By Gino Blefari
In July, the real estate market faced a housing-inventory challenge with several reports showing an increase in home prices and decrease in home sales. For example, CoreLogic Case-Shiller reported home prices rose 5.6%, setting an all-time high for the sixth consecutive month. And the National Association of REALTORS® said existing home sales were down 1.8%.
These numbers may give some pause at first glance, but considering the basics of supply and demand, it’s clear the number of sales have decreased due to a small pool of available homes paired with a high number of potential buyers on the market. This shows us that home prices that steadily increase box many home seekers out of the market.
However, even with a tightening market, the latest Berkshire Hathaway HomeServices Homeowner Sentiment Survey found that prospective homeowners’ confidence in the real estate market continues rising. Specifically, it showed that 68% of potential buyers hold a favorable view of the real estate market. This is not surprising considering continued job growth, low interest rates, and a strong economy.
Millennials are among those looking forward to owning a home in the tight market – often their first. One of our network agents, Ellen Hill from Berkshire Hathaway HomeServices Georgia Properties, explained that the high prices and low demand is also impacting millennials who are interested in taking their first leap into homeownership. She says during recent brokerage consultations, she’s finding more millennials are living with their parents or continuing to rent for longer periods of time to save for a substantial down payment. This of course contributes to the current decline in home purchases.
Overall, it’s clear that continued home price increases are not surprising considering the low housing inventory we’re seeing in many markets across America coupled with a firm demand for homes. The better news is homebuilders are coming on stream with more projects in a variety of price points. And, as homeowner equity builds, we may begin to see more people place their homes on the market. With continued job growth, millennials saving for the big purchase, and rising consumer confidence in play, we believe more and more homes will begin to be purchased.