April Housing Data Shows Promise for Weary Buyers
Updated: May 13, 2022
The US housing supply appears ready to rebound, according to new data released this week by Realtor.com, though some suggest it’ll take a slow while.
An increase in the number of mid-sized homes, according to the report, could mean more listings are available for families wanting to upgrade from their starter homes—which could, in turn, potentially result in an uptick in first-time buying options.
Additionally, active listings overall posted the smallest year-over-year decline (-12.2%) since December 2019, according to its Monthly Housing Trends Report.
Some Buyers Actually Want to Negotiate Price
Spiking mortgage rates—up from 3% six months ago to 5.64% early this week—are arguably leading to an increase in inventory.
“House prices are too high based on fundamentals such as price-to-income and price-to-rent, writes blogger Bill McBride on Calculated Risk. “And some investors appear to be pulling back due to higher cap rates, and some builders are reporting buyers actually want to negotiate on price.”
In February, the months-of-supply was at 1.7 months, and the Case-Shiller National Index (SA) increased 1.90% month-over-month. In the March existing home sales report, the NAR reported months-of-supply increased to 2 months.
However, to get back to more normal price changes, McBride said the months-of-supply will have to increase to the 4- to 6-month range.
“That could happen with a combination of an increase in inventory and a decrease in the sales rate. To see national price declines, months-of-supply would probably have to increase to over 6 months,” he said.
Any Inventory Improvement Won’t Be ‘Huge’
Steven Ostad, founder and principal of Real Quick Capital, tells GlobeSt.com that he thinks inventories could “possibly improve, but it won’t be a huge spike.
“Inventory will grow because people may want to sell and capitalize on the money they’ve made the past three years due to the rise in home values. If there’s a major recession or massive increase in unemployment, people may downsize.”
Inventory will pick up, but it will be absorbed by the market for buyers who have been waiting on the sidelines, Ostad said.
“Before we see inventory go up, however, prices will have to drop so there is no longer a fight for these homes,” Ostad said. “There won’t be enough increase to the point where there won’t be any takers. We do not foresee a 2009-11 situation, in which we saw a massive increase in homes hitting the market. There will be an increase but not a massive influx that would create stress in the market or a crash.”
Still a Solid Sellers’ Market
Aron Johnson, REALTOR, Russ Lyon Sotheby’s International Realty, tells GlobeSt.com that it is still a solid seller’s market nationally and in Arizona in most price points/markets, but more listings or standing listings help for a healthier market.
Positive examples would include more listings, “which should ease the frenzied pace and outlandish offers buyers have experienced in the past few years, as buyers have more to choose from and can be a bit more selective, slowing the pace also bringing back a bit more cordial balanced negotiations not just regarding price but terms/repair negotiations for a more robust win-win situation for buyers and sellers,” he said.
“For sellers, it will help relieve many of their fears of not finding a replacement home while still reaching a great fair market price on their home and not being required or opting to go into a post-possession or multiple moves with short-term housing lease necessity between homes. All in all, a housing supply rebound is a substantial positive, even if just a minimal one for now.”
Rolling Inventory Rolling to a Stop
Oriana Lehman Wood, REALTOR, Russ Lyon Sotheby’s International Realty, tells GlobeSt.com that the spring and early summer show positive signs of inventory improvement for buyers in Phoenix, despite rising rates.
“For the past couple of years, we’ve seen what we call a “rolling inventory,” homes coming on, and immediately within hours in some cases, going pending,” she said.
“However, in the past few weeks, with a combination of increased mortgage rates and sellers realizing they may have pushed thresholds of price, inventory is coming on and staying for a few days maybe even a couple of weeks [and] dare we even mention the word price ‘price reductions.’
“Don’t get too excited; however, it’s really just a stabilization of an intense market of between 27% and 40% appreciation year over year. So, to see some inventory sit even for a few days or weeks, in the history of our home market, is still an insanely short time, but a real treat for both buyers and realtors trying to catch our breath and manage the market environment.
“And sellers still rule the roost getting above-market offers, we are just seeing more discussion happening and evaluation. All a welcome improvement and environment in which to work.”
A Continued Supply-Demand Imbalance
Ultimately, though, it is unlikely the markets will see home price softening any time soon, John Beacham, CEO, Toorak Capital Partners, tells GlobeSt.com. “Home buyers and renters continue to be pressured with high inflation and increasing rates that are pushing housing affordability on all fronts.
But Danielle Hale, Chief Economist for Realtor.com, said in prepared remarks that these April data suggest “a positive turn of events is on the horizon” for weary buyers.
“If the trends we’re seeing now hold true, we could potentially see year-over-year inventory growth within the next few weeks,” she said.
“The key to this growth will be the continuation of softening buyer competition and an increasing number of sellers putting homes on the market. While home shoppers are still seeking relief from record-high asking prices and all-time low supply, when compared to the past two-plus years of double-digit annual inventory declines, an imminent rebound is welcome—a real estate refresh, if you will.
“There’s a long uphill climb to balance, but it starts with heading in the right direction, and April data shows a lot of promise.”