While home sales continue to rebound and rise in the US housing market as 2019 comes to a close, the low housing inventory remains an issue for homebuyers and real estate investors alike.
Largest Decline in Housing Inventory Since 2018
Thanks to low interest rates, demand for real estate property in the US continues to grow as buyers hope to take advantage of the more affordable housing costs. October 2019 saw a year-over-year (YoY) increase in home sales of 3.9% and a month-over-month increase of 0.4% from September 2019, RE/MAX reports. This follows the increase in sales in May, July, and September of 2019, making October the 4th month in the past 6 to see a rise. Before May, the US real estate market hadn’t seen an increase in home sales for 9 months.
Metro areas that saw the largest increase in home sales YoY in October included:
- Los Angeles, CA (+24.4%)
- Charlotte, NC (+19.1%)
- Burlington, VT (+16.1%)
RE/MAX Holdings CEO, Adam Contos, commented on the rise in sales and the drop in real estate inventory:
October continued a recent win streak for home sales, and the market is positioned much better than it was a year ago. Demand is strong, due in part to low interest rates, but buyers have limited options because inventory remains such a challenge.
Housing inventory saw a YoY drop of 9% and 5.5% from September 2019. This was the largest decline since May 2018, leaving the months of supply for October at 3.1. The Miami real estate market was the only metro area reported having a months of supply over 6, indicating a buyer’s market.
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Real estate markets that had the lowest months of supply of inventory included:
- San Francisco, CA (1.6)
- Denver, CO (1.8)
- Manchester, NH (1.8)
- Phoenix, AZ (1.8)
The Days on Market (DOM) was also low, according to the RE/MAX report, standing at 49 days.
Metro areas that witnessed the lowest Days on Market in the US housing market included:
- Omaha, NE (21)
- Cincinnati, OH (27)
- Nashville, TN (28)
Those with the highest DOM in October included:
- Des Moines, IA (102)
- Augusta, ME (96)
- Miami, FL (86)
And with the drop in supply and the rise in demand, the US median sales price also hit a record high of $254,800 for October. This was an 8.4% increase YoY, the highest it has been in the month of October since 2013.
The metro areas that saw double-digit increases in median sale prices in October included:
- Trenton, NJ (+20.9%)
- Albuquerque, NM (+15.8%)
- Boise, ID (+10.9%)
However, the following metro areas did see a YoY drop in median sales prices:
- San Francisco, CA (-2.6%)
- Burlington, VT (-0.8%)
The combination of these real estate market trends (rising prices and dropping US housing inventory) spells out a competitive seller’s market for buyers.
The RE/MAX report is based on housing inventory data across 54 metro areas in the US real estate market. A Redfin report, which looked at 217 metro areas, also noted significant drops in inventory and a rise in home sale prices.
A Positive Housing Market Forecast for US Inventory in 2020
Despite the current housing market trends, Contos says that the forecast is bright:
Fortunately, key forecasts suggest an increase in new-homes moving onto the market next year, which would help address the inventory situation and potentially slow the steady price gains we’ve seen for so long.
In fact, in October, US home permits for future construction rose to a 12-year high. Housing starts rose by 3.8% (1.314 million units). Single-family construction led the way with a jump of 3.2% (the highest the market has seen since August 2007).
As the Commerce Department reports more home completions in the US housing market as well as an increase in the inventory of houses under construction, experts say much-needed relief will come for buyers in the coming months. All signs point to a strengthening real estate market.
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