Is now a good time to buy or sell my property? It depends, home values are rising, but sales of new single-family homes are declining and there’s a lack of new construction.
It was a mixed bag of real estate news last week, with some positive and negative signs for the housing industry.
Sales of new single-family houses were down in April by about 1.5 percent over the revised estimate for March. Last week, the Department of Housing and Urban Development and the U.S. Census Bureau reported that sales of new houses were at a seasonally adjusted annual rate of 662,000.
While that number is up 2 percent from a year ago, it’s a worrying sign that the housing market could be stalling due to a lack of new construction. The number of new homes being built is still less than before the Great Recession, and should be over 1 million new homes per year. Moreover, the new houses that builders are building right now tend to be higher priced, semi-custom or custom homes. They’re not starter homes for first-time buyers, who are hungry for something new to buy in their price range.
How do we know? The median sales price of new houses sold in April 2018 was $312,400. The average sales price was 407,300. That tells us that a lot more higher-priced homes are being sold. Even at today’s still-low 4.5 percent interest rate for a 30-year mortgage, you’d still need an income of about $90,000 to afford a home that costs $312,400, with about a $10,000 down payment. That’s $30,000 than today’s median income for a family of four.
Realtor.com released its May data preview and the data indicates home price appreciation could be slowing down, while inventory is holding up. Both are good signs for home buyers.
According to Danielle Hale, chief economist of realtor.com, the amount of housing inventory in May is on track to show a smaller decline than April’s 6 percent slip from a year ago.
“In order to see a significant inventory deceleration, we need more new listings in the market. May could achieve that and be a high point for new listings relative to the past few years. New listings are expected to finish the month at 570,000 whereas in 2016 and 2017, May new listings were near the 550,000 mark,” she explained. “While this may not feel like good news for buyers now grappling with higher mortgage rates and continued price increases, it’s a step in the right direction that could eventually bring home price growth in line with income growth without record-setting income growth.”
Zillow’s chief economist doesn’t agree that home prices are slowing down. In its April Zillow Real Estate Market Report, national median home values are rising at the fastest pace in 1 years. Across the country, home values rose 8.7 percent over the past year to a median value of $215,600. Markets where home values are rising the fastest include San Jose, Las Vegas and Seattle. Over the past year, Zillow found that San Jose home values appreciated 26 percent to a median of $1,263,900.
According to Zillow senior economist Aaron Terrazas, “home values have not appreciated this quickly since June 2006, right before the housing bubble bust, when they were appreciating 9 percent annually. U.S. home values are now higher than they have ever been, and home values in 21 of the 35 largest housing markets have surpassed peak value hit during the height of the housing boom over a decade ago.”
“Home values are rising faster than we’ve seen in a very long time: The spring home shopping season has been a perfect storm of strong demand and tight supply,” Terrazas added. “Sluggish new construction has exacerbated the supply situation and homes that are hitting the market, are moving very quickly once they do. Americans are also in a spending mood, boosted by recent tax cuts and rising wages. Millennials who long delayed becoming homeowners, are out in force – a shift we’re also seeing in softer rent appreciation.”