As usual, with the spring market comes a fluster of buyers in the market, but much to their surprise this year — very little inventory. This lack of inventory is restricting the amount of homes being sold and driving up prices.
For the entire Bright MLS market, first quarter sales were 2.2% lower than last year, but the median sold price increased by 4.7% over the first quarter of 2017. Inventory was 17% lower than the end of the first quarter in 2017 and 29% lower than the end of the first quarter in 2016. (These numbers are for Bright’s entire footprint, which encompasses a large part of the Mid-Atlantic: parts of 6 states and Washington, D.C., and were compiled from all 3 systems: Bright, MRIS and TREND)
Typically inventory increases in first quarter, but for the first time in at least 10 years, inventory at the end of the first quarter is lower than at the end of last year.
Despite considerable demand all year, pending sales have lost a step in recent months because low supply is pushing prices higher and making home buying less affordable in several parts of the country,” NAR Chief Economist Lawrence Yun said.
These charts clearly show how the market across the entire Bright footprint is starting to resemble the bubble we experienced from 2002-2006:
As you can see, from the first chart, the Average End of Month Inventory (green line) was very low from 2000 to 2005. This was the housing bubble of the early 2000s – buyers were taking advantage of record-low mortgage interest rates, and buying. That accounts for the high Average Monthly Sales (the blue line in both charts) as well as the increase in the Average Monthly Price (the orange line in the second chart). From 2007 to about 2012-2013 the market adjusted. But since about 2012-2013, monthly sales and inventory numbers have flipped and diverged again. The trend is once again showing a similar pattern as we witnessed back in the early 2000s – lower inventory and higher sales, a sellers’ market. One difference is that the average prices (the red line in the second chart) haven’t dropped back to what they were in the early 2000s. It’s been relatively stable since 2013.
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Adapted from MRIS Blog #7057, May 14, 2018