Sunny Forecast for Spring 2015 Market
The last week of the month is always filled with a blizzard of housing data. But unlike the snow and ice that have been pelting many parts of the U.S., the housing data point to a hotter spring ahead. Last week, we saw a disappointing slowdown in completed home sales, with a 4.9% decline in existing-home closings in January on a seasonally adjusted annualized basis. But the report on January data from the National Association of Realtors® also showed that there was a limited supply of homes for sale and that buyer traffic increased. That helped push up home values, which appreciated 6.2% on an annualized basis.
The Case-Schiller Home Price and Federal Housing Finance Agency also weighed in last week with data on December home price trends which confirmed the accelerating appreciation of home prices. We expect this trend to continue until enough sellers respond by listing more homes for sale. There wasn’t much change in new-home sales for January, but new-home prices continue to set new records, putting them out of reach of most households. The median U.S. household could afford only 25% of the almost 57,000 new-home inventory units currently listed for sale. And a third of the 200 largest home-building markets have no affordable new-home inventory on the market. Pending sales, which are new contracts signed on existing homes, increased in January by 1.7% on a seasonally adjusted basis. Pending sales were up 8.4% over last year, to the highest level in 18 months.
Consumer confidence and sentiment declined marginally from January, when both were at multi-year highs. However, a higher percentage of households indicated that they are planning to purchase a home in the next six months. Plans to purchase a home had been stuck at low levels and bucking the upward trend in consumer confidence. It is not surprising that more households are planning to buy now. After all, more than 1 million jobs have been created in the past three months, wages are finally showing signs of increasing, and new low-down-payment programs and lower mortgage insurance rates are available.
Across all of the data shown, including traffic, search, inventory, and price data, there is no question that 2015 has started off much stronger and much healthier than last year—and for that matter, any year since 2006. The availability of both credit and homes for sale are too tight, limiting growth in home sales, but we should see improvement in both constraints as the year progresses.
-From Realtor.com