Redfin: Housing Demand Dropping in Short Term

What happens to the real estate market when housing supply falls for 25 straight months?

Oh, come on–you’re a mortgage banker. Prices go up and sales stall, duh.

Two reports from Redfin, Seattle, suggest housing demand could be falling in the short term, although such demand remains robust from a year ago.

The company’s monthly Housing Demand Index fell by 1.7 percent in October, to 134 from 137. From a year ago, however, the Index rose by 26.6 percent. A level of 100 represents the historical average for the three-year period from January 2013 to December 2015.

The 15 metros covered by the Demand Index reported nearly 15 percent fewer homes for sale last month than there were a year prior. October marked the 29th straight month of year-over-year inventory declines in these major markets and the fourth consecutive month of double-digit declines. Meanwhile, new listings posted a much-needed gain for the first time in five months, up 2.6 percent in October.

Redfin said the seasonally adjusted number of buyers requesting home tours remained essentially flat from September to October, increasing 0.6 percent, while the number making offers fell 5.4 percent. Compared to last year, 43.7 percent more buyers requested tours in October and 4.4 percent more wrote offers.

“The fact that touring activity remained constant while offers dropped off in October tells us that the buyers are still there; there’s just not much to bid on,” said Redfin chief economist Nela Richardson. “The small boost in the number of homes newly listed for sale is certainly the bright spot of this report. Additionally, the most serious buyers can rejoice that we are nearing the holidays, which bring less competition from other buyers for homes that sellers are often very eager to unload before the new year.”

In a separate report, Redfin said while home prices rose by a strong 7.6 percent from a year ago, to $288,000 across all markets, Redfin said sales fell on a year over year basis for the fourth straight month as housing inventories continued to fall.

“Despite strong buyer demand, sales are sputtering due to low inventory,” Richardson said. “The last time we saw a substantial increase in the number of homes for sale, Donald Trump was a candidate in a Republican field of 11.”

Redfin said nationally, the number of homes for sale plunged 12.2 percent, the sharpest year-over-year decline in inventory since 2013, to a 3.1-month supply of homes in October. Richardson said housing inventories have not been at the “balanced” level of six months’ supply since January 2012.

The report said low inventories are particularly stark in West Coast markets. The San Jose metro area saw the steepest year-over-year inventory drop and the sharpest corresponding price increase. There were fewer than half as many homes for sale in October as there were a year earlier, sending prices up 19.2 percent to a median of $1.05 million. In San Jose the typical home that sold last month found a buyer in 12 days.

Just eight of the 74 metros Redfin tracks posted year-over-year increases in inventory, primarily in smaller markets in the Midwest and the South, including Austin, New Orleans, St. Louis, Dallas and Nashville.

Nationally, Redfin said the typical home spent 44 days on the market, five days fewer than a year ago. Last month, average sale-to-list price ratio rose to 98.2 percent, up from 97.9 percent a year earlier and 22.5 percent of homes sold above their list price, compared to 21.5 percent a year ago.

Redfin said Seattle was the fastest market, with the typical home finding a buyer in just 10 days, down from 13 days a year earlier. San Jose and Boston were the next fastest markets with 12 and 14 median days on market, followed by Oakland (15) and San Francisco (15). San Francisco was the most competitive market in October, where 78.6% of homes sold above list price, followed by 76.3% in San Jose, 63.7% in Oakland, 45.6% in Seattle and 42.8% in Tacoma, Wash.

The report said nine metro areas saw double-digit increases in the median sale price, led by San Jose, which rose by 19.2% in the past year to $1.049 million, followed by Seattle (16.5%), Las Vegas (14.6%), Oakland (13.1%) and Salt Lake City, Utah (12.6%). Six metros saw price declines in October, with Columbia, S.C. declining by 5.4 percent to $139,000.