As the summer of 2013 unfolds, the nation’s housing market continues to show signs of improvement.
Millions of foreclosed and vacant properties flooded the market beginning in 2007 after the housing bubble of the early 2000s burst.
But a dreary housing market has improved throughout much of the country, and a national economist is predicting a shortage of housing through the rest of the year.
On April 23, the U.S. Commerce Department reported that the seasonally adjusted annual rate of new home sales rose by 1.5 percent to 417,000 in March, up from 411,000 in February. New-home sales were 18.5 percent higher than during the same period last year, and economists generally expect construction of new homes to gain momentum this year.
Total existing home sales fell by 0.6 percent to a seasonally adjusted annual rate of 4.92 million in March, from a downwardly revised 4.95 million in February. However, they remain 10.3 percent higher than the 4.46 million units sold in March 2012.
Lawrence Yun, chief economist for the National Association of Realtors, attributed the decline in existing-home sales to market forces. Demand for homes has outstripped supply.
“On a year-to-year basis, March of last year to March of this year, existing home sales were higher by 10.3 percent, which marks 21 consecutive months of year-over-year increase,” Yun said. He said the national median home price of $184,300 represents an 11.8 percent increase from one year earlier.
Sales are also picking up for higher-priced homes, a market segment that saw steep declines in the wake of the
financial crisis. Prices for homes priced at $500,000 and higher range have increased by 25 percent from a year earlier, Yun said.
“We are seeing the upper-end market move faster than the lower-priced homes,” Yun said. “The latest price increase would represent the strongest increase since November of 2005.”
By contrast, homes priced between $100,000 and $250,000, which Yun described as the “sweet spot,” increased by 7 percent in March compared to a year earlier. Sales of homes priced below $100,000 actually fell, he said.
More homes tend to come on the market during April, but Yun anticipates a shortage of inventory to continue through the rest of 2013.
“April is usually when we see a big increase, seasonally speaking. Based on historical analysis, that translates to about a five-months supply of houses, which means we’re still in an inventory-tight situation, because we want to see about a six-month supply for a balanced market,” Yun said.
Economists warn that housing markets are a reflection of local economic conditions. When companies are hiring and more people have jobs, home prices rise. When jobs are scarce, home prices tend to tumble. However, many national trends are reflected in local markets.
In Yellowstone County, the April unemployment rate dipped to 3.9 percent, compared to the statewide average of 5.5 percent, and a national average of 7.5 percent.
Put another way, 2,220 more people were working in Yellowstone County in April compared to one year earlier, noted Billings Realtor Howard Sumner.
Ron Thom of Billings-based Prudential Floberg Realtors, said home prices in Billings have advanced for more than a year, but a shortage of inventory has created upward pressure on prices.
“Where the market had been balanced, it has turned a little more toward a seller’s market because there are more buyers than sellers,” Thom said. “One of the biggest complaints you hear is the lack of inventory. There seems to be a lot of buyers and not as many homes.”
Jase Norsworthy of Prudential Floberg Realtors said multiple offers and full-price offers are becoming more common.
When a house in the Poet Streets came up for sale not long ago, clients increased their offer by $5,000 above the asking price in order to make the sale.
“The day it went on the market they were in a multiple bidding situation,” Norsworthy said. A house that’s well maintained and priced properly will frequently receive multiple offers, he said.
Houses priced at the higher end of the market are also seeing a rebound. More buyers are shopping for homes priced from $300,000 to $500,000, Thom said.
What has driven the market toward higher-priced homes?
“Both hospitals are recruiting in the medical field, and we have experienced more and more activity from the Bakken oil field,” Thom said. “Many of them are relocating their families to Billings.”
Another indicator of strength in the real estate sector is reflected in the stock prices for publicly traded home builders.
Recently, Toll Brothers Inc., a Pennsylvania firm that designs, builds and markets single-family homes, has seen its stock trading near its 52-week high as home construction rebounds.
Exchange-traded funds that specialize in home builders soared by 65 percent in 2012, but have retreated in 2013.