Inventory Mismatch Paints a More Detailed Picture
the National Association of Realtors latest Existing Home Sales Report reports the inventory of existing homes for sale in today’s market to be at a 3.6-month supply. That's now 7.1% lower than this time last year, marking the 20th consecutive month of year-over-year drops. We're seeing the same thing in our area.
Typically, a 6-month supply of homes for sale is considered a "normal market", where home prices appreciate with inflation. When there is less than about a 6-month supply the demand for houses outpaces supply. And you are probably aware of what happens when demand is higher then availability. Prices go up.
Here's the chart showing the US has been in a sellers' market for the last 5 years. Look at last month's numbers. They reached an all time low.
Trulia recently published reports showing that there's not only a shortage of homes on the market, but what homes are available for sale are not necessarily the price point home buyers are looking for. Trulia categorized homes in three ways: starter homes, trade up homes and premium homes. They then matched up the number of buyers searching for each price category and created a "mismatch score" to measure the search interest of buyers against the category of homes that are available on the market. For example: “if 60% of buyers are searching for starter homes but only 40% of listings are starter homes, [the] market mismatch score for starter homes would be 20.”
Here's the results of Trulia's analysis.
Nationally buyers are searching for starter and trade-up homes. And just like here in North Fort Worth, Keller and the Alliance area, the builders who typically provide a steady supply are just not producing the number of homes we need to fill the demand. So we, like the rest of the country, are coming up short with the listings available. It's a highly competitive seller’s market in these categories.
Nationally, premium home buyers face less competition in their price range. We, however, have not seen that type of problem just yet in the higher priced areas like Trophy Club, Colleyville and Southlake. And when we do, it will likely not create a downward price trend. Rather I suspect it will create a closer to "normal" market time for those sellers. But across the country:
“It leaves Americans who are in the market for a home increasingly chasing too fewer options in lower price ranges, and sellers of premium homes more likely to be left waiting longer for a buyer.”
Lawrence Yun, NAR’s Chief Economist doesn’t see an end to this coming any time soon:
“Competition is likely to heat up even more heading into the spring for house hunters looking for homes in the lower- and mid-market price range.”
Real estate is local. And though the Dallas/ Fort Worth area is experiencing the same housing shortage and run up of prices as much of the rest of the country, each neighborhood and area is a bit different. If you're thinking about buying OR selling this spring, let’s get together to discuss the exact market conditions in your neighborhood.