June 21, 2017
New data on existing home sales just out from the National Association of Realtors (NAR) show strong demand in the month of May. As a matter of fact, demand was stronger than expected, based upon the average forecasts of economists nationwide. The new NAR report highlights that inventories are extraordinarily low right now, and that home prices are hitting record levels. NAR stated in their release: “Existing-home sales rebounded in May following a notable decline in April, and low inventory levels helped propel the median sales price to a new high.”
And here are the actual numbers, as reported this morning: “Existing home sales climbed 1.1 percent to a seasonally adjusted annual rate of 5.62 million in May from a downwardly revised 5.56 million in April. Last month’s sales pace is 2.7 percent above a year ago and is the third highest over the past year.”
The moving of millions of people from one house to another (what I call “churn”) each year stimulates a great deal of home improvement activity. HomeAdvisor’s data shows that people who move to a different home tend to hire help with things like cleaning carpets, installing or repairing cabinets, home security systems, painting and staining, toilet repair/replacement, radon/environmental testing, and, recently, new water purification systems and smart-home tech.
Key Points: “Low” and “High”
Mortgage rates are hovering near 4.0 percent now (30-year fixed), although some lenders will go under 3.9 percent, yet the pace of home sales is being held back. To my mind, there are two key trends here, one feeding the other: low inventories, and high prices. The shortage of homes for sale relative to demand has led to competitive bidding among home buyers. This is driving prices out of reach for many.
One consequence of low inventories and high prices is that it is forcing would-be buyers to examine other options. If they can’t find what they want in the marketplace, and if they don’t need to move to a different location, many will choose to remodel, expand, or update the home they have. If they need more space, they can often convert a garage or basement, or make more efficient use of their space using closet organizers.