Home Sales See Highest Monthly Spike In 4+ Years
There was good news for the real estate market when the National Association of Realtors released their most recent Existing Home Sales Report.
Home Sales jumped up from February to March by 6.1%. This was the highest monthly increase since December 2010, which saw an increase of 6.2%.
Year-over-year totals compared to last March are also up by 10.4%. Home sales increased year-over-year for the 6th consecutive month, and the 10.4% annual increase is the highest since August 2013 which saw a 10.7% increase.
The seasonally adjusted annual rate of home sales also increased from February, from 4.89 million to 5.19 million. That is the highest annual rate since September 2013, which was also at 5.19 million.
Here is more from Lawrence Yun, NAR Chief Economist:
More good news from the report: housing inventory increased in March over last year by 2%. The last 3 months saw a year-over-year drop in inventory, so this is a much needed welcome sign.
Despite that, inventory still isn’t meeting demand, as the Month Supply of Inventory dropped in March, from 4.7 Months in February, to 4.6 Months.
The median home price also increased by 7.8%.
Things look good for 2015. In fact, Mr. Yun says in the following video that 2015 could be the nest year for real estate in 9 years, and at the current pace, we could see the annual sales pace remain over 5 million:
There are still things on the horizon that could hamper home sales.
The big issue has been and continues to be the lack of inventory. There simply isn’t enough to meet the demand. This is a big factor in home prices accelerating.
Over the last 100 years plus, real estate appreciated at an average annual rate of 3%-4%. This is considered a healthy rate of appreciation.
High appreciation is a good thing, in spurts. It is a normal part of the real estate cycle.
However, extended periods of rapid appreciation can be detrimental. When the market swings heavily in one direction, it will need a correction to balance things out. That is what we were seeing in the last half of 2014.
However, with appreciation taking off again, this could be bad. Think back to the big real estate boom in the early 2000s. Appreciation skyrocketed unchecked, and this lead to the bubble bursting and the resulting real estate market crash.
Now I am not saying that is where we are headed. However, if home values continue to increase the rate at which they are appreciating, we could some similarities.
So, if more houses are needed, then why aren’t more sellers selling?
Studies show that home owners are hanging on to their homes longer than average.
This stat can also be explained by the fact that many home owners experienced negative equity as a result of the crash.
Many couldn’t sell simply because they owed more than their home was worth.
Although that is still the case for some, most home owners are no longer under water.
In fact, according to the most recent numbers from CoreLogic, the total number of mortgaged properties under water was 5.1 million, or 10.8% of all mortgaged properties.
On top of that, 1.2 million borrowers regained equity in 2014.
The top 5 states for negative equity–Nevada, Florida, Illinois, Rhode Island and Arizona–account for 31.7% of the negative equity homes.
Probably a big factor is the pace of wage increases. Simply put, wage increases have not kept up with home price increases.
This could be playing a big factor in 2015 and into 2016.
It doesn’t seem to be greatly affecting buyers, at least directly. The home sales numbers reflect this.
However, inventory could improve if there were more move up buyers. This would open up more inventory for first time buyers.
But, if current home owners are holding off on the next home because of the financial squeeze, then this could be a bigger contributing factor than most people realize.
The market is appreciating, buyer demand is strong, and with low inventory competition is less.
This is like a prefect storm to sell right now.
Plus, interest rates remain low, so the next purchase you can get more house.
But, if you aren’t seeing your salary get bumped much or any, this could make potential move up buyers hesitate on making the move.
And a lot of this could go back to what people remember about what happened when the real estate market crashed a few years back.
People apparently learned a valuable lesson from our previous mistakes–don’t buy more house than you can afford. There is no thinking that “I will better be able to afford this in a couple years once I get a raise.”
So, it seems the market is offering golden opportunities to buyers and sellers (and folks that would be both sellers and buyers), yet trepidation about the market (combined with wages lagging behind home values) is holding people back.
2015 for housing has started with a loud bang, and looks to be one of the best years in real estate in a decade. And the people that can ensure this (sellers) are fearful to move forward. It is almost like circular reasoning.
If you are interested in buying homes for sale in Charleston SC, then visit my Pam Marshall Realtor website.
Sellers can check out my Pam Marshall Realtor sellers page.
Keep up with the latest Charleston SC home sales stats at my Charleston SC Real Estate stats page.