Buyers strike? Amid the price spike, home sales plummet for the third month, pent-up sellers brace, new listings and inventory rise
It is perhaps the most distorted and perverse housing market ever.
By Wolf Richter for WOLF STREET.
It’s a world of unprecedented Fed intervention, government stimulus, inflation that has turned red this year amid a bizarre phenomenon of companies complaining of a labor shortage , while nearly 10 million people are considered “unemployed” and 16 million people claim some sort of unemployment insurance. While 2.1 million mortgages remain on forbearance programs, investors have flooded the housing market, including individual buyers who are snatching second homes in mad auction wars .
But sales fell for the third month in a row, as new listings and supply started to rise from very low levels, with many more coming to market this year.
Sales of existing homes – single-family homes, condos and co-ops – fell 2.7% in April from March, after dropping 3.7% in March and 6.3% in February, at an annual rate seasonally adjusted to 5.85 million households, the lowest since July 2020, according to the National Association of Real Estate Agents today. Compared to April 2019, sales increased by 11.8%, after having largely unwound the huge peak that started last summer (historical data via YCharts):
Cash sales, typically a sign of investor activity, accounted for 25% of all transactions in April, up from 15% in April 2020. Retail investors and second home buyers made up 17% of total home sales, up from 10% in April 2020.
Dallas Fed Chairman Robert Kaplan highlighted the role of these investors in distorting the housing market, and cited this as one of the reasons for “talking as soon as possible” about cutting QE.
“More and more over the last 6-8 weeks, I hear more and more often reports from private investors entering the single-family home market, competing with families, often making offers above of the asking price and asking that the house remain furnished, ”Kaplan said.
“So we are in a position where families are being evicted, or evicted, from being able to buy the first house,” he said. “This is an example of an excess, perhaps an unintended consequence, a side effect of these extraordinary [monetary policy] Actions. “
Non-investor buyers’ strike underway? While individual buyers still fight with investors in silly and expensive auction wars offering insane amounts over asking price, there are anecdotal indications that more and more buyers are staying away from the market. this zoo because they are sold out or have reached the end of the year. their financial capacities or don’t want to end up buying at the most insane top of the market. For buyers, this is a terrible time to buy a home. And it is becoming more and more evident.
For sellers, however, this is the best time to sell a home.
And sellers are getting ready, more inventory to come.
Inventory of houses put up for sale Rose for the third month in a row, to 1.16 million homes, still historically low, but the highest since November. And supply rose to 2.4 months at the current pace of sales, the highest since October (data via YCharts):
New listings of homes for sale increase of the decline linked to the pandemic. According to realtor.com residential ad database, new registrations in April were up 10.9% from March, after jumping 19% in March from February, and were up 33% from the pandemic low in April 2020. Despite the increase , new registrations remain well below normal seasonal levels (Aprils connected by green line):
Repressed sellers. Much more inventory is hitting the market this year: 10% of homeowners plan to sell their home in the next 12 months, which is 25% higher than the typical share of homes that come onto the market in a year. typical year, according to the NAR and Harris Poll in a previous report, citing their survey of potential home sellers across the United States.
Of these potential sellers, 56% plan to list their home for sale within the next 6 months. And 76% have taken steps to start listing their home.
When vacant homes hit the market, like homes that owners didn’t sell last year when they bought a new home (the infamous “second home”), it adds supply without adding demand because these owners are already living in their new home. at home and you don’t need to buy another one.
Buying a home without selling the now vacant home contributed to the inventory shortage. When those left-behind vacant homes hit the market, it solves this shortage. It is the process of the parallel inventory becoming a real inventory.
The median price of existing homes climbed 19.1% year over year to $ 341,600, up 48% from five years ago in April 2016.
For single-family homes, the median price climbed 20.3% year over year to $ 347,400. For condominiums, the median price jumped 12.6% year over year to $ 300,000 (data via YCharts):
The winner of these mad auction wars is not the buyer. This is the seller… THE WOLF STREET REPORT: Now is the perfect time to sell a house (to FOMO buyers)
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