Winter is approaching and real estate agents are anticipating a slowdown in transactions as both buyers and sellers prepare for the holiday season. However, with the housing market firing on all cylinders, experts predict the market will hold strong in the coming months but still warn buyers will be faced with challenges.
This year, the usual fall/winter inventory drop off has commenced resulting in fewer listings than we saw last year with more consumers than we usually see. The National Association of Realtors reports, ”Inventory in the U.S. is on average 15% greater in the warmer months than in the colder months and currently, national inventory is 6.5% lower than this time last year.” Looking at the latest report from Trulia, we can see that recent natural disasters across the country have impacted inventory conditions as well. Locally, in southeast Michigan, there are over 12,000 listings heading into the fourth quarter, which on average, are staying 31 days on the market. Also, inventory levels decreased 29% compared to the 17,000 listings available in Southeast Michigan at this time last year, reflecting the typical seasonal decline. With this inherent lack of inventory, competition is expected to be fierce over available properties and buyers who waited until fall hoping to score a bargain will find limited options.
In Michigan, there were 4,407 home sales in September, resulting in a 7% decrease compared to September 2016. Third quarter and year-to-date sales decreased 2% from last year as well. Despite housing prices in Michigan increasing 10%, demand still remains strong. The unemployment rate nationwide has declined every year in October since 2009. The most recent unemployment numbers from the Bureau of Labor Statistics put October’s unemployment rate at 4.1%. Simply put, people are in a better position to buy homes today than they were just a few years ago. In addition to more people having jobs, Millennials are now coming of age and are expected to make up the largest portion of homebuyers this fall
For now, we are stuck with about 4.2 months of inventory nationally. At this same time last year, the U.S. housing market had approximately 4.5 months of inventory, so we are currently trending downwards. For perspective, six months of inventory is considered to be a balanced market that benefits both buyers and sellers. This trend also holds true throughout Michigan. According to Redfin.com, as of September, there was a 4.6 month supply of inventory and at the same time last year there was a 6.0 month supply. This means that there are fewer listings available and when listings become available they are purchased quickly. In other words, it’s still a seller’s market.
One bright-spot for buyers is that new listings in southeastern Michigan are up slightly up, adding approximately 420,000 new listings to the market since 2016. This contributed to a 2% increase. While new listings declined in the first four months of the year, they have increased in five of the last six months. Although a small increase, this can provide some relief for buyers struggling in this tight market.
Following last week’s meeting, the Federal Reserve agreed to keep interest rates unchanged, which pointed to solid U.S. economic growth and a strengthening labor market.
While the housing market expectations may be tempered until spring, there is absolutely no reason why buyers and sellers can’t capitalize on it over the next quarter. With prices and demand expected to increase and inventory to remain limited, those that can accurately recognize seasonal trends could tip the scales in their favor.
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