Doctors: Inventory growth is now outpacing sales in buyer-friendly housing markets

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June 10, 2019


MARKET RECAP

Doctors: Inventory growth is now outpacing sales in buyer-friendly housing markets

Spring home-buying season is officially here, and an abundance of inventory has entered the housing market.

As more and more homeowners list their homes for sale, new data from Realtor.com suggests the market is shifting further in the favor of homebuyers.

“The U.S. housing market has largely favored sellers over the last several years as a result of the record-breaking low inventory and red-hot demand that led to intense competition and fast-rising home prices. However, we’re now seeing some metros buck this trend,” Realtor.com Chief Economist Danielle Hale said. “Slowing sales and growing inventories have caused months supply to increase in many markets across the country.”

Albany, New York; Chicago, San Antonio, Jacksonville, Florida; Los Angeles; Providence, Rhode Island; Dallas; Nashville and Tampa are the best-performing metros for American homebuyers, according to Realtor.com.

Unfortunately, in these buyer-friendly housing markets, inventory has now outpaced sales growth, according to Hale.

“As demand cools in these top markets for buyers, inventory continues to ramp up,” Hale said. “On average, the top markets for buyers are seeing active inventory grow at a rapid 14.6% pace, year-over-year, compared to the national growth rate of just 4%.”

But as supply continues to heighten in these markets, the company has discovered that price appreciation has hit a wall.

In fact, sales prices in the top 10 markets have grown only 1.4%. This is significantly down from the 8.4% sales price growth seen in 2018, and 6.3% growth in 2017, according to Realtor.com.

Additionally, lessened demand and pricier inventory have led to an impact on sales, which have declined 5.5% on average, year-over-year.

“These 10 housing markets are already more buyer-friendly when looking at the availability of homes for sale in different markets, however, the mismatch between what’s available and what buyers want has led to lukewarm demand and lackluster sales,” Hale said. “As inventory continues to grow in these markets, buyers will see more options, and should ultimately gain more bargaining power.”

NOTE: Realtor.com analyzed the top performing markets for homebuyers in order to gauge the pace of sales relative to inventory.

Looking Ahead: Upcoming Key Market Dates

Wednesday, June 12, 2019 Consumer Price Index
Wednesday, June 12, 2019 Core CPI
Wednesday, June 12, 2019 Federal Budget
Friday, June 14, 2019 Consumer Sentiment Index

As mortgage rates plunge, millions more homeowners can benefit from refinancing

Mortgage rates are falling unexpectedly and sharply, and that means millions more homeowners can now benefit from refinancing their loans.

Fear over the ongoing trade war with China, and now potentially Mexico, has investors rushing to the relative safety of the bond market, pushing yields lower. Mortgage rates loosely follow the yield of the 10-year Treasury.

There are now about 5.9 million borrowers who could see their rates drop by at least 75 basis points by refinancing their mortgages. That is an increase of 2 million in just the past month, according to Black Knight, a mortgage software and analytics company.

That is the largest population of eligible candidates in nearly three years and represents an aggregate of $1.6 billion in potential monthly savings. Per borrower, the savings is about $271 per month.

If the rate were to drop just another quarter point, close to 7 million borrowers could benefit from a refinance, with a collective savings of just over $1.8 billion.

Falling rates are also benefiting buyers, especially as home prices are now cooling. Home prices in March were up 3.8% annually, the first time growth has fallen below its 25-year average of 3.9% since 2012, according to Black Knight.

Affordability is now the best it’s been in more than a year, with the monthly payment on the average-priced house down 6% in the past six months (that’s with a 20% down payment).

“When we factor income into the equation, we see that it takes 22% of the median income to purchase the average-priced home. That’s the lowest payment-to-income ratio in more than a year as well, and far below the long-term average of 25.1%,” wrote Ben Graboske, president of Black Knight’s data and analytics division.

Homebuyers have been up against a tight supply of lower-priced homes and an overheated market in general. While the price gains have come down significantly, today’s younger buyers are still saddled with high levels of debt and are often paying very high rents, making it increasingly difficult to afford a home.