Tight Inventories Force Buyers to Start Early

by 15 Mar 2013

Realtor.com listing data for February suggest buyers are getting an early start to the 2013 home buying season amid signs that sellers are finally responding to the positive market by increasing depleted inventories.

While inventories remain at record lows, the average age of the inventory was down by 9.26 percent over the month and by 11.71 percent on a year-over- year basis, suggesting that many reluctant home sellers may finally be coming off the fence to take advantage of recent improvements in housing prices. From January to February, the median age of the inventory fell in 145 of the 146 markets tracked by Realtor.com. The national median list price also reversed its recent downward trend, rising by 1.55 percent over the month and 1.01% on an annual basis. And while list prices continue to decline in many smaller industrialized markets in the Midwest and North East, the number of markets experiencing a decline is beginning to turn around, spelling more good news for the housing market and the US economy at large.

The nationwide median list price f rose to $189,900 in February. While list prices remain about 2.6 percent below their peak during the 2012 home buying season ($195,000)--and 24 percent below their level in January 2007 ($249,900)--if list prices continue to pick up speed as they did last year in the spring, 2013 could prove to be another good year for the housing market. The total U.S. for-sale inventory of remained at near-record lows in February, with 1,494,218 units for sale. While the inventory was slightly up on a monthly basis, reflecting the beginning of the home buying season, it was down by 15.97 percent compared to a year ago and is less than half its peak of 3.1 million units in September 2007. Record low inventories, combined with list prices that are once again on the rise, are likely to set the stage for continued gains in housing values in the upcoming year.

The median age of inventory of for-sale listings fell to 98 days in February, 11.71% below the median age one year ago (February 2011). While the median age of the inventory is highly seasonal, the year-over-year decline is consistent with a gradual, but persistent downward trend that has been occurring for the past two years. The strength of housing markets varied greatly by region, with markets in California registering the highest increases in listing prices coupled with the largest inventory declines. Phoenix, Seattle and Denver were also among the top performers. However, although their numbers have begun to decline, many smaller industrialized markets in the Midwest and the Northeast continue to register year-over-year list price declines, as did Philadelphia, Chicago and New York City.

On a year-over-year basis, the for-sale inventory declined in all but five of the 146 markets tracked by Realtor.com, while list prices increased in 78 markets, held steady in 29 markets and declined in 39 markets. While the number of markets experiencing year-over-year list price declines had been increasing for the past 6 months, this pattern appears to be turning around. Last month, for example, list prices increased in 71 markets on a year-over-year basis and declined in 50. On a year-over-year basis, February median list prices were up by 1 percent or more in 78 of 146 MSAs, and up by 5 percent or more in 51 MSAs.

Median list prices were down by 1 percent or more in 39 markets, while 11 experienced a decline of more than 5 percent. The remaining 29 markets have not experienced significant changes in their median list price compared to a year ago. During the past seven months, the number of markets experiencing year-over-year price declines has steadily increased, while the number experiencing list price increases has steadily declined. However, this pattern appears to be turning around, with the number of markets registering a year-over-year list price decline in February (39) significantly below the number of declines observed in last month (50). Nevertheless, year-over-year list price trends are not as strong as they were one year ago. Markets experiencing the greatest list price declines generally have not experienced large reductions in their for-sale inventories. Excluding Chicago, for-sale inventories in the markets with the greatest list price declines fell by an average of 8 percent, roughly half the national average. However, for-sale inventories in both Chicago and New York are down by about 22 percent.


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