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Real Estate Market- Supply vs. Demand

The impact and low levels of inventory is not only affecting Redfin's bottom line, according to the National Association of Realtors, the ongoing inventory shortages that are upholding U.S. home prices in many metropolitan areas has caused pending home sales in May 2017 to decline for the third consecutive month. None of the major regions saw an increase in contract activity last month.

Chief NAR Economist, Lawrence Yun, says it's clear the critically low inventory levels in much of the country somewhat sidetracked the housing market this spring. "Monthly closings have recently been oscillating back and forth, but this third consecutive decline in contract activity implies a possible topping off in sales," he said. "Buyer interest is solid, but there is just not enough supply to satisfy demand. Prospective buyers are being sidelined by both limited choices and home prices that are climbing too fast."

Consumer confidence could be playing a key role in the slowdown in contract activity. NAR's quarterly Housing Opportunities and Market Experience survey, released earlier this week, found that fewer renters think it's a good time to buy a home, and respondents overall are less confident about the economy and their financial situation than earlier this year. "The lack of listings in the affordable price range are creating lopsided conditions in many areas where investors and repeat buyers with larger down payments are making up a bulk of the sales activity," said Yun. "Meanwhile, many prospective first-time buyers can't catch a break. Prices are going up and there's intense competition for the homes they're financially able to purchase."

Realtor.com Senior Economist Joseph Kirchner, Ph.D. said, "Today's reported decline in contract signings is the third monthly slip in a row. This could be evidence of a downward trend - but there's no reason to panic yet."

Kirchner continued, "For one, the pending home sales index has been relatively stagnant since 2015, and has dropped to this level during that time. Plus the numbers aren't a perfect gauge of what's actually happening in the market. Sales can continue to grow while pending sales numbers are going down if the time between signing a contract and officially closing the sale shortens."

"However, today's numbers are yet another indication that the lack of homes for sale is having a major, negative impact on the market. The future direction will be brighter if and when we see a significant uptick in inventory, but that unfortunately doesn't seem to be right around the corner", concluded Kirchner.

*In our local markets for single family homes located in Sarasota and Manatee County, the numbers are mixed as of May 2017 year-over-year:

Sarasota:

Pending Sales: + 1.6%
Inventory: +13.2%
Months of Inventory: 4.5
Median Price: 2016-$263,000 | 2017-$260,000

Manatee:

Pending Sales: (-7.7%)
Inventory:+6.4%
Months of Inventory: 4.3
Median Price: 2016-$277,000 | 2017-$299,000


* Resource- July 2017 -Sarasota/Manatee Realtor® Magazine, the official magazine of local real estate, is published monthly by the Realtor®Association of Sarasota and Manatee.

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