- Demand explosion caused by two things: mortgage rates being one full percentage point lower today compared to one year ago and Millennials, the largest demographic, aging into home buying years
- Inventory of existing for-sale homes down -8.5% annually, the lowest level since tracking began in 1982 by Realtor.com
- Imbalance of supply and demand caused median home prices in 12/19 to jump +7.8%, the largest annual increase in four years
According to new data just released by The National Association of REALTORS® (NAR), home buyers in December 2019 bought homes at the fastest pace in two years. Sales increased +3.5% in December, according to NAR. At this current sales pace, total supply could sell in three months.
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Median home prices of existing single-family homes rose +7.8% annually in December…this was the biggest annual increase in median home prices in nearly four years. This +7.8% in December increase followed a +5.4% annual increase in median home prices for existing homes in November.
Homes in the lowest market tier, homes priced at -$100,000, saw the largest price surge and the largest annual sales volume drop, -7.7% in December, for one reason and one reason alone…inventory is the tightest in this low-tier of the housing market. There simply are not enough homes for sale in the lowest market sector.
Obviously, investors were very active in the lowest tier of the market, choking supply even more. According to Peter Boockvar, chief investment office with the Bleakley Advisory Group, “Investors continue to lift the pace of their buying as they search for yield totaling +17% of purchases in December, +16% of purchases in November, +14% of purchase in October 2019 and +13% of purchases of the most affordable houses one year ago.”
Homebuyers in all other price points of the market could see sales decline if prices continue to increase. “There is so much frustration out there because would-be home buyers are motivated, but they’re thwarted by shortages,” said Holden Lewis, home and mortgage expert with NerdWallet. Fewer homes are on the market, but sales are rising, which means that buyers already face competition from other buyers long before the beginning of the traditional buying season.”
Thanks to CNBC’s Diana Olick for source data.