The 2016 spring real estate market clearly favors sellers.
Although interest rates are low, the prices of homes have increased dramatically in the aftermath of the housing crash. These conditions have significant consequences for both buyers and sellers in the real estate market.
A Remarkably Low Supply
Due to tightening inventories, there are fewer homes available to buyers.
According to the National Association of Realtors, the supply of homes available for sale in December 2015 was the lowest it had been since early 2005.
Similarly, inventory appears to be 9% lower than in 2015 across the nation. The lead economist of the National Association of Realtors, Lawrence Yun, notes that one can find many of the housing shortages in places not typically associated with tight inventories, including Kansas City.
The low supply means growing competition among buyers.
Pace of Sales Speeds Up
The real estate marketplace realtor.com suggests that houses are selling at a rate that is about 7% faster than that of last year. Economic analysts project that the increase in home prices will only continue.
In April 2016, the median length of time between a house being listing and contracted was 68 days, as opposed to 74 days in March. Compared to April 2015, this April’s median has also been shorter (68 this year as opposed to 74 last year).
Thus, in spite of the record high home prices, sales have still been speeding up.
In April, the median listing price for homes was $245,000—a 2% increase from the previous month and a 9% increase from April 2015.
Lawrence Yun of the NAR points to a 5.3 million annualized pace for existing-home sales in the first quarter of 2016. Inventory has risen a little, but it is still tight, with an estimated 4% fewer homes available for sale compared to last year.
Tight Inventories Benefit Sellers
Analysts at realtor.com believe that these trends are all positive signs for sellers. According to lead economist Jonathan Smoke, the spring has seen a healthy, robust real estate market so far.
In April alone, nearly 550,000 new listings arrived on the market, helping to increase the total inventory. Nevertheless, the overall inventory has remained low.
Even after a high median age of inventory in March (22 days), the average age has since decreased by six days. There are nearly 5% fewer homes available for sale this year in comparison to last year.
Here are a few ways tighter inventories benefit sellers:
- Sellers receive more views for online house listings, according to realtor.com.
- Retailers can increase their prices.
- Sellers can close sales quickly.
All of these factors contribute to favorable conditions for sellers in the current housing market.
Hot Markets in California
The hottest markets have houses selling between 17 and 45 days faster than homes in the rest of the US.
Many of the hottest housing markets in the US can be found in California currently. In fact, the most expensive real estate market in the US is also the hottest right now, according to April rankings from realtor.com: San Francisco.
Homes listed in San Francisco sell after spending an average of only 25 days on the market.
Five of the top 10 places of the hottest markets in California are Santa Rosa, San Jose, Santa Cruz, and Sacramento.
Other Cities on the Top 10 List
Cities in other states on realtor.com’s top 10 rankings list include:
- Denver at number three
- Dallas-Fort Worth at number six
- Ann Arbor at number nine
- Columbus, Ohio at number ten
Even among the top 10, the difference in the average number of days homes spend on the market is remarkable. The difference between first-ranked San Francisco and tenth-ranked Columbus is nineteen days.
Trends in the Top 20 List
As with the top 10 list, the top 20 list shows that California cities dominate. In fact, 10 of the cities on the top 20 list are located in California.
Meanwhile, though, Jonathan Smoke points out that Midwestern cities seem to be on the rise.
Cities on the to 20 list include Sioux City, South Dakota and both Lafayette-West Lafayette and Fort Wayne in Indiana.
Factors Fueling the Success of Housing Sales
The high demand and need for low inventory in the Midwest have helped the growth spur just like the other regions.
The fact that interest rates remain low only fuels the growth. According to Black Knight Financial Services, interest rates have seen a 0.35 percentage point drop since the beginning of the year.
Ongoing job growth also contributes to the health of the real estate market. With more people employed, more people can afford to buy homes—especially thanks to the low mortgage interest rates.
The positive outlooks in hot markets like those included in realtor.com’s top 20 list are representative of the national trends of a real estate market that favor sellers.