March home sales declined some 4.9% after a robust February though analysts aren’t terribly concerned about the dip, citing rising inventories as the market’s way of keeping home prices in check.
That’s the conclusion offered by the National Association of Realtors in their assessment of the current state of the market. Chief economist for the NAR, Lawrence Yun, said of March 2019’s numbers, “It is not surprising to see a retreat after a powerful surge in sales in the prior month. Still, current sales activity is underperforming in relation to the strength in the jobs markets. The impact of lower mortgage rates has not yet been fully realized.”
The 2019 market is expected to be strong overall, but there are a lot of hidden factors that could have a big impact one way or the other.
Most of these issues revolve around new tax codes and the pressures construction firms face in funding new projects.
Sales of existing homes in March 2019 are down 5.4% year over year with 5.51 million units sold in 2018 as opposed to 5.21 million this year.NAR existing home sales report April 23, 2019
Median prices for existing homes showed a reverse trend, besting their 2018 number but some $10,000. The median existing-home price in 2018 was $249,800 compared to the jump in 2019 to $259,400. This isn’t that surprising, however, given that it is the “85th straight month of year-over-year gains” according to the NAR.
Housing inventory numbers are also up in March 2019 as compared to the month prior, rising from 1.63 million to 1.68 million. This number is also up from the 1.64 million number of homes for sale one year prior with a 3.9 month supply of inventory if the current rate of sales continues. That number is up from 3.6 months of unsold inventory in February and March 2018.
As stated earlier, the NAR thinks this is a positive sign, or as Yun comments, “Further increases in inventory are highly desirable to keep home prices in check…The sustained steady gains in home sales can occur when home price appreciation grows at roughly the same pace as wage growth.”
Even though the NAR is largely positive in their assessment of the current state of the real estate market, there are some developments that could complicate this year’s market, namely with regard to changes in the tax code implemented the past several years.
The average home remained on the market for 36 days as opposed to 44 days a year ago.National Association of Realtors
“The lower-end market is hot while the upper-end market is not. The expensive home market will experience challenges due to the curtailment of tax deductions of mortgage interest payments and property taxes,” Yun says.
The upper-end slowdown is particularly impacted by tax laws and changes to them as most of the upper-tier properties are purchased in addition to other homes already owned.
Real estate markets that are currently experiencing very robust sales include Columbus, Ohio, Boston, Massachusetts, the Midland Texas region, Sacramento and Stockton, California.
Current NAR President John Smaby thinks the increasing inventory numbers are an especially good sign since mortgage rates are at historical lows.
There’s some indication that the low mortgage rates and high inventories are attracting buyers. A total of 33% of all home sales in March 2019 were to first-time home buyers. Then again, a profile of all home buyers in 2018 shows that 33% were first-time home buyers.
Of the high inventories, he said: “We had been calling for additional inventory, so I am pleased to see that there has been a modest increase on that front…We’re also seeing very favorable mortgage rates, so now would be a great time for those buyers who may have been waiting to make a purchase.”
Even with mortgage rates so low, all-cash offers are still a healthy portion of the overall market. A full 21% of all sales in March 2019 were cash offers, up from 20% a year ago but down from 23% in February. Foreclosures and short sales dropped to 3% of March’s total sales while the number was about 4% in February.
Single-family home sales in March 2019 were down compared to the previous year and down further from the numbers reported in February. Condos and co-ops, however, suffered a particularly steep drop with sales volume down 5.3% compared with last month and off some 11.5% compared to last year.
The media single-family home price in March was $261,000 and the median condo or co-op price was $244,000. All major regions experienced a slight drop in March 2019, with the Northeast down some 1.5% and the Midwest down some 8.6% year over year.
Meanwhile, the South experienced a 3.4% annual decrease while the West had a 6.0% decline.
The NAR’s Pending Home Sales Index will be released at the end of this month while the report on Existing-Home Sales for April 2019 will be released on May 21.