If you’re out shopping for a home this weekend, bring your checkbook.
There may still be ice on the ground in much of the nation, but the spring housing market is the hottest it’s been in a decade. Consumer sentiment in both the economy and the housing market is rising and that is translating into strong demand from homebuyers. The trouble is, the supply of homes for sale is incredibly weak and getting weaker. What is for sale is selling fast.
The typical home that sold last month went under contract in 60 days, eight days faster than one year ago, according to a new report from Redfin, a real estate brokerage. Nearly 15 percent of all homes listed for sale in February were off the market within two weeks, up from 11.7 percent last year. This is the fastest February market Redfin has recorded since it began tracking in 2010.
The speed and the competition are combining to push home prices higher. Redfin recorded a 7 percent annual jump in median sale prices in February. Homeowners now have a lot of equity. In fact, total home equity hit a new peak at the end of last year, according to research by the Federal Reserve.
“While great for homeowners, continuously strong price growth across the U.S. since 2012 has posed significant challenges for first-time buyers, especially given such low supply in affordable price-tiers,” said Nela Richardson, Redfin’s chief economist. “There is a silver lining on the horizon, however. Rising prices and increased equity may tip the scales for homeowners who have been delaying their decision to move up, which could add much-needed starter-home inventory to the market.”
More homeowners think now is a good time to sell, according to the latest housing sentiment survey from Fannie Mae. More also consider now to be a good time to buy as well, but the same is not true for renters. Confidence in home buying is slipping among renters as affordability sinks.
“Inventory conditions are even worse than a year ago, and home prices and mortgage rates are on an uphill climb,” said Lawrence Yun, chief economist for the National Association of Realtors. “These factors are giving many renter households a pause about it being a good time to buy, even as their job prospects improve and wages grow. Unless there’s a significant boost in supply levels this spring, these constraints will, unfortunately, slow or delay some prospective buyers’ pursuit of purchasing a home.”
Regionally, Seattle was the fastest market in February, according to Redfin, with nearly half of all homes going under contract in just 12 days. Oakland, California, and Denver followed with 15 and 18 days on the market, followed by San Jose, California, (21) and San Francisco (28). The majority of those homes sold above list price.
As for supplies, Rochester, New York, had the largest decrease in inventory, down 42 percent compared to a year ago. Buffalo, New York, down 38 percent; Seattle, down 35 percent; and Omaha, Nebraska, down 35 percent; also saw far fewer homes available on the market than a year ago.
On the bright side, Provo, Utah, saw the biggest jump in listings, up 31 percent from a year ago, followed by Knoxville, Tennessee, up 22 percent; and New Orleans, up 16 percent.