Housing Trends Foreshadow Housing Shortages Ahead
Low mortgage rates shrink entry-level and mid-tier inventory levels in September 2019
- The September U.S. median listing price was $305,000, up 4.3 percent year-over-year
- Nationally, homes sold in an average of 65 days in September, one day slower than last year
- Inventory declines accelerated, now down 2.5 percent from a year ago
SANTA CLARA, Calif., Oct. 8, 2019 /PRNewswire/ -- Nearly two years after U.S. housing inventory hit its lowest levels in recorded history, the market is showing signs it may be headed for another shortage, according to realtor.com®'s September 2019 housing trend report released today. Data show increased demand from lower mortgage rates prompted a 10 percent year-over-year decrease in available homes under $200,000 and halted 18 months of inventory gains in the mid-market last month.
National inventory of homes for sale continued to decline in September, posting a 2.5 percent decrease over this time last year, and a faster rate of decline compared to August's 1.8 percent decrease. Driven by strong demand and short supply, entry-level homes priced below $200,000 have been steadily decreasing since May of 2014, which continued in September with a yearly decline of 9.8 percent. After 18 months of solid inventory growth, mid-market homes priced between $200,000 and $750,000 -- which make up the largest segment of inventory -- flatlined in September with 0 percent growth and are poised for their first decline next month.
"Buyers looking for their next home have faced the headwinds of tight inventory and a competitive market this year. While lower mortgage rates and the arrival of fall promised a reprieve, conditions continue to tighten as demand remains strong.. September inventory trends, especially in the mid-market, may be the canary in the coal mine that we could be headed for even lower levels of inventory in early 2020," according to George Ratiu, senior economist for realtor.com®.
Finding an affordable home has been a challenge for buyers in recent years, but mid-market inventory in particular has seen some relief in the last 18 months. This month's data shows that recovery has halted, which should translate into increased competition for move-up buyers, not just first-time buyers.
"The mid-tier of housing represents nearly 60 percent of homes for sale on the market, making it a solid indicator of how tight inventory levels are in the U.S. After more than a year and a half of solid growth in this segment, we're seeing inventory levels stall out and flat-line. If, or better yet, when inventory in this segment begins to take a downturn, the vast majority of homebuyers are going to feel its effects as their options rapidly dwindle," said Ratiu.
Homes listed over $750,000 continued to grow by 4.7 percent year-over-year. However, if strong homebuying demand, fueled by lower interest rates, continues to persist into the fall, the inventory of homes in this upper-tier price range could also see declines by February of the coming year...
