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Is It a Seller’s Market?

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Is It a Seller’s Market

Is It Finally a Seller’s Market? -  Home sales across the nation are up, but the number of properties listed for sale continues to drop, so have we finally turned the corner from a buyer's market to a seller's market? Statistics released last week by the National Association of Realtors indicate that the answer is yes!

The number of homes listed for sale in January fell by 4.9%, leaving only 1.74 million properties on the market. That’s the lowest that number has been since December of 1999, when there were only 1.71 million homes for sale.

Back in January of 2011, there were 2.91 million homes on the market, so clearly the inventory of properties for sale is shrinking. However, the number of home sales was up 0.4% last month. At that pace, we would see an annual rate of 4.92 million units. That's up 9.1% from January 2012.

So what does all of this mean? Simply put, there are more people interested in buying a home now, but there are fewer homes available. In fact, at the current sales pace, it would take just 4.2 months to sell all of the homes that are currently listed across the nation.

Typically, inventory of homes for sale increases in the spring, but economists at the National Association of Realtors say this year could be different. While they expect the inventory to increase a little bit, they aren't anticipating the usual spike because many homeowners either can't afford to sell their homes or are waiting for home prices to rise higher before they do.

Homeowners who purchased their homes during the housing boom in the mid 2000's have seen the value of their properties drop off significantly in recent years and are now underwater on their mortgages – meaning they owe more on their loan than the home is now worth. That is preventing them from selling even if they'd like to do so.

Analysts at the National Association of Realtors say the increased demand but lack of inventory will cause prices to go up, but how high they go still remains to be seen. In the meantime, investors are purchasing as many properties as they can in communities where home prices are still low. Places like California, Arizona, and Florida were hit the hardest during the recession, and as a result, have seen the largest decline in prices. Investment groups are swooping into these states, buying up the properties, and leasing them long-term for now, with hopes of selling them for a profit once home prices level off.

Unfortunately, though, those investors have made it harder for “traditional” buyers to purchase a home, so in many states, bidding wars are taking place for the few remaining homes on the market.

But despite the lack of inventory, analysts at Goldman Sachs estimate that home sales could rise to 5.2 million units this year, which would be a 12% increase from last year.

So how can the number of sales increase if inventory is expected to be lower than usual? Economists at Goldman Sachs predict than many homeowners who are holding out for now will eventually list their properties later this year once they realize that prices have stopped increasing.


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