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Low Inventory Continues to Influence Housing Market

Low Inventory Continues to Influence Housing Market

As more data and insight into the housing market comes out, it's clear that 2017 was an earth-shattering year for residential real estate.

According to a report from Zillow based on home sales data from the prior year, there has not been a year on record in which homes sold faster.

Based on Zillow's data from its proprietary listing service, the average home was on the market for just 81 days, including closing. During June 2017, the hottest month of the year for home sales, median listing times were as low as 73 days nationally. In certain markets, that number went even lower: Los Angeles clocked a median sales time of 59 days in May, while San Francisco homes tended to sell in just 41 days around the same time.
 
Housing inventory is not only selling faster - it has tended to fetch higher prices, too. Another Zillow report found that around 25 percent of homes sold for more than their list price in 2017. For comparison, only 18 percent of home sales in 2012 went for more than the initial asking price. On average, Zillow found that listings that sold for above their sticker prices garnered an additional 3 percent - a sizeable takeaway for sellers and a hefty additional expense for buyers.

More Americans continue to enter the housing market, but inventory remains a concern. According to Lawrence Yun, Chief Economist of the National Association of Realtors, the market continues to favor sellers as low inventory pushes prices higher, and reduces the time required to sell.

"Affordability continues to be a pressing issue because new and existing housing supply is still severely subpar," Yun said in the latest report on existing home sales data. Research from the NAR indicates that in March, the U.S. market for existing homes had only 3.4 months worth of inventory available. That would be almost half of the six months of stock that economists generally consider equally beneficial for buyers and sellers.

Inventory Squeezes First-Time Buyers
The NAR's report also warns that such market conditions may be wearing down first-time homebuyers in particular. This share of buyers comprised 34 percent of the homebuying market in 2017, but that proportion has slipped in the first months of the New Year.

"[Real estate agents] in several markets note that entry-level homes for first-timers are hard to come by, which is contributing to their underperforming share of overall sales to start the year," according to NAR President Elizabeth Mendenhall. "Even with the expected uptick in new listings in coming months, buyers in most markets will likely have to act fast on any available listing that checks all their boxes."

Home sales continue to post strong results in many local markets, proving that buyers in many places are not being totally priced out of homeownership. As prices are expected to moderate through 2018, it stands to reason that affordability will improve slightly and first-time buyers will see an opportunity to make a move.