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April 23rd, 2013

Home sales slip due to limited inventory

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Fran Images--SoldSales of existing homes and condominiums in the U.S. declined slightly in March as prospective buyers faced rising prices, bidding wars and constrained supplies of homes from which to choose.

That’s all according to a home sales report released yesterday by the National Association of Realtors.

Home sales edge lower

Existing-home sales–completed transactions that include single-family, townhomes, condos and co-ops–declined 0.6 percent in March after a downwardly revised February, but remain 10.3 percent higher than the same time last year.

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Sales of existing single-family homes slipped 0.2 percent in March and were up 9.1 percent compared with March 2012.

Sales of existing condominiums and co-ops fell 3.2 percent in March to an annualized rate of 600,000 units. Condo sales were up 20 percent compared with the 500,000-unit pace a year earlier.

Home sales normally are higher in summer than winter due to milder weather and family preferences to move after the school year ends. Seasonal adjustments are made to the data to factor out such variations.

Supply is low

Slightly more than 1.9 million existing homes were on the market at the end of March, representing a 4.7-month supply at the then-current pace of sales, up slightly from 4.6-month supply at the end of February. The supply of for-sale homes in March was 16.8 percent lower than a year ago.

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A supply of six months is considered to represent a balanced market that favors neither buyers nor sellers. A smaller supply signals a seller’s market in which sellers have a stronger position in negotiations.

Demand is exceeding supply

Demand to purchase for-sale homes currently exceeds supply, triggering multiple bids and rising prices, said Lawrence Yun, NAR chief economist, in a statement.

“Buyer traffic is 25 percent above a year ago, when we were already seeing notable gains in shopping activity,” Yun said. “In the same timeframe, housing inventories have trended much lower, which is continuing to pressure home prices. Home construction is rising and low mortgage rates are continuing to keep affordability conditions at historically favorable levels. Underwriting standards remain excessively tight, while renters are getting squeezed by higher rents.”

Prices are up

The national median price of existing homes sold in March was $184,300, a rise of 11.8 percent compared with March 2012. The national median price of a single-family home was $185,100, up 12.1 percent. The national median price of condos was $178,900, up 10.4 percent from a year ago.

The median price is the point at which half of the homes sold for more and half sold for less. Changes in the sizes and types of homes sold from month to month can distort median price data.

The bottom line for buyers and sellers is that housing markets are strengthening, though the future of supply, demand and mortgage rates is always uncertain.

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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