Home sales are continuing on an upward trudge – but more inventory is needed to really jump-start the market
A stronger economy, an improving job market and wage growth are expected to push home sales and home prices higher in 2018 – but the pace of growth will be hampered by weakening affordability and continued low inventory, according to the National Association of Realtors.
Lawrence Yun, NAR chief economist, presented his 2018 midyear forecast at the association’s annual legislative meeting and trade expo last week. Yun forecast 2018 to finish with a sales pace of around 5.6 million, up 1.8% from last year’s 5.5 million. Yun predicted 5.7 million sales in 2019.
“Overall fundamentals remain solid, driven by a growing economy and steady job creation, which will sustain home sales in 2018 slightly above last year’s pace,” Yun said. “The worsening housing shortage means home prices are primed to rise further this year too, hindering affordability conditions for homebuyers in markets across the country.”
Yun said the strangled inventory is the main factor keeping sales from being higher. While home sales have seen a modest increase since the beginning of the year, Yun said there needed to be more supply to alleviate upward pressure on prices. Without that, he said, contract activity is likely to remain flat.
Total housing inventory as of the end of March was 1.67 million existing homes for sale – 7.1% lower than at the same time last year, according to NAR. Yun said that inventory has sunk steadily for the last five years, and that the country is now experiencing the lowest inventory levels in a generation. Unsold inventory is at a 3.6-month supply at the current sales pace. That’s down from 3.8 moths a year ago, NAR reported.
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