January Market Reports: Inventories are Down to the Wire

January is the month when real estate markets traditionally take a breather to restock their shelves for the spring season. In the final quarter of 2016 record demand powered by concern over interest rates and rising prices encouraged buyers to clear the shelves of depleted supplies and strong sales continued into the new year.

An analysis of the January market reports from the National Association of Realtors, Redfin, RE/MAX, Trulia and Zillow, and a February report from realtor.com provides a consensus on the important trends shaping today’s residential real estate economy.

Whether markets will be able to resupply MLSs with adequate numbers of homes for sale to meet demand in time for the coming sales season tops the list of concerns.

The Inventory Crisis Deepens

Declining inventories of homes for sale has been a problem since the beginning of housing recovery in 2013 [1] that has grow more serious over the past two years.  Inventories in January 2015 were 1.87 million[2] and have declined to 1.69 million in January,[3] according to NAR, a loss of 180,000 properties or 9.6 percent.

With home sales becoming a year-round business, demand tends to pick up following the holidays.  With inventories ending 2016 at multi-year lows, the outlook for the coming spring season is increasingly grim. New listings are having an Impact, according to some but not all of the  January market reports.  Supplies still have a long way to go to reach levels of last spring, which had shorter supplies than 2015.

Here are some comments from the reports:

• “The residential real estate market now has a brand new low level of supply,” wrote Jonathan Smoke, chief economist of realtor.com.

• “Sellers are still warming the bench as the supply picture looks weaker than demand.  This is the first January in three years in which new listings fell short of the previous year:” said Redfin chief economist Neela Richardson.

• “Overall inventory hs fallen year-over-year nationwide in each of the past four months,” said Svenja Gudell, chief economist at Zillow.

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Shortages are forcing prices above sustainable levels in more and more markets.  Affordability has become such a critical issue that economists are finding new ways to measure it.  Recently, NAR launched the Realtors® Affordability Distribution Curve and Score, and Trulia’s introduced a  Mismatched Markets report to help find markets that meet their budgets.

 The table below is a snapshot of the current inventor crisis as of the end of January (except realtor.com, which reports February data)

January Inventories at a Glance

 

Source	Month over month	Year over year	Days on Market	Comments
NAR	2.4%	-7.1%	50	Has fallen year-over-year for 20 straight months
realtor.com	2%	-11%		(February data)
Redfin	-0.5%	-12%	-7	5.1% drop in new listings
REMAX	-4.3%	-16.9%	-5	Inventory declined for 99 months
Zillow	NA	-2.9%	NA	Supplies of lowest priced homes down 4.6%

Sales still Strong, Prices Soar

Strong sales kicked off the new year at a healthy pace, up from 3.8 to 5,8 percent overJanuary 2016, and realtor.com reported February was even stronger.  Reflecting the tight demand, prices rose even faster, from 4.3 to 7.1 percent—a trend that might encourage sellers to list their prices in the coming spring market higher than they might otherwise.

January homes sold faster in every report, a trend that might modify as more properties come on market in February and March and should rate rise as expected. Redfin reported January was the fastest month on record.

All eyes will be on February inventory totals to set the tone for the spring season. Conditions could not be more ideal for sellers who can pick the time to see.  Retiring boomers, investors, move up buyers who have some flexibility are looking at ideal conditions to sell, Should sellers wait another year, prices may be even higher, depending on price range, but demand will suffer as buyers, especially first-time buyers, find themselves priced out more and more local markets.

January Market Reports at a Glance

Source	Monthly Sales Trend	Annual Sales Trend	Monthly Price Trend	Annual Price Trend	Median Sale Price	Days on Market or Months Supply	Comments
NAR	3.3%	3.8%	N/A	7.1%	$228,900	50 days or 3.6 months supply	January’s price increase was the fastest since last January (8.1 percent) and marks the 59th consecutive month of year-over-year gains.
realtor.com	N/A	N/A	8%	8%	$250,000	90 days	February data
Redfin	-25.9%	5.6%	-2.4%	7.0%	$261,100	59 days	Fastest sales on record
RE/MAX	NA	4.5%	-3%	4.3%	$208,500	66 days	Tenth month of price increases
Trulia	3.3%	4.0%	N/A	Starter:  7.6% Trade-up: 6.3% Premium: 7.2%	Starter: $164,920 Trade-up: $285,895 Premium: $595,262	N/A	Trulia reports price and inventory trends on a quarterly basis by price categories.
Zillow	N/A	N/A	0.6%	6.8%	$193,800	9.0%	Zillow does not report sales and uses its AVM for values.

Geographic trends

The West led sales in January, up 6.6 percent in NAR’s report but Zillow reported slower sales in the Bay Area and Los Angeles due to affordability problems.  Denver was Redfin’s fastest-selling market and Seattle and Oakland next. Zillow only ranks two of its top-ten fastest growing metros in the west: Seattle and Portland.

Southern markets like Nashville, Memphis and Lakeland FL are seeing prices rise quickly and Redfin ranks Dallas number one in the nation for fasting rising prices. Existing-home sales in the South in January rose 3.6 percent to an annual rate of 2.31 million, and are now 3.1 percent above January 2016. The median price in the South was $201,400, up 9.2 percent from a year ago, according to NAR. Ten of Zillow’s faster growing large markets are located in the South.

In the Midwest, existing-home sales decreased 1.5 percent to an annual rate of 1.29 million in January, and are 0.8 percent below a year ago. However, prices reached a  median of $174,900, up 6.5 percent from a year ago, according to NAR.  Zillow ranked Minneapolis, and Detroit among metros with the largest annual declines in inventory.

January existing-home sales in the Northeast jumped 5.3 percent to an annual rate of 800,000, and are now 6.7 percent above a year ago. The median price in the Northeast was $253,800, which is 2.5 percent above January 2016.  Redfin reported Buffalo NY saw sales decline 9.9 percent and had the largest overall decline in overall inventory, falling nearly 40% in a year, followed by Portsmouth NH and Rochester NY.

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