3 Surprising Things Learned From the Spring Housing Market
Summer has officially arrived, but spring data has just started to give buyers and sellers clues about what to expect as the selling season continues.
Some consider the spring and summer seasons a convenient time to enter the market. Buyers are out and about in warmer weather, and the typical school break provides an opportune time for buyers and sellers to pack up and move.
Whether you’re already swimming in the housing market or still thinking about whether to dip your toe in, here are three recent data points to keep in mind:
- Home Prices
Home prices are important to potential sellers who want to know what their home might be worth, while they give hints to buyers about what they will pay, says Danielle Hale, managing director of housing research for the National Association of Realtors®.
There are many ways to capture housing market values, but many of them seem to show the same trend nationally — home prices continue to rise, says Hale.
Another recently released measure, the S&P/Case-Shiller Home Price Index, showed an increase of 5.2 percent nationally in the 12 months ending in March, down from 5.3 percent in February. Prices are still below their peak levels from the summer of 2006, according to the S&P/Case-Shiller national, 20-city and 10-city indices, but some cities like Dallas are seeing record values for single-family housing.
The squeeze in housing supply is closely related to the uptick in prices, Fannie Mae’s Chief Economist Doug Duncan says.
Historically, home prices have risen three-quarters of one percent annually on average after inflation, notes Duncan. For the past four years or more, after inflation, they’ve increased between three and four percent.
“There’s much stronger real house appreciation. This comes back to supply,” Duncan says. “And builders haven’t been building.”
At the current rate of overall home sales, it would take 4.7 months without additional housing inventory to clear what’s on the market now, according to NAR. Many economists believe “normal” supply is between six and seven months, says Duncan.
- Housing “Tier” Appreciation
A house’s price tag will depend not only on a home’s location but also its type. Where home prices are on the rise, the pace of increase is fastest for lowest-priced homes in many cities, and that makes it tougher for people in the market for starter homes, notes Duncan.
In Denver, for example, homes priced below $298,386 had a 15.83 percent year-over-year gain in March, according to Duncan’s analysis of S&P/Case-Shiller Index data. Homes in the “middle” tier, priced between $298,386 and $418,848, had a 10.83 percent year-over-year gain. “High” tier homes, or those priced above $418,848, had a 6.75 percent year-over-year gain.
In many cities, developers are not building as many homes with lower-revenue points, Duncan says. In some cities in California, for example, it would take only two months to clear inventory at the current sales pace.
“What’s happening there is the absence of available properties,” Duncan says. “The ones that are available are being bid up.”
When the inventory level is below six months, it’s an indication prices are increasing, and it’s a more competitive sellers’ market, says Hale.
“There are more buyers than sellers, which makes a buyer’s life trickier and a seller’s life easier,” she says.
Estimates, forecasts and other views expressed in this article should not be construed as indicating Fannie Mae’s expected results, are based on a number of assumptions and may change without notice. How this information affects Fannie Mae will depend on many factors. Neither Fannie Mae nor its Economic & Strategic Research (ESR) Group guarantees that the information in this article is accurate, current or suitable for any particular purpose. Changes in the assumptions or underlying information could produce materially different results. The ESR Group’s views expressed in this article speak only as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.