.
When you take a broad view of the housing market we all are working in today, it looks very healthy. Demand is high, employment and wages are growing, and mortgage rates are low.
According to a CNBC report, home sales are falling because as demand drops where there are too few homes and the homes that are available are very expensive. Moreover, there are 8 million more renter-occupied homes today than there were in 2007.
Svenja Gudell, chief economist at Zillow, offered her assessment of recent data.
“It sets up a situation in which the housing market looks largely healthy from a 50,000-foot view, but on the ground, the situation is much different, especially for younger, first-time buyers and/or buyers of more modest means. Supply is low in general, but half of what is available to buy is priced in the top one-third of the market.”
And with supply on the short side, it would seem like the perfect opportunity for homebuilders. However, they just are not building enough inexpensive houses to keep up with market needs. In August, the U.S. Census Bureau noted that new home sales dropped 3.4 percent. But why aren’t your clients buying the homes that are there? Peter Boockvar, chief market analyst with the Lindsey Group, offers his thoughts.
“The recent home sales data has reflected a slower pace and I continue to believe it’s due to more a push back on pricing.”
The numbers would seem to support this position. As it is, only 2 percent of newly built homes sold in August were priced under $150,000. Hust 14 percent priced under $200,000. Gudell points out that inventory is stuck at roughly mid-1990s levels, but the country has grown by more than 60 million people since then.
“It’s time we stopped sugarcoating the truth with this data — the simple fact is that we are severely underproducing housing in this country, relative both to basic demographics and currently high demand from buyers. Buying conditions, in theory, are great right now: Jobs and incomes are growing, and rock-bottom mortgage interest rates are helping keep financing costs low. What’s missing from the equation is a lack of homes actually available to buy at a price point that’s reasonable for most buyers.”
Nela Richardson, chief economist at Redfin, points out that while the market is mismatched, it is not likely that home prices will drop as long as some buyers are willing and able to open their wallets and spend more money for less house.
“We expect price pressure to remain pretty strong well into the fall. First-time buyers are struggling to find a footing in this market. The first-time buyer share is down from historical levels, but the thing is, you don’t need everyone to buy a house in this market. As long as there are one or two buyers who can afford, and those buyers can be investors, then the sale will go through, and that’s what we’re seeing at some level.”