Longboat Key, Florida | May 22nd, 2018 – Consumers are now less confident on buying a home compared with the last two years, according to Lawrence Yun, chief economist of the National Association of Realtors (NAR).
Yun, who was the keynote speaker during the recent 12th annual global conference of Manatee and Sarasota realtors, cited during this meeting NAR’s 2018 first quarter Home Opportunities and Market Experience (HOME) survey. This poll indicated that 68 percent of consumers feel that the time is good for home buying. This percentage compares with the 75 percent recorded in the 2016 first quarter and the 70 percent of consumers confident on home buying in the 2017 first quarter.
The main drawback for prospective home buyers, NAR’s Yun said, is affordability. He noted that between 2011 and 2017, income growth has significantly fallen behind the price appreciation of residential properties. During this six-year period, there was a 48 percent surge in housing prices while there was just a 15 percent increase in incomes, he pointed out.
Buyers aiming to engage the residential property market, Yun added, are also “feeling rushed to buy,” because of the shortage of inventory. NAR reported that on the national level the number of existing residences available for sale as of the 2018 first quarter dropped to 1.67 million from the 1.80-million count a year earlier. Measured in terms of months’ supply, there was a 3.5 months’ supply during this year’s first three months, a decline from the 3.7 months in the 2017 first quarter.
Region’s Inventory Down
Notably, these national statistics are replicated in the Sarasota-Manatee area. Sarasota’s housing market inventory in the 2018 first quarter declined 9.7 percent to 2,971 available residences, while Manatee’s count slipped by 5.9 percent to 2,185 sales listings. Months’ inventory for Sarasota was recorded at 4.4 months during this year’s January-March period, a 13.7 percent decline from 2017. In Manatee, inventory was estimated at 4.3 months’ supply, down 6.5 percent during the same comparative period.
NAR partly attributes the diminishing number of residences available on the market to the current tendency of homeowners to stay in their residences longer. A 2017 NAR report showed that 10 years is the median duration of homeowners staying in their residences, a 30-year high also seen in 2014 and in 2016.
What appears to be happening is a vicious cycle, as industry analysts also say that many households are not moving because of record-low inventory of available residences. They also note that current prices have not risen high enough to prod more homeowners to put their properties on the market.
On the Horizon: Rising Interest Rates
Aside from the current thin inventory, Yun indicated that prospects of higher mortgage rates in the near future put pressure on prospective home buyers. The NAR economist said a further decline is unlikely from the current 4.5 percent mortgage rate levels. He noted that the market expects two more hikes in the Fed’s benchmark interest rates this year, while three interest rate upward adjustments are forecast next year. Mortgage rates two years from now could hit 6 percent, Yun said.
Clearly, there are myriads of factors now at work which would affect decisions to buy or sell a residence. Our Judy Kepecz-Hays team can certainly help you navigate through all these market complexities. Send us an e-mail or call us, and we shall partner with you toward a most fruitful real estate deal.